Ontario brings in foreign housing tax to cool Toronto market

Federal Finance Minister Bill Morneau speaks to the media after talks on housing market in the Greater Toronto Area with Ontario Finance Minister Charles Sousa and Toronto Mayor John Tory in Toronto on Tuesday

If legislation passes, the tax would be effective retroactively to April 21.

A 15 per cent tax on home purchases by non-resident foreigners. "It is about creating stability and addressing affordability in our housing market", she said". "Strengthening Ontario's rental market is an important way our Fair Housing Plan will help make everyday life more predictable, affordable and fair for Ontarians so they can continue to put down roots in the communities they love".

Despite the focus on foreign speculators, the government has admitted it doesn't have good data on the real estate market.

"Most of those projects are now on hold pending a review of this announcement and many of them will be cancelled and not proceed", he said. Prices in Vancouver were down 9 percent in March from a year ago, according to the Canadian Real Estate Association. The index prices for Greater Vancouver and Greater Toronto stood at C$919,300 (US$687,636) and C$772,500 (US$577,830), rising 13% and 29% year-over-year, respectively.

The move comes a week before Ontario unveils its budget on April 27 and two days after the province's Finance Minister Charles Sousa said the government recognizes that "now" is the time to address the issue.

Defending the new measures, Ontario Premier Kathleen Wynn stated at a press conference today: "When young people can't afford their own apartment or can't imagine ever owning their own home, we know we have a problem".

Ontario is also expanding rent control, which now applies only to units built before November 1991.

"While we support the government's interest in ensuring viable rental options for Ontarians, well intentioned yet dramatic changes to rental policies meant to improve options for renters will have unintended consequences, resulting in a stagnant rental industry, declining rental assets, and less choice for today's tenants". In Toronto, the average price of detached properties hit $1.56 million, an increase of 32.8 per cent from March 2016.

Expanding the province's existing rent control system to cover all tenants. Other measures to be implemented by the CMHC next month include the introduction of improved underwriting flexibilities and a revised premium schedule supporting increased affordable housing.

Federal and Ontario finance ministers say that while they are concerned about diminishing housing affordability in Toronto, they will not introduce measures for homebuyers that could impact house prices in the city by boosting demand.

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"What we're aiming to do is to bring in some initiatives that will help people in that whole continuum of housing right from rental through to purchasing a home without having unintended consequences", she said in Ottawa.

Real estate agent Sabrina Ataullah-Jan said that Canadian properties are undervalued and that is why the Toronto area has an influx of foreign investment.

Wynne acknowledged that the government will wait and see what impact the measures will have and wouldn't rule out taking further action, if necessary.

The Ontario government has announced what it calls a comprehensive housing package aimed at cooling a red-hot real estate market.

Like many others, Altbaum is calling for either a foreign buyers tax - like the one imposed in Vancouver in August - or a change to capital gains taxes to discourage investors from flipping properties.

- A five-year, $125-million program aimed at encouraging the construction of new rental apartment buildings by rebating a portion of development charges.

A standardized lease document for all tenants.

Ontario also plans to allow municipalities, led by Toronto, to slap their own tax on vacant properties.

Federation of Rental-housing Providers of Ontario (FRPO) president and chief executive officer Jim Murphy is disappointed the proposed rollback - which he said could be "very damaging" to the future supply of rental housing - was made without formal consultation with the industry directly responsible for the development and operation of rental housing.

- An effort to understand and tackle practices that may be contributing to tax avoidance and excessive speculation in the housing market.

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