Ontario’s move to curb foreign real estate buyers appears to be working, which is evident in the declining number of deals in the months following the province introduced a tax on non-residents. Slightly more than 3% of real estate activity in Toronto and the Golden Horseshoe from May to August involved foreign buyers. The overall Toronto Region housing market has considerably cooled since the non-resident speculation tax was introduced, though experts agree that is to be attributed to the psychological impact of other new provincial policies, including expanded rent controls and land for affordable housing. On its own, the tax has no contribution in making homes more affordable.
Foreign buyer rates are higher in York Region, which topped the list of Ontario municipalities at 6.9% of transactions from May to August, followed by the city of Toronto, where the rate was 5.6%. In the month following the introduction of the new tax, some 4.7% of those who purchased homes and condos in a wide swath that stretches from Niagara through to Toronto, east to Peterborough and north to Barrie, were non-residents. However, that takes into account several previously negotiated deals that were unaffected by the new tax.
There is no provincial data on the number of foreign buyers before the levy was introduced. While the Toronto Real Estate Board released its figure of 5% of foreign investment into the regional market early this year, there was widespread skepticism among some who held the belief that the level of overseas investment was much higher. However, researches conducted subsequently, including some done by the Ontario government, have revealed similar findings.
Given that foreign students and those applying for landed immigrant status are exempt from the new tax, the levy only affects about 1.5% of all real estate transactions. York Region, which recorded the highest foreign investment in the province, has bead badly affected since Ontario introduced its cooling measures last April. The tax, however, cannot be fully blamed afford the slowdown in the Toronto region housing market. The 15% foreign buyers tax is levied on businesses and buyers who are not citizens or permanent residents of Canada, and is similar to one in British Columbia that has been in place for over a year.
The Ontario Real Estate Association (OREA) showered its appreciation on the government for collecting data on foreign transactions but it urged Queen’s Park to address the supply side of the housing market. OREA also noted that foreign buyers represent a sliver of the property market and that the province should develop a target given that it frequently encourages off-shore investment. It has also been noted in government report that in the month after the tax was implemented, from April 24 to May 26, 1.5% of transactions involved foreign buyers. This is outside of the Greater Golden Horseshoe, and has risen slightly from May to August. According to industry experts, housing sales in Toronto are expected to remain up year-over-year, but month-to-month sales have been on the wane since the province’s new policies were ushered in.
