Ontario real estate tax curbs foreign buyers
The number of sales involving a foreign entity has steadily declined since the province introduced its non-resident speculation tax.

TheStar.com
April 25, 2018
Tess Kalinowski

A year after Ontario launched its foreign buyers’ real estate tax, the province has raised about $41 million and steadily reduced the number of off-shore property transactions in the Greater Golden Horseshoe area to about 1.6 per cent in February 2018, from about 4.7 per cent in May.

New numbers released by the Liberal government on Wednesday show nearly half of the non-resident speculation tax collected in the province — $18.9 million — between Nov. 18 and Feb. 16 was in the City of Toronto. York Region accounted for another $13.1 million. Less than 1 per cent was collected outside the Toronto area.

The number of real estate transactions involving at least one foreign entity has been dropping since the 15 per cent tax was introduced April 20, 2017 as the cornerstone of Ontario’s Fair Housing Policy, which was aimed at cooling the scorching Toronto-area housing market.

Although the number of foreign transactions was relatively small when the market peaked last March with a 34 per cent year-over-year price gain, the psychological effects of the policy have been enormous.

The number of homes sold in the Toronto area in March this year was down 40 per cent compared to a year earlier. The average price was 14 per cent lower, according to the Toronto Real Estate Board, dropping to $784,558 from $915,126.

In York region, which previously topped the list of foreign buyers in the province, the number of affected transactions has been more than halved, from 6.9 per cent between May and August to 3.2 per cent between August and November.

In the City of Toronto where the level of foreign transactions was previously 5.6 per cent, the number of transactions has dropped to 2.5 per cent, according to the latest figures.

Of the 66,307 real estate transactions in Ontario between August and November, 1,099 or 1.7 per cent involved at least one foreign entity.

The province has no data on the number of foreign transactions prior to the introduction of the tax. But a study from the Toronto Real Estate Board released prior to the tax showed 4.9 per cent of transactions in the area involved a foreign party.

The tax isn’t entirely to blame for the slowdown in the Toronto market. Interest rate hikes and new mortgage stress tests by Canada’s bank regulator have also slowed home sales.

Foreign students and those applying for landed immigrant status are exempt from the tax, which was aimed at investors rather than those planning to live in the property they purchased.

A recent study by Toronto real estate broker John Pasalis suggested that the downturn in the housing market has cost about 1,000 homeowners about $136 million when buyers walked away from homes they had purchased prior to the drop in property values.