Canadian Realestate Magazine forum is the place for positive industry interaction and welcomes your professional and informed opinion.

Agents on potential Toronto foreign tax

Notify me of new replies via email
Canadian Realestate Magazine | 03 Oct 2016, 08:15 AM Agree 0
Readers from across the country have weighed in on a potential foreign buyers tax in Toronto. Here are the results
  • MF | 03 Oct 2016, 11:06 AM Agree 0
    Re. “Capital will always go where it is appreciated. Our BC government’s stupid tax and the loss of billions in investment is going to create a lot of jobs in Seattle and other investment friendly cities.”
    It has been said, 'If things and actions are what they are, and their consequences will be what they will be, then why should we wish to deceive ourselves?' (Bishop Butler in the 18th century).
    A Venezuelan solution Made in Canada, might make nationalists 'feel better', but driving away investment is not the way to strengthen the market. Supply and demand are part of the nature of things; when Diefenbaker ranted against foreigners and Bay Street, it didn't achieve anything for Canada.
  • George Christopoulos | 03 Oct 2016, 11:37 AM Agree 0
    I'm trying to understand how empty residential units owned by foreign investors will create jobs.
    Speculating in residential real estate and investing in Canadian business are two very different things.
    • MF | 03 Oct 2016, 02:43 PM Agree 0
      You are using the term speculating in a somewhat critical way; while using the term investing when the activity is one that you defend. Contractors need finance, especially when banks will often not lend until 80% of condo units are sold; speculating/investing can perform a vital and useful function. It is also completely illusory to think that supply and demand are not, or somehow can be driven out of, the real estate market. Driving away foreign investors - Venezuela-style - would be thoroughly unhealthy for Canada. Diefenbaker tried it, and it achieved nothing useful.
  • LanceH | 03 Oct 2016, 11:58 AM Agree 0
    Dear MF. I agree, except it's not "nationalists" that wish to "make the rich pay", it's the Lefty's! Comparing to Venezuela is right, and just like them, when things get worse, their answer will be to "do more", (dig in deeper) rather than back off. In Venezuela, it takes over a year for your new car to arrive, causing the price of resales to jump. So instead of opening up the markets, they've tried to regulate the price of used cars, which everyone will simply find ways around.

    George, a fair question. Maybe they should've put a "business investment" carrot out their first, then later added a modest tax on houses (not big enough to frighten them), thus, "gently steering them" towards business investment and creating more jobs than the modest amount created by a home purchase (and reno and upkeep).
  • MF | 03 Oct 2016, 12:58 PM Agree 0
    LanceH: Some of the most destructive forces have historically come from nationalists of the left. With investors and companies disinvesting from Venezuela because of punitive anti-foreigner measures and freezing of assets, Caracas is not a model for Canada to follow. Some ppl in Canada may think such measures give them touchy feely vibes.

    But in market terms they are disastrous.

    It's an illusion if ppl think real estate is somehow immune from supply and demand.
  • Joseph Pede | 03 Oct 2016, 01:34 PM Agree 0
    Canadian investment, development and construction in real estate represents approximately 15% of Canada’s GDP. Canadian real estate values are approximately 50% less expensive than comparable foreign real estate markets in the USA, Europe and Asia (New York, Paris, London, Rome, Hong Kong, Geneva etc). When one takes into consideration the plummeting Canadian dollar, real estate values are well priced, even if they represent a greater investment opportunity for foreign buyers.
    Policy makers and politicians fail to acknowledge the low rental costs of housing in Canada. While real estate values appear high, rental costs remain some of the lowest of major cities across the world. Why should real estate values be politically manipulated when Canadian real estate values are still 50% less than those in other global markets?
    Politicians fail to realize that “low interest rate policies” have contributed to domestic growth in the Canadian real estate market, and demand for single detached homes has far outweighed supply. Available land being the critical issue. Nonsensical “Sprawl” as a development initiative was and is idiotic – this is very much visible in cities such as Mississauga and Brampton. Not all increases in real estate values are attributable to foreign buyers. Sprawl also creates huge costs in infrastructure development.
    Banks have fueled their profits with free money and FEES and destroyed the Middle Class’ ability to save money and earn a safe interest-rate based return. Rather than placing a surtax on foreign buyers we should be increasing interest rates instead. The only hiccup is that we would instead bankrupt the corrupt banking system and their duplicitous partners (i.e. politicians).
    Domestic owners of real estate benefit with the increases in real estate values. I, as a father and grandfather, can pass on the wealth I have gained of home ownership to my children and grandchildren via inheritance or via gifting. There is nothing wrong with millennials living with their parents and grandparents in order to save money to buy a home. I did it and my kids did it – it’s smart.
    Rather than killing an important segment of the Canadian economy, politicians and developers must develop strategies to fill a real need – affordable housing for that segment of the population who have been marginalized by race, creed, color or lack of education. That becomes a social and moral mandate, which currently does not exist. Our Native peoples are victims of such abuse, discrimination and lack many of the required needs we take for granted.
    I cannot feel sorry for individuals who continue to grow their personal debt in an attempt to benefit from the lucrative housing market. They are risk takers and their ultimate fate is driven by their own greed.
    Joe Oliver is just another political jackass trying to make hay from a barren wheat field. I suggest he goes to Israel, where only Israeli Jews can be citizens and only Israelis Jews can own homes.
    • MF | 03 Oct 2016, 02:05 PM Agree 0
      Caracas-on-Bay Street is illusory; actually seeing supposed virtue in emulating Venezuela and driving away investors - Diefenbaker-style , makes no sense for Canada.
    • Kris Kooblall | 05 Oct 2016, 10:20 AM Agree 0
      /Rather than killing an important segment of the Canadian economy, politicians and developers must develop strategies to fill a real need – affordable housing for that segment of the population who have been marginalized by race, creed, color or lack of education. That becomes a social and moral mandate, which currently does not exist. Our Native peoples are victims of such abuse, discrimination and lack many of the required needs we take for granted.
      I cannot feel sorry for individuals who continue to grow their personal debt in an attempt to benefit from the lucrative housing market. They are risk takers and their ultimate fate is driven by their own greed./

      How do you plan to do that?

