Mayor Olivia Chow’s Executive Committee easily approved a proposed tax on foreign buyers of residential properties in Toronto Tuesday.
The move means that foreign buyers would have to pay a new 10 per cent tax on the value of a purchase property. It will come into effect in just under a year on January 1, 2025, pending approval from city council.
“Staff are recommending introduction of a 10% rate on the residential purchase price, which, when coupled with other land transfer tax related impacts, is expected to effectively deter real estate speculation,” city staff said in a summary of the proposed tax.
The move comes as all levels of government try to make it easier for existing residents to find and afford a home.
Earlier this year Toronto City Council voted to boost the vacant home tax in order to deter owners from leaving properties empty.
Ontario introduced a 25 per cent Non-Resident Speculation Tax (NRST) for residential properties in Ontario back in 2017. City staff recommended that the new Municipal Non-Resident Speculation Tax mirror the provincial provisions. They said that coordination with the province on the new tax was one of the items discussed as part of new deal discussions with provincial officials over the past few months.
If approved by council, the new tax would come into effect just as a federal ban on residential property purchases by non-Canadians expires at the end of this year.
While the tax is aimed at deterring foreign speculation in Toronto’s housing market, city staff estimate that it could generate up to $15 million in revenue in the first year for the cash-strapped city. They estimate the revenue would be closer to $9.6 million if the federal government extends a ban on foreign buyers beyond this year.
But speaking with CP24 Tuesday, Mortgage Broker Elan Weintraub of mortgageoutlet.ca said he doesn’t think the tax will do much to improve the market.
“So I think that foreign buyers just represent a very small component of the market. I don’t think it’s going to have an impact at all,” he said.
He said lowering development charges would do more to help boost the housing supply.
Similarly, he said market forces will probably cause landlords to try to raise rents as they renegotiate mortgages at higher rates, despite a promise made this week by the mayor to keep taxes on multi-residential properties lower so that rents don’t go up.
Mayor Olivia Chow is expected to deliver a budget later this week which could include a tax hike of as much as 16.5 per cent for most homeowners, though Chow has said she is still listening to residents to determine the rate she will propose in the budget she sends to council.