Photo: James Bombales
This week, the BC government unveiled its 30-point plan for a fairer housing market. The plan is intended to cut down on speculation originating from outside of the province, making real estate more affordable for BC residents. And, according to one economist, it could be an incentive for the Ontario government to make some changes of its own.
CIBC senior economist Benjamin Tal is predicting that the Ontario government could hike its foreign buyer tax from 15 to 20 per cent in coming months, in anticipation of a rush of foreign investment as the new rules push buyers from Vancouver to Toronto.
“It’s almost too good to resist,” Tal tells BuzzBuzzNews. “I think that door is possibly open now.”
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Tal says that an increase in foreign investment in the Toronto housing market could be a serious revenue boost for the Ontario government, especially if it chose to increase the tax.
“I do not think that many policy makers will admit this, but they don’t expect the tax to change [foreign investment] in any way,” he says. “[Since the tax was introduced in April,] we’re not seeing any significant change in [foreign buyer] behaviour. So Ontario would be tempted to raise the tax as another way to raise revenues.”
Late last year, PwC and the Urban Land Institute release their Emerging Trends in Real Estate 2018 report, which found that an overwhelming majority of Ontario’s real estate professionals thought the foreign buyer tax did little to deter foreign investment in the Toronto real estate market.
“Most interviewees think that overseas buyers still see Canada as a safe haven and an attractive place to live, so they will continue to buy in the Canadian market regardless of new taxes,” reads the report.
But, even if a higher tax wouldn’t push GTA housing demand – or prices — down, Tal says the Ontario government could use the revenue to help address housing affordability in the area.
“They could put this revenue towards more social housing, and things like that,” he says.
As for the chances of the change happening anytime soon? Tal is unwilling to bet on an actual date for the tax hike: “I really don’t know, but I do think that it’s a possibility now,” he says.