After blizzards of headlines over the last few years, Vancouver real estate is no longer the only dog and pony show around. With a highly inflated housing market where a home will cost you more than 11 times the average median total family income, Toronto is keen to adopt policies that will stunt a further frenzy. The answer? Among other measures, Toronto is also on board with Vancouver’s 15% foreign buyer tax. It is still too early to know if it will it curb the appetite for real estate in the GTA or have little effect whatsoever?
In April this year, the Ontario provincial government announced that they would introduce 16 measures to protect the health of the real estate market. Among promises to expand rent control and impose taxes on vacant homes, Ontario Premier Kathleen Wynne has announced that the province follow B.C.’s model and introduce a 15% foreign buyer tax.” The measure is intended to help people afford buying or renting a home in a city that’s going the way of its western cousin. Foreigners currently working in Ontario, those who receive citizenship or permanent resident status, as well as international students would be eligible for a rebate under the new policy. Anyone else, it’s pony up or get out (of our housing market, that is).
But in a day and age when the price point of an average semi-detached home in Toronto just increased by 30% in a single year, is foreign money even the problem? “With this tax, we are targeting people who aren’t looking for a place to raise a family — they’re looking only for a quick profit or a safe place to park their money,” Wynne said. Fair enough, but just like Vancouver, if this measure is not supplemented by a healthy economy (read: higher wages) and home prices continue to rise, the tax will do little to curb the problem. Reality and experience tells us that the problem is supply and demand, along with an imbalanced cost of living to salary ratio.
While Toronto is undoubtedly Canada’s financial engine, The Globe and Mail reported that the median total income for Toronto families is a paltry $78,667. That’s behind Ottawa, Edmonton and Calgary, all of which punch in above $100,000. If you look at how much income you need to qualify for the average home, which is just under $1 million, it’s more than double that median amount. And this assuming one has a down payment of $75,000 or more.
Of the more astute arguments against the tax, many have pointed out that much of the development in the GTA could not have been done without foreign investment. A BuzzBuzzNews article cited an email newsletter written by Toronto developer Brad J. Lamp, in which he called B.C.’s foreign buyer tax “an egregious error in policy.” Lamb’s position was that the tax will only cause higher prices in Vancouver because it doesn’t address “the real issue affecting the market: lack of supply.” Looking at the numbers since the tax was introduced in B.C., it’s impossible to deny that home prices continue to rise. Lamb also said that as much as 25% of total sales for pre-construction condos in Toronto were sold to foreign buyers – a phenomenon that helped propelled development to begin with.
Of course, a high rate of residential development also means commercial and retail space. Retail and commercial space mean more jobs. And with real estate responsible for 14% of Ontario’s economy, once you begin to piece it together you realize the scope of its importance.
As the financial engine of the country, the health of Toronto’s real estate market has far larger and more serious implications for the country as a whole. Both the Toronto Real Estate Board and the Ontario Real Estate Association are adamant critics of the tax—mostly because it does nothing to solve the issue of affordability.
Foreign buyers are, not now, nor were they, ever responsible for the cost of Canadian housing; we are. If developers have taken advantage of this further interest to raise the prices of homes here, it is our policy makers who are to blame. Lax foreign buyer policy and a rapacious appetite for short-term, self-interested monetary gain over long-term fiscal health are running the show and have been for some time; while the rest of us look on and wonder what the ringmaster needs to throw his hat in for good.
Before and after pictures of the area surrounding the Bathurst Street bridge were compiled by BuzzBuzzNews and offer a stark reality check.
Bathurst Street Bridge looking east, 1980s
Image courtesy BuzzBuzzNews website