With British Columbia coming down hard on foreign buyers and speculators with the original tax on the former being increased to 20% and a new one on the later taking effect immediately, will they set their sights on Toronto?
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With British Columbia coming down hard on foreign buyers and speculators with the original tax on the former being increased to 20% and a new one on the later taking effect immediately, will they set their sights on Toronto?
The speculator tax is only 0.5% this year, but starting next year it will increase to 2%. Given that many foreign buyers are desperately trying to get their cash out of a corrupt financial system by using Canadian real estate as insurance policies, the tax levied by British Columbia may not have much impact. However, a likelier scenario is they’ll turn to Canada’s largest city, where real estate is cheaper than it is in Vancouver but appreciates just as well—and as quickly.
Lois Volk, an Invis mortgage broker in Toronto, doesn’t think such a scenario is implausible. In fact, she thinks it makes sense because Toronto has a foreign buyer tax too—which is still capped at 15%--and it hasn’t dissuaded foreign buyers and speculators from buying real estate.
“It may well happen and they’ll have to put their money somewhere else,” she said. “The foreign buyer tax in Toronto hasn’t stopped them, either. Unless Toronto follows suit, it would make sense that the buyers come here.”
Expect Ontario’s provincial government to keep an eye on how the newly-unveiled measures in B.C. play out, especially since the provincial Liberals are in an election year. If foreign money pouring into Toronto real estate catches fire with the electorate the way it has on the West Coast, the Liberals may be inclined to act.
“I can understand he resistance of people just buying properties to park their money because it does take homes out of the market, and a lot of them aren’t being rented,” she said. “In areas with housing shortages and high rents, it will aggravate the problem.”
The new mortgage rules have made qualification harder and foreign speculation may exacerbate the unaffordability crisis, which is particularly acute among first-time buyers.
“I’m noticing a lot more that for first-time buyers, and even second-time buyers, it’s getting much more difficult to qualify,” said Volk. “We’re also dealing with higher interest rates and stress tests and there certainly are people who can’t get into market anymore, and the combination of higher interest rates is having quite an effect. I’m seeing a lot more condo dwellers and even noticing that the rental market is getting tight.”
