Vancouver was the 1st Canadian city to introduce a tax on foreign homebuyers in an attempt to cool off sizzling prices. Now Toronto is following suit as it looks to bring stability to the city’s frantic housing market that some experts predict could be at risk of a bubble, Canadian media reports.
The government introduced a 15 per cent non-resident speculation tax that is aiming to deter foreign speculators from driving up home prices even further. Housing prices have risen by over 30 per cent on average in Toronto in the past 12 months. Chinese investors in particular have been active in the market recently.
The new tax was 1 of 16 housing measures the provincial government announced to help control the market. The move is designed to make it more affordable to rent or buy a home in the city. The story is similar to what happened in Vancouver last year, where rapidly rising home prices forced the government there to roll out a similar tax on non-resident buyers.
The new tax will not impact immigrants who work in Toronto since they are able to receive a rebate will be made available. In addition to that, immigrants who are awarded citizenship or permanent resident status and international students will also be exempt from the new tax.
“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,” City News quotes Premier Kathleen Wynne as saying.
However, the actual impact the new regulations will have remains to be seen. Experts claim the government doesn’t have the housing market data necessary to determine if foreign demand is the cause of the rising housing prices. The most likely outcome will be a short-term slowdown in the market once the measures are implemented, but it’s hard to predict the long-term outcome, says CIBC Economist Benjamin Tal to the website.
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