In June, the governing party’s campaign promise to ban foreign real estate buyers became law in Canada. Depending on your perspective, it was an instance of political leaders keeping faith with the voters — or an example of poor timing.
The two-year ban on property purchases by foreign buyers comes as home sales and prices are headed downward, even as delistings soar. The latest figures on the Toronto housing market show a dramatic 79 percent decline in condo sales, for example. The ban will take effect on January 1, but will not apply to permanent residents, buyers legally working or studying in Canada, or asylum-seekers. All other non-citizens will be barred from purchasing property. The same will be true of corporations that are not controlled by Canadians. In one sense, the plan is not a major departure, but rather an extension of what has been happening at the provincial level. As Storeys reported last month: “British Columbia was first out of the gate [with restrictions] in 2016, with the provincial government announcing a 15% surtax for non-residents of Canada, which got bumped up to 20% a year later. The law also allowed Vancouver to impose a vacant property tax to encourage more of the city’s housing stock to appear on the rental market. “Ontario followed in 2017, introducing a ‘non-resident speculation tax’ of 15% of the purchase price for the Greater Golden Horseshoe Area around Toronto. This year, in the wake of a massive run-up in house prices during the pandemic, Ontario’s government bumped up the tax twice — first to 20%, and just recently to 25% — and expanded it to include the entire province.” In Ottawa, the main parties were all on board with the idea of restricting purchases by foreign buyers. The Liberals and Conservatives both promised a ban in the last campaign, and the New Democratic Party proposed a B.C./Ontario-style 20 percent tax nationwide. Critics say the plan is window dressing, and won’t have a real impact on prices. That’s because foreign buyers aren’t as common in the real estate market as many people believe. A study by Baker Insights Group revealed that foreign purchases represented just 1 percent of all Canadian property sales in 2020. At the high end — very rich individuals and corporations — foreign buyers will prove adept at finding loopholes in the legislation, some observers predict. Among the skeptics is Tsur Somerville, a professor at the Sauder School of Business at the University of British Columbia and director of the UBC Centre for Urban Economics and Real Estate. In an interview with the Spanish-language newspaper EL PAÍS, he noted: “We have already seen these taxes in cities where there is a lot of interest, such as Vancouver and Toronto. They had little effect. The housing crisis is, overall, an issue linked to domestic factors, although it is easier to point the finger elsewhere instead of at ourselves.” |
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AuthorLarry Weltman is a Customer Service Representative for AccessEasyFunds Limited, or AEF, an Ontario-based firm Archives
November 2022
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