Ontario Government hiking foreign buyer tax – is it too late?
The government of Ontario announced that, effective October 25, its foreign buyer tax would be hiked to 25% — the highest of such tax in Canada.
The Non-Resident Speculation Tax, which aims to crack down on foreign real estate speculation, previously sat at 20%, marking a 5% hike.
The change comes as housing in Ontario remains unaffordable and out of reach for many residents. Applied to foreign nationals, corporations, or taxable trustees who purchase homes in Ontario, the province says the higher tax will “strengthen efforts to deter non-resident investors from speculating on the province’s housing market and help make home ownership more attainable for Ontario residents.”
“Young families, newcomers and those all over the province dream of having their own home, a dream which continues to be out of reach for too many,” said Minister of Finance Peter Bethlenfalvy. “To help Ontario homebuyers, our government is increasing the Non-Resident Speculation Tax rate by another five percentage points to 25%, making it the highest in Canada, to further discourage foreign speculation in Ontario’s housing market.”
This is the second hike to the Non-Resident Speculation Tax seen this year alone, after the government raised it from 15% to 20% in March. At the same time, the province made sweeping changes to where the tax would be applied, expanding it from just the Greater Golden Horseshoe Region to the whole province.
At the time, a number of experts said that raising the tax wouldn’t have any meaningful effect on Ontario’s real estate prices due to such a small percentage being owned by foreign investors. In fact, data StatCan’s 2018 Canadian Housing Statistics Programreported non-resident ownership of housing (when more than 50% of owners on a property title reside outside Canada) at just 2.2% in Ontario. Even when factoring in non-resident participation (when just one of the owners resides outside of the country) that number rose to only 3.3%.
Further to that, CMHC’s 2020 Condominium Apartment Survey, which tracked non-resident ownership of condo apartments in major urban centres from 2016-2020, revealed that out of 17 major markets across Canada, the majority had a foreign buyer presence below 1%. Even in Toronto, which is home to the highest proportion of newcomers annually, it saw just 2.6% of condo apartments with non-resident owners.
This week’s increase is one part in a series of moves by the provincial government to address the Ontario housing crisis. Last week, the Province announced it would be doubling the fines for unethical and illegal new home cancellations, and Municipal Affairs and Housing Minister Steve Clark is expected to introduce a piece of housing legislation Tuesday.
“Today’s announcement is another step in our government’s plan to make housing more attainable for all Ontarians,” Clark said. “We are working to end Ontario’s housing supply crisis — both by building 1.5M new homes over the next 10 years, and by ensuring Ontarians are able to access our existing housing supply. These measures are a clear indication of our commitment to do precisely that.”