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Ontario, Canada brings in foreign housing tax to cool market

Ontario, Canada brings in foreign housing tax to cool market

The Canadian Press has learned the Ontario government will place a 15 per cent tax on non-resident foreign buyers as part of a much-anticipated package of housing measures to be unveiled today, aimed at cooling a red-hot market.

The foreign-buyers tax won't apply as directly to Hamilton, which sees less interest from global buyers than Toronto, but if it serves to lessen demand elsewhere in the Greater Golden Horseshoe, Hamilton may see some relief.

The main reason house prices are skyrocketing in Toronto (the price of an average detached home is now over $1 million and has risen 33 per cent in the past year) isn't that there aren't enough government taxes on real estate.

"When young people can't afford their own apartment or can't imagine ever owning their own home, we know we have a problem", said Kathleen Wynne, the Ontario premier.

The Ontario government introduced a package of 16 measures Thursday created to tame runaway home prices in Toronto and surrounding cities, and improve affordability for those hoping to own or rent property.

Ontario Finance Minister Charles Sousa has said governments need to figure out what they can do about housing affordability without overcorrecting the system.

"There's the foreign buyers tax, the empty homes tax in Vancouver... so there certainly has been progress, but generally speaking, we should raise property taxes and cut income and sales taxes, and we haven't done that yet for the general population", he says.

Overall, the NRST sounds great and might give the average citizen the impression that the Ontario Liberal Government is actually trying to cool down house prices, but in reality it will have very little impact on the demand for houses. Prices in Vancouver were down 9% in March, compared with a year ago, according to the Canadian Real Estate Association. Toronto is also likely to see a vacancy tax introduced to curb so-called absentee landlords, a measure backed by Mayor John Tory.

Another housing measure would expand rent control, which now only applies only to units built before November 1991.

Timing isn't everything. Robert Kavcic, a BMO senior economist, argues foreign investment in Toronto real estate isn't at Vancouver levels, another reason any impact on pricing here shouldn't be as severe.

The solution from Vancouver, on the west coast, was to impose a foreign buyer tax. "They themselves have said, you know, we want to make sure our sales practices are appropriate, they're transparent, that buyers and sellers understand what's happening in the marketplace".

Premier Kathleen Wynne said the new tax would not target immigrants, and a rebate would be available to foreigners who work in Ontario, those who subsequently get citizenship or permanent resident status and worldwide students. It also includes rebating a portion of development charges to encourage rental construction under a five-year, $125-million program.

- Education for consumers on their rights, particularly on the issue of one real estate professional representing more than one party in a real estate transaction.

Toronto Mayor John Tory issued a statement on Ontario's housing plan: "I welcome numerous actions announced by Premier Kathleen Wynne's government today".

Tal said he suspects that over the next few years, builders who were planning to construct rental buildings will opt for condos instead or cancel the developments altogether, a move that would reduce the supply of rental units.

Murphy said 30 per cent of condominium units in the Toronto area are rented and new controls could hurt small investors who own one or two units to supplement their income.

Some housing measures promised by the province Thursday were encouraging to market watchers in Hamilton, where prices have been rising by double digits for years.


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