The federal government has introduced legislation that will institute a ban on non-Canadians buying residential property for a two-year period beginning on January 1, 2023. This temporary ban is intended to help curb speculation by foreign investors that the government claims has caused Canadians to be priced out of the housing market.
As the government takes steps to help boost the supply of housing to the market, this ban is aimed at tackling demand which has partly risen due to foreign investors and leading to surging housing prices.
Provincial governments like Ontario are also seeking ways to discourage foreign buyers of residential properties. The Ontario government just announced a hike to its non-resident speculation tax from 20% to 25%. This 5% hike is being used as a deterrent against non-resident investors looking to speculate in Ontario’s housing market. It is the second time that the province has hiked this rate after having increased it from 15% to 20% in March 2022.
The tax will apply to foreign nationals, corporations and taxable trustees that invest in Ontario’s residential property market. According to Minister of Finance, Peter Bethlenfalvy, this hike would make Ontario’s non-resident speculation tax rate the highest in the country and was designed to discourage foreign speculation. He noted that for many in the province dreaming of having their own home, including young families and newcomers, it appeared that their dreams were out of reach.
Municipal Affairs and Housing Minister, Steve Clark, also announced that the government was going to build 1.5M homes over the coming 10 years and ensure residents continued to have access to the current housing supply as part of measures intended to resolve the housing crisis. The government also said it would double the fines on unethical and illegal new home cancellations and terminations of purchase agreements. These penalties are to go back into the pockets of the victims.
However, industry experts have said that the tax measures may not have any meaningful effect on the housing market due to the small percentage of homes actually owned by foreign investors. 2008 StatCan figures indicate that non-resident homeownership in Ontario stood at just 2%. A 2020 Condominium Apartment survey by the Canada Mortgage and Housing Corporation (CMHC) also found that in a majority of 17 major markets across the country, foreign buyer presence was less than 1%. Toronto, which has the highest population of newcomers reportedly had just 2.6% of condos being owned by non-residents.
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