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Representatives of the Canadian mortgage industry are voicing concerns about a foreign-homebuyer tax for the Greater Toronto Area while recognizing the need for cooling measures to tame the market.
“It is un-Canadian to blame foreigners for affordability concerns caused by lack of supply in the market,” writes Mortgage Professionals Canada in a news release sent out today.
Add the lobby group to the potential measure’s opponents, who include developers, realtors, and even Tim Hudak, former Ontario Progressive Conservative leader and current president of the Ontario Real Estate Association.
“Imposing a foreign buyers’ tax does nothing to solve a lack of supply and could create adverse effects on the national, provincial and regional economies,” the lobby group states.
The view puts Mortgage Professionals Canada at odds with some of the country’s biggest banks, including CIBC and National Bank, both of which have expressed support for a foreign-buyer tax in the GTA.
Ontario’s land transfer tax in 2016 bolstered the province’s coffers by $514 million more than had been previously projected, according to Mortgage Professionals Canada.
Making non-residents pay an additional tax on residential real estate purchases in the Greater Toronto Area would make it harder for the province to balance the 2017-2018 budget should the levy discourage sales activity, the group’s release suggests.
That said, Mortgage Professionals Canada adds “we understand the need for action in the GTA market.” However, it notes “concerns” given recent developments in Vancouver’s housing market.
In August 2016 the BC government tacked a tax of 15 per cent on non-residents when they purchase residential property in Metro Vancouver.
In February, Metro Vancouver home sellers listed 3,666 dwellings. There haven’t been that few homes put on the market in any February since 2003, according to the Real Estate Board of Greater Vancouver.
“A foreign buyers’ tax has not improved affordability and has instead simply reduced housing activity,” says Mortgage Professionals Canada.
If Ontario wants to bring a similar tax to the GTA, Mortgage Professionals Canada advises policymakers to form a joint industry-government group to look into potential “economic repercussions.”
The group is asking the province to consider two other moves to improve affordability in the region as well.
One is offering further incentives, such as the increased land-transfer tax rebate offered to first-time buyers, a move Ontario Finance Minister Charles Sousa announced late last year.
That would “encourage more young people to enter the market,” Mortgage Professionals Canada suggests.
The group is also rallying for Ontario and local municipalities to work towards increasing supply by removing hurdles to development.