The Ontario government is hiking its foreign homebuyers tax to 20 per cent from 15 per cent, effective Wednesday, in a move designed to help stem soaring home prices in the province.
The tax, known as the “non-resident speculation tax,” is also being expanded to include home sales across Ontario. It had previously been confined to the Greater Golden Horseshoe.
The government is also eliminating rebates that were available to international students and foreign nationals working in Canada, unless they apply for permanent residence. New permanent residents will be eligible for rebates.
“Our government is working to increase supply and help keep costs low for Ontario families and homebuyers, not foreign speculators looking to turn a quick profit,” the Ministry of Finance said on Tuesday. Ontario will also work with municipalities that want to apply vacant home taxes, the ministry added.
The changes come at a time when the government says a shortage of housing is helping drive up prices beyond the means of many households. The average cost of a house or condo in the GTA hit $1.3 million last month. A detached house in the city of Toronto was selling for $2 million on average.
Ontario has collected around $610.1 million under the tax since it was introduced in 2017 by the previous Liberal government. The changes announced Tuesday are expected to raise $175 million in the 2022-2023 fiscal year and $235 million the following year. It could be less, however, given those totals are subject to rebates.
In a speech to the Toronto Region Board of Trade minutes before the tax hike was announced, Premier Doug Ford said “it’s no secret that we have a housing crisis in Ontario.”
“The supply doesn’t come close to matching our current needs, let alone those of a fast-growing population,” said Ford.
“We are tackling the supply issue head on and moving forward with no delay because we can’t afford to wait,” he said.
But real estate experts say the foreign speculation tax is the kind of demand-side policy that hasn’t proven effective in the past.
Land registry data shows there were fewer than 200 transactions per month — less than one per cent — that are subject to the non-resident speculation tax, said Toronto Regional Real Estate Board (TRREB) chief market analyst Jason Mercer.
“For much of 2020 and 2021, this number trended closer to 100 transactions per month,” he said.
John Pasalis, president of Toronto’s Realosophy brokerage, said he doesn’t expect the tax hike will have much impact on the Toronto region’s heated housing market.
“This idea of the foreign buyer who has no ties to Canada — it’s not a serious person,” he said.
TRREB CEO John DiMichele said in a press release earlier this month that “history has shown that tax based policies pointed at foreign buying and speculative activity… have had very little impact on the market simply because this type of activity accounts for a small share of overall market activity.”
