Foreigners who buy homes in Toronto and its surrounding area now face an additional 15% tax – echoing a recent measure adopted in Vancouver – as part of a slew of measures aimed at tempering a heated housing market that ranks as one of Canada’s most expensive.
The tax – part of proposed legislation unveiled on Thursday by the Ontario provincial government – will be levied on houses purchased in the Golden Horseshoe, an area that stretches from the Niagara region and the Greater Toronto Area to Peterborough.
It will apply to all residential purchases made by those who are not citizens or permanent residents of Canada, as well as foreign corporations. Once the legislation passes, the tax would be applied retroactively to purchases made as of 21 April.
“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. “And when the rising cost of housing is making more and more people insecure about their future, and about their quality of life in Ontario, we know we have to act.”
Amid two years of double-digit gains and mounting fears of a housing bubble, her government has consistently fended off calls to intervene. The pressure ramped up earlier this month, after figures showed the average price of homes in the Greater Toronto Area soared 33% in the past year, pushing the cost of a detached home to an average of C$1.21m.
“There is a need for interventions right now in order to calm what’s going on,” said Wynne. The tax would be revenue neutral, she added, aimed squarely at tempering demand. “In some ways, we have to realise this is a good problem to have … [It] is the unwanted consequences of a strong economy with a promising future.”
The tax was not aimed at new Canadians or those looking to settle in Toronto, she stressed. “With this tax, we’re targeting people who aren’t looking for a place to raise a family, they’re looking only for a quick profit or a safe place to park their money.” Those who pay the tax but later become Canadian citizens or permanent residents, or who work or study in the area, will be eligible for a rebate.
The tax is one of more than two dozen measures introduced on Thursday and aimed at injecting affordability into the region’s housing market. The proposed legislation includes expanding rent control, incentives for those who build rental housing and new tools that will allow Toronto city council to follow Vancouver’s lead in imposing a tax on vacant homes.
In August, the province of British Columbia became the first in Canada to impose a 15% tax on foreigners buying houses in metro Vancouver. Low interest rates along with demand from foreign investors – many of them from China – had helped turn Vancouver into one of the world’s least affordable housing markets.
The tax, inspired by similar measures adopted in Sydney, Singapore and Hong Kong, sent home sales in metro Vancouver plunging some 40% in the initial months. Prices have also tumbled, down 9% in March compared with one year earlier, according to the Canadian Real Estate Association.
Foreigners are believed to make up a smaller proportion of buyers in Toronto’s housing market, but exact figures are unknown as the government does not keep statistics on foreign buyers.
The Ontario government estimated on Thursday that investment by foreigners hovers around 8% in Toronto and the surrounding region. “Developers are telling us they have individuals coming, jumping in the queue and buying multiple units with no intention of living in them,” said Charles Sousa, Ontario’s minister of finance.
The measures – which include better reporting on foreign buyers – aims to be a starting point in addressing the many reasons that demand for housing in the region has been increasingly outstripping supply, sparking eye-watering bidding wars. “There is no silver bullet, there’s no single answer that’s going to resolve the problem,” Sousa said. “We’re just trying to facilitate it and put measures around it to stabilise the market.”