Toronto Realtors Say Foreign Buyer Tax Would Hit Rental Supplyby
Quarter of overseas investors planned to rent properties
Home prices forecast to gain 10% to 16% this year, board says
Taxing foreign property buyers could inadvertently squeeze the supply of rentals in Toronto, where tenants are already having trouble finding affordable homes in a market where prices are forecast to rise by double digits this year, the local real estate board said.
Overseas investors accounted for fewer than 5 percent of transactions in the Greater Toronto Area last year, the Toronto Real Estate Board said Tuesday, citing the results of a new survey. Most sought homes as a residence rather than to park cash, the findings show. About 25 percent planned to rent out their properties.
The survey comes amid calls for Canada’s largest city to follow Vancouver, where a provincial foreign-buyer levy imposed at the start of August led to a 26 percent decline in home sales the same month. Toronto has taken the lead as the nation’s hottest property market, with average detached-home prices surging 20 percent to C$1.25 million ($950,000) in 2016 from the prior year. The the city’s rental vacancy rate hovers at 1 percent, according to board figures.
The board sees no let up in price gains this year. While home sales will slip to 110,000 transactions in 2017 from 113,133 last year, average prices are forecast to rise 10 percent to 16 percent to between C$800,000 and C$850,000.
A foreign buyer tax in Toronto “would be misguided,” the board said in a statement Tuesday. "While governments have been focusing their policy solutions on allaying demand, what is needed are policies that focus on the lack of available homes for sale and for rent."
The board’s fourth-quarter rental-market report last week said that "investor-owned condo apartments are the only option for renters looking for new, modern units" in Toronto’s most sought-after neighborhoods. Rental transactions fell almost 6 percent from a year earlier because "of a lack of units available for rent, not because of declining demand."
The board’s latest survey on foreign ownership questioned member real estate agents who had represented buyers in the 12 months to November. Realtor responses showed that 25 percent of overseas buyers planned to rent out their property, 40 percent sought a primary residence and 15 percent wanted a home for a family member to live in.
In British Columbia, the debate over the utility of taxing foreign buyers continues, with the average Vancouver home still costing more than C$970,000.
B.C. Premier Christy Clark said on Jan. 29 that foreigners residing in the province on a work permit would be exempted from the 15 percent tax, arguing that skilled workers are needed in the technology industry and higher education to help create jobs.
“Now that the additional tax has effectively cut back the excessive demand we were seeing last year, we are in a position to make the adjustments necessary to help ensure we can keep attracting highly skilled workers,” she told reporters.