      Where are foreigners purchasing Canadian residential real estate benefitting the Canadian economy and Canadians?

      Many foreigners purchase residential real estate for speculative purposes and invariably flip these properties all the while crowding out Canadian families in the process whose income is earned here in Canada based on local Canadian economic conditions and factors?

      Canadian families pay annual taxes in excess of $30,000.00 per year and at 15% tax imposed on the purchase by foreigners, Canadian families subsidize these foreign purchases by $100.00 per day per family.

      Please do not make ridiculous arguments based on real estate values as a part of national GDP compared to other GDP in other countries.

      Why is the Shanghai government restricting purchases of local real estate to Chinese residents and citizens with a minimum of 5 years personal income taxes filed?

      Housing is an economic and social good. It's main purpose is to Canadian families and not an investment tool to be manipulated by highly shrewd foreign investors parking their funds for invariable and quasi-illegitimate and unlawful purposes.

    • MF | 06 Oct 2016, 11:10 AM Agree 0
      Mr Kooblall: If you, like Venezuelan Bolivarian revolutionaries or Jaganist neo-communists, really believe that it is the state rather than private individuals which owns, controls and defines things which are socially and economically good, then this is most vastly different from the way prosperity in North America has historically arisen. To purport to take away from the real estate market the influence of supply and demand, to give the power to politicians and bureaucrats instead to distribute largesse in housing to those they deem politically suitable, to deny the socially useful function of investment for contractors who need finance for condo developments because the banks won't give them mortgages until they have sold up to 80% of the units pre-construction; this is just not the way things are done in North America. The suburbs of Caracas and Georgetown are not a glowing real estate model for Calgary, AB and Worcester, Mass.
  • Strong Vote for 15% foreigner tax | 04 Oct 2016, 04:01 PM Agree 0
    15% tax should be imposed on foreigners to purchase property simply due to facts Toronto house market heavily disturbed by foreign investment. House bubbling will damage Canadian economy badly.

    Any measurements can be done to make homes affordable and sustainable will stablize economy in any country.

    FDI (foreign driven investment) in business and manufacturing has been approved to be long term and stable growth of economy and GDP. Every person deserves a home. A home is basic need for humanity, not a commodity to make short term profit.

    Canadian government shall impose all tools to calm down house bubbling and short term profit taking, instead, encourage more foreign investment into long term business and manufacturer in Canada.
    • MF | 04 Oct 2016, 05:01 PM Agree 0
      ..and, Sir, your proposed measure would be unlikely to improve things. In fact, it would drive away much needed investment.

      This is what an article of this magazine, dated today, says:

      'The Urban Development Institute’s CEO and president Ann McMullin said that taxation is not the key to more affordable housing and urged all levels of government to increasing supply.

      “If governments truly want to see affordable homes in our communities, they need to make it easier for developers to build housing,” she said, highlighting that demand-side measures will curb job creation in the construction sector.'

      Politicians so often want to put up taxes and if uninformed comment gives them enough 'excuse' to do so, they will.

      But if it's housing affordability that you are really concerned with, then talk to the local councils in Canada in places that have a mediocre record for processing planning applications for releasing land for new housing.

      In fact, if you are interested in supporting the availability of condominium developments, you could encourage investors, whether Canadian or foreign, to buy units pre-construction, because - as you maybe know since you are expressing views on the subject - in Canada contractors need finance to an almost desperate extent since banks will often not even lend them any money until up to 80% of their units are sold pre-construction.

      So if you are concerned about housing affordability and availability, there is plenty that you can do to advocate for this need, but taxing house sales is not one of them.
  • David | 05 Oct 2016, 12:31 PM Agree 0
    Or alternatively for the foreign buyers, a 5% instead of the 15% purchase tax, and take away the Principal Residence Exemption and/or Capital Gain exemption upon the sale of their property unless they are citizen and file their tax return (with world wide income disclosed). Whatever gain from the housing will be fully taxable. This will give the local people incentive and an edge. It may not curb the house price increase completely, but it will put us in a more favorable position in buying. Just my two cents....
    • MF | 06 Oct 2016, 10:56 AM Agree 0
      The Canadian government getting involved in the worldwide income of people who are not citizens or even residents? Such a draconian measure would damage the credibility of Canada as a well managed economy.
  • djd | 05 Oct 2016, 12:55 PM Agree 0
    The historically high ratio of home ownership is considered to be one of the stabilizing forces that makes Canada so such a great country to live in. The foreign buyer tax is intended to moderate the influence of AFFLUENT FOREIGN BUYERS on Canadian real estate. By doing so, it helps to keep the Canadian market in balance and within reach of Canadian buyers. Meanwhile, taxes flow into Canadian coffers.

    How can that possibly be bad.

    I've have been in the real estate business for over 40 years. This is by far the scariest cycle I've ever seen. Cycles always always always correct until supply and demand is restored. Brace for impact.
    • MF | 06 Oct 2016, 11:17 AM Agree 0
      Since when have tax hikes been the basis for economic growth and strengthening the real estate market?

      If ppl are interested in addressing housing availability and affordability, they can do far worse that pressure politicians whose local government officials have a mediocre record at processing planning applications for land release; they can encourage people to invest in condo developments, because banks won't give mortgages until up to 80% of condo units have been sold pre-construction.

      Bucking supply and demand and picking on foreigners won't make the real estate market more buoyant.
Post a reply