Can Foreign Buyer Tax Cool Off the Housing Market?

Can Foreign Buyer Tax Cool Off the Housing Market?

Don’t Let Speculation Stop You from Buying a Condo for Sale in Downtown Toronto

As the Toronto housing market situation spirals out of control, even those who were initially skeptical of the idea of levying a Vancouver-style 15 percent tax on foreign buyers in Toronto are now calling it a much-needed measure to stem demand.

Ontario Finance Minister, Charles Sousa said earlier this year that he was considering implementing the 15 percent tax in Toronto. The minister has met with support from experts and leading banks. However, due to lack of concrete data, the government has been moving slowly on the subject so as to not cause collateral damage. Economists too are unsure about which side of the wall the housing market cat will leap, but are nevertheless convinced that a tax on foreign buyers could be one step in a multi-pronged strategy to cool the housing market.

On the other hand, realtors are strongly resisting any levy of foreign tax, as they believe this will cause irrevocable damage to the economy. The Toronto Real Estate Board (TREB) is also against the idea, quoting statistics that show only 4.9 percent of real estate purchases being made by foreign buyers.

The Argument for Foreign Buyer Tax

When the Vancouver housing market got completely out of control, British Columbia went ahead and levied a 15 percent tax on foreign buyers. The effect was immediate. Sales of detached houses went down by a sharp 54 percent compared to the last year. Market analysts and leading banks feel this is a good case study for Toronto, and can be an effective measure to cool the red-hot market.

While experts welcome the levy on foreign buyers, many also feel that the measure may not be adequate. A new report by Ryerson’s City Building Institute has proposed an annual property “progressive surtax” that would be applied to the value of homes above a certain threshold. The tax will be waived for people who are earning and paying taxes locally, but others would have to cough up the tax. This, experts believe will reassure Torontonians that the demand-supply is driven strictly by local factors, and it could have a calming effect on the market.

The Argument against Foreign Buyer Tax

Condos in Downtown Toronto

Realtors argue that the 15 percent foreign buyer tax has not been a success in Vancouver since neither demand nor affordability has gone down, and housing activity has merely slowed. Fewer people are listing their houses for sale.

The other argument is that the Vancouver market is quite different from Toronto’s in that the foreign immigrant population plays a predominant role in driving the Vancouver housing market. Since the TREB report says that Toronto has a much smaller percentage of foreign buyers compared to Vancouver, they believe the tax will have no significant impact in bringing down prices.

On the other hand, such a move, they feel, would unnecessarily hamper growth and directly affect the rental market, as many foreign buyers invest in condos. If these buyers pull out, there could be a scarcity of condo projects, promoting rentals to go up. The issue remains contentious, but is widely viewed as one of the many ways in which Toronto’s housing market woes can be addressed.

With low-rise homes getting scarcer in the city, many young professionals and families are looking at new luxury condo projects in Toronto. With interest rates being at a historical low, a condo is viewed as an excellent investment opportunity. Downtown living comes with several advantages such as reduced commute time, a vibrant social scene, good local schools, and an abundance of trendy restaurants, hotels and shopping centres.

If you are considering buying a condo in Toronto, The Davies, located right next to Robertson Davies Park at Avenue Rd. and Cottingham, is a great choice. While you get the excitement of a trendy downtown home, the calm, green surrounding affords you the respite you need from the pace and bustle of city life. Not to forget, these new condos for sale are walking distance from the TTC. With beautiful and sophisticated building interiors and architecture, luxurious outdoor amenities and a lush surrounding, The Davies has a lot to offer.

View the floorplans of our condos in downtown Toronto and find out more. Call us today at 647-360-9588 to schedule an appointment to see our new condo project or register online for more information.

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