Photo: Kevin Cabral/Flickr
Canada’s sixth largest bank has done an about-face on the idea of a foreign-buyer tax for Toronto’s housing market, and Ontario’s finance minister is also changing his tune.
After the BC provincial government’s creation this past summer of a 15-per cent levy on non-resident homebuyers in Metro Vancouver, National Bank was an outspoken opponent of Ontario applying something similar to Toronto.
National Bank argued that foreign buyers weren’t as active in Toronto, the federal government could take action itself, Ontario should focus on issues affecting supply, and affordability was holding up better in Toronto, particularly in the condo segment, thanks to low interest rates — but that was then.
“Much of the above still holds, and yet, we admit we were wrong. Or rather, it’s time for a re-think,” writes Warren Lovely, National Bank’s managing director of public sector research, in a report published today.
“We’re not saying that an incremental property transfer tax levied on foreign buyers is the silver bullet when it comes to arresting what CMHC (Canada Mortgage and Housing Corporation) terms ‘problematic conditions in the greater Toronto region, but its time may have come,” he adds.
Lovely may have a sympathetic ear in Ontario Finance Minister Charles Sousa, who announced today he is mulling a foreign-buyer tax, the Globe and Mail reports.
Lovely observes the heat from the Toronto housing market spreading farther and farther beyond the city, and he’s not alone. Earlier this year, CMHC, the national housing agency, said soaring GTA home prices were now begetting higher prices in areas as far flung as St. Catharines-Niagara.
Observers may be numbed to the Greater Toronto Area’s double-digit increases. But the average residential sale price in January for the Niagara area was $345,294, up a searing 23.7 per cent compared to that time a year ago, according to the local real estate board.
As buyers get priced out of the GTA and look to surrounding areas, the inflow of interest persists.
“There’s seemingly no end in sight to Toronto’s influx of prospective home buyers, whether from rural regions, other provinces or other countries,” Lovely explains.
Toronto’s job market is a big pull, he adds, as is the fact that the city is a gateway to a very liveable country.
“In the long run, supply has to be part of the solution, but it appears more could be done to tame demand, and dulling the foreign bid for Toronto and environs could be part of a multi-pronged housing affordability strategy for Canada’s largest province,” says Lovely.
National Bank suggests policymakers could go even further than a foreign-buyer levy. It recommends the City look into Vancouver’s vacant-home tax.
Starting January, the owners of all secondary residences in Vancouver that are left uninhabited for at least six months during the year face a tax of 1 per cent of the property’s addressed value.
The bank acknowledges the share of homes left empty by investors isn’t as great in Toronto, and stresses it is not pushing for “a Paris-style vacancy levy.” (The City of Lights recently tripled its secondary-home tax to 60 per cent more than is applied to primary residences.)
“But when a market’s this tight, every incentive to free up properties should be examined closely,” Lovely concludes.