Ontario sets tax on foreign buyers to cool housing market
April 20 2017 06:26 PM
Canada
A "Sold over asking" sign is on display on a house for sale in Toronto.

Reuters/Toronto

* Move part of 16 measures to cool market
* Similar tax led to price decreases in Vancouver
* Rent controls will be applied to all homes
* Vacant homes tax will also be implemented


Ontario's provincial government on Thursday introduced a 15% tax on property purchases by foreign buyers as part of 16 measures designed to cool Toronto's red-hot housing market.
A rapid acceleration in home prices in Toronto has prompted some economists to voice fears the real estate market in Canada's largest city is in a bubble and raised concerns about the ability of first-time buyers to afford a home.
The issue has become a headache for the province's Liberal government, which is trailing the Progressive Conservatives in polls ahead of an election in June next year, and lawmakers face a difficult balancing act to find policies that will stabilise prices without crashing the market.
A similar tax introduced by British Columbia last July led to a sharp decline in sales activity and a fall in prices. Prices in Vancouver were down 9% in March, compared with a year ago, according to the Canadian Real Estate Association.
Sydney, Singapore and Hong Kong have also introduced foreign buyers taxes.
"This is a complex issue," Ontario Premier Kathleen Wynne told reporters. "There wasn't one single thing that we could do that would resolve the issues that we're confronting. That's why we're bringing forward this package."
Wynne said the province would expand rent controls to all private rental units, including those built after 1991 which are exempted under current rules.
Rent hikes on new buildings will be limited to 1.5% above the inflation rate, which sat at 2% in February.
The province will also implement a tax on vacant homes in Toronto as part of measures to address a lack of supply of affordable homes, the province's finance minister Charles Sousa said.
It will also introduce a C$125mn ($93mn) five-year programme to encourage construction of new apartments.
Toronto prices rose 33% in March from a year earlier and the average price of a detached home topped C$1.2mn ($903,000) last month.
Bank of Canada Governor Stephen Poloz has warned the level of price increases is unsustainable.
Souza met with his federal counterpart Bill Morneau and Toronto Mayor John Tory on Tuesday to discuss potential measures.
The three agreed to work together to track data and enforce compliance with tax regulations and to meet every quarter to assess the Toronto market.
The announcement of the measures comes ahead of Ontario's annual budget on April 27.



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