Ontario may not have any other choice but to follow in British Columbia’s foot steps in the tax they implemented last month on Foreign Buyers.
Why? Because “everybody else” is doing it, Benjamin Tal told Business News Network (BNN) on Friday.
Ontario’s Finance Minister, Charles Sousa, hasn’t completely ruled out the 15 per cent property transfer tax that B.C. has levied on foreign buyers in response to the quickly escalating real estate prices.
Benjamin Tal further went on to say “The short answer is simply [Ontario] doesn’t have a choice because everybody else is doing it,” referring to countries such as New Zealand that have a similar tax.
At the pace that prices are rising in the Toronto and the surrounding areas the government is likely to take action to try and “slow down” the market. The underlying issue isn’t a result of foreign investment, it’s to what extent they inflate prices in a way that it is much more difficult for people who live in the Greater Toronto Area (GTA) to purchase a home.
According to the Toronto Real Estate Board (TREB) the average selling price of a home in the GTA soared over $100,000 compared to the same time last year to an average selling price of $710,410 with 9,813 homes sold last month compared to 7,943 homes sold year with an average selling price of $603,534. The bulk of the sales prices and number of sales grew in the 905 area code where the average selling prices grew close to $130,000 reaching $728,122.
However, the foreign buyers tax, so to say, isn’t the only solution to maintain affordability in the GTA. Among other possibilites, Tal cites:
- Compelling banks to tighten their lending practices by making them pay for their own mortgage insurance.
- Raising the down payment minimum to 10 per cent, even for homes under $1 million,
- Closer monitoring of lending to subprime buyers.
- Offering tax incentives to developers to make more purpose-built rental buildings, including more flexible rent control rules, as ways of cooling Toronto’s housing market.
Foreign Investors aren’t the only ones to hold accountable for the inflated market, low-interest rates, cheap lending, scarcity of land, shortage of purpose rentals are just to name a few that are equally contribute to the market and the way it is right now.
But higher interest rates could spell disaster, borrowers would just have to spend more to pay down their debt, which in turn would give them less to spend in the real economy, possibly sparking a recession.
We may have come too far to correct the buyers who’ve capitalized the opportunity to bite-off more than they can chew with the lower interest rates however, if indeed, a foreign tax is implemented, it may just provide the cooling necessary to slow down the pace.
We can’t speculate at this time how much of a tax could be under consideration for Toronto, if at all, nor exactly when this will be finalized.
If you have knowledge of any foreign buyers looking to purchase any Real Estate in Toronto before any changes to foreign investors and their rules, we can suggest now may be the time to act on it and make the decision before it’s too late, contact The Ali & Khan Team to further discuss.