Ontario’s new foreign-buyer tax should have been narrower in scope, a popular Canadian real estate analyst suggests.
“I was supportive of maybe a smaller tax on resale housing,” says Ben Myers, VP of market research and analytics for Fortress Real Developments, on the latest BuzzTV Facebook Live broadcast.
The Non-Resident Speculation Tax was unveiled last week as part of Ontario’s Fair Housing Plan to tackle affordability challenges in many markets around southern Ontario, including the Greater Toronto Area.
This tax will generally apply to non-residents and foreign corporations purchasing residential real estate between one and six units in the Greater Golden Horseshoe.
The GGH covers a swath of southern Ontario that stretches roughly east to west from Peterborough to Waterloo and north to south from Orillia to Niagara.
But this tax, which targets the new and resale housing markets could have negative impacts on residential development, some observers say.
Developers typically secure financing for new projects by selling units before breaking ground. These are known as pre-construction units, and foreign-buyers are more active in this segment than others, experts suggests.
Myers estimates foreign buyers account for about 5 to 8 per cent of sales activity in Toronto’s housing market. But within the pre-construction market, the share of units purchased by foreign investors could be as high as 25 per cent, Brad Lamb, a Toronto developer and broker, recently told BuzzBuzzNews.
Applying a broad foreign-buyer tax that impacts this market could put downward pressure on condo construction, Myers suggests.
“I think we want to promote additional supply in the marketplace, and if that comes from foreign buyers, I don’t think that’s the big issue,” he says.
Myers isn’t just talking supply of condos for ownership. Many of these pre-construction purchases end up listed for rent.
“We want rental supply in the marketplace, so if they’re (foreign buyers) renting them out, I don’t think it’s a big issue. Obviously the issue is if they’re keeping them vacant, but… I certainly don’t see that from any of the projects that we have or from any of the data that’s coming out of CMHC and others,” he adds.
Myers does note some positives about Ontario’s plan, particularly when compared to the one BC rolled out last August for Metro Vancouver.
“At least the plan that Ontario did was a little bit more well thought out. We grandfathered the tax in,” he says.
The analyst supports a number of exemptions bundled in with the tax. Rebates are going to be offered to foreign nationals who have jobs in the province. Same goes for international students and those who subsequently become citizens 0r permanent residents.
“You’re contributing to our economy, you should have the right to buy a home,” says Myers.
See the full BuzzTV broadcast with Myers below: