Calls for the implementation of a tax on foreign buyers of property in the Greater Toronto Area are "premature," a pair of real estate groups say.
In letters to Ontario Finance Minister Charles Sousa and Toronto Mayor John Tory, the heads of the Toronto Real Estate Board (TREB) and the Ontario Real Estate Association (OREA) say introducing such a tax would be "a knee-jerk reaction to a problem which we do not fully understand."
TREB president Larry Cerqua and OREA president Ray Ferris wrote that a foreign buyers tax will do "little to address the growing affordability challenges facing many Ontarians and may have negative consequences for our broader economy."
The groups argue that more information is needed to get a better understanding of foreign buyer involvement in Toronto's housing market.
The government of British Columbia recently introduced a 15 per cent tax on foreigners buying property in Greater Vancouver. In the wake of the tax's introduction, housing activity in Vancouver area has slowed considerably. Reaction seems to have been swift — the Real Estate Board of Greater Vancouver said house purchases declined by 26 per cent in August compared with the same month a year earlier.
The arrival of the tax in Vancouver led to suggestions that foreign interest in real estate will shift to other markets, including Toronto, which has already seen significant home price gains, just not on the same scale as Vancouver. High-end real estate seller Sotheby's recently said it expects a lot of demand in Vancouver's luxury market to move to Toronto.
Little choice: economist
There have been a pair of calls recently for a tax on foreign homebuyers in the Toronto area to help cool the market.
CIBC economist Benjamin Tal said Ontario will have little choice but to implement a tax similar to that of British Columbia. Tal said the main reason behind higher prices around Toronto is a policy-driven lack of land supply, leaving a tax as one of the only levers available to influence the market.
In addition, former federal finance minister Joe Oliver, writing in the National Post this week, said Ontario should quickly impose a 15 per cent tax on purchases by non-residents and foreigners of residential property in certain Toronto-area communities.
Sousa said earlier this week there are no plans at the moment to implement a tax in Toronto similar to Vancouver's.
"Our government will continue monitoring the housing market in both Ontario and B.C. over the course of the next few months to see the impacts of the recent decision by the government of B.C.," Sousa said in a written statement.