Photo: James Bombales
The Ontario government’s decision to offer international students rebates on its recently announced foreign-homebuyer tax could chip away at the levy’s effectiveness, one expert suggests.
“Foreign students are believed to represent a significant share of condo demand in Toronto,” Shaun Hildebrand, senior vice president of Urbanation, a firm that researches the GTA’s condo market, tells BuzzBuzzNews.
To skirt the tax of 15 per cent, a foreign homebuyer with a child studying in Canada could buy a home under that child’s name to qualify for a rebate, Hildebrand suggests.
That’s because when Ontario unveiled a foreign-homebuyer tax of 15 per cent for the Greater Golden Horseshoe, which includes the GTA, it included a number of proposed exemptions and rebates.
Among them was a rebate for international students, so long as they have been enrolled at an approved post-secondary institution full time for at least two years.
“Foreign condo purchasers that do not plan to attain citizenship or permanent resident status or do not have children enrolling in school here are believed to represent a very minor share of the market,” Hildebrand explains.
“So, it is highly unlikely that the new 15 per cent Non-Resident Speculation Tax will have any material impact on condo sales, given the rebate available,” he adds.
Hildebrand also notes that in the pre-construction market, a non-resident would potentially have several years before the tax was due. That gives foreign buyers in this segment “time to put [their] ducks in a row to avoid paying the tax,” he continues.
Taxes on the purchase of an Ontario home are paid upon the final closing, rather than up front during the deposit period.
Ontario’s Fair Housing Plan, a 16-point policy including the foreign-buyer tax, comes amid a boom in the number of international students choosing to study in Canada, according to a recent report from RBC.
In fact, in 2016 close to 415,000 international students were enrolled at post-secondary schools across Canada, up from 350,000 in 2015. In 2007, international students numbered 180,000.
Lauren Cooper, the RBC economist who authored the report, says more time is needed to gauge the impact of the tax and what role increased numbers of international students could play in the market.
“My first reaction to that is that it’s too soon to tell, just given that those measures were recently implemented and that this upswing in the number of students has been occurring pretty much for the past decade,” Cooper tells BuzzBuzzNews.