VANCOUVER’S REALTY TAX WILL HIT THE GTA - BECAUSE IT MUST
By Peter Shurman
Note to Finance Minister Charles Sousa: when was the last time a Conservative suggested a new tax to you? Well, mark today’s date in your calendar because it’s the answer! I support what the BC government has done to cool the red-hot housing market in Greater Vancouver as an appropriate means of doing the same in the GTA.
If you’ve been home shopping in Vancouver or Toronto in the last 10 years or so, you know how deep your pockets have to be. That recently changed with the August introduction of Greater Vancouver’s new 15% tax on homes purchased by foreign speculators. Offshore buyers had been about 10% of the total purchasers in Vancouver.
Initial reports indicate home sales there dropped almost 30% between July and August, when the tax took effect.
Toronto, pay attention! Foreign capital was already investing here but now, Vancouver buyers are targeting Toronto and our market is on fire.
Most people think of real estate as the pool of available properties from which you purchase a first home or upgrade the one you have. Their attitude is “it is what it is.”
But there are many who don’t see it that way. For them, it’s another investment opportunity. Wealthy people, notably foreign, seek safe places to “park” money. There’s always the stock market but it’s never a place where one invests with the certainty of a good return. The Vancouver and Toronto real estate markets, meanwhile, have provided a bonanza over time. Indications are that those who used the Vancouver real estate market as a sure-fire investment vehicle are pulling up stakes and heading east to the GTA for a better deal. In Ontario, nothing differentiates foreign speculative buying from family home purchases.
This presents Ontario with circumstances that are aggravating an already overheated housing market in the GTA. It is common to see commuters heading into the city daily from north of Barrie, east of Bowmanville and from the Niagara area.
The question is whether Ontario should be looking at the BC example and put limits on the foreign capital influx that has become a major thorn in the side of people who live and work in Canada and share in the dream of owning a family home.
My view is that we not only need to act, but that it’s urgent!
To be sure, there are differences between Vancouver and Toronto. Vancouver development is closed because of natural barriers - mountains and an ocean. But, in the metropolitan area around Toronto, artificial barriers have been created by provincial "greenbelt" legislation that mandates the preservation of non-residential lands to prevent urban sprawl. In place for ten years, the greenbelt boundaries were reviewed last year and the recommendation was to maintain them. That means that farmland, forests and meadows have been ruled as inviolate unless the Wynne Government decides otherwise - no different than being unable to expand beyond the natural barriers surrounding Vancouver. So, home prices continue to balloon at lightning speed due, at least in part, to inflated demand resulting from an influx of foreign capital.
To summarize, the GTA housing market has little room for new single family home construction; foreign investment speculation has arrived in the GTA from Vancouver and is causing an additive effect; and, the hope of home ownership for new buyers (as average Toronto homes sell for almost $800,000 and detached for $1.28-million) is faint indeed.
Vancouverites appear extremely supportive of their new 15% foreign buyer’s tax - 90% approve, according to surveys. The feeling is this has given them a fighting chance to get a “piece of the rock”.
I believe Torontonians would agree and Ontario should consider following suit. If Queen’s Park introduced this form of tax as a means of dampening speculative buying, I’d expect sales volume to diminish and prices to stabilize, not drop. It’s time for some stability in this churning market so that buyers who want to own property near where they work and play get a fair shot. Prospective buyers find themselves securing savings and mortgage loans only to discover the dream has evaporated because prices rise too fast to keep up.
The BC government levied its 15% tax on the "Greater Vancouver Regional District" in BC’s Lower Mainland, roughly equivalent to Toronto/GTA west to Burlington; east to Bowmanville; and north to Barrie. But studies would have to refine the area and determine whether the rate should be 15%, as BC has, or look to end foreign speculation entirely by going higher.
Regardless of how it’s addressed, we must confront a problem that exists here now and that BC’s legislation has fueled. Real estate is still primarily about housing families and the GTA market is not in need of foreign speculation to maintain strength. Local demand is and will remain high enough to keep this market buoyant.
Peter Shurman is a former Conservative MPP & Opposition Finance Critic.