Ontario hits foreign homebuyers with 20% tax

Ontario is raising a tax on home purchases by some foreigners to 20% and making it harder to avoid as it tries to cool a scorching real estate market.

The so-called speculation tax will apply to homes bought anywhere in the Canadian province by foreign nationals and foreign companies, provincial Finance Minister Peter Bethlenfalvy said in a statement Tuesday. Currently, the tax is 15% and applies only to homes in Toronto and surrounding areas.

The soaring cost of homes and rents has become a significant political issue in the province of about 15 million people, and Ontario Premier Doug Ford faces an election in June. In Toronto, the average sale price in February was CA$1.3 million, seasonally adjusted.

Since the pandemic started, even small cities and towns, far from Ontario’s major cities, have seen huge increases in home values as buyers took advantage of ultra-low mortgage rates.

The benchmark price of homes in the London and St. Thomas region, about a two-hour drive from Toronto, was CA$749,000 in February, up 84% in two years. In Barrie, north of the country’s largest city, a typical home is now CA$940,000, according to data from the Canadian Real Estate Association.

Nationally, home prices posted a record monthly surge in February as buyers piled into the market ahead of interest rate increases by the Bank of Canada. Benchmark home prices rose 3.5% last month from January, according to CREA data.

Foreign citizens can apply for a rebate from the Ontario tax if they become permanent residents of Canada within four years of paying it. But rebates will no longer be given to international students or to foreign nationals who are temporarily working in the province. The tax has brought in about CA$600 million in revenue since first implemented in 2017, though some of that may be given back, a government spokesperson said.

“There is no silver bullet to solving the housing crisis,” Housing Minister Steve Clark said in a statement. “Addressing the housing supply crisis is a long-term strategy that requires long-term commitment and coordination with our partners and between all levels of government.” The provincial government said it would work with local governments to implement other measures, including taxes on vacant homes.

 

Copyright Bloomberg News

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Ontario Unveils Massive New Transit Plans For the GTA, Including New Subway Lines

The Ontario Government laid out plans this week for two new transit lines that would further connect the GTA and the Greater Golden Horseshoe region.

The province’s 30-year transportation plan, released on Thursday, details several in-the-works and planned future projects, including the construction of the controversial Highway 413. But amongst the list were two new undertakings: an Ontario Line to Toronto Pearson Airport connection and a Burlington to Oshawa line.

The latest infrastructure plan, entitled “Connecting the GGH: A Transportation Plan for the Greater Golden Horseshoe,” comes just 12 weeks before the provincial election. Ford committed to spending $82B over the next decade on several transportation projects, including the two highway projects, expanded passenger rail service, new subway lines, and expansions of several existing highways.

Until now, the Ontario Line, an upcoming 16-km Toronto subway line, was set to run from Exhibition in the west up to the Ontario Science Centre in the east. But the province’s transportation plan calls for the construction of an additional transit loop connecting the Ontario Line to “new major transit hubs where regional services connect, including Pearson International Airport and Richmond Hill Centre, and to other subway and GO Rail lines.”

If it comes to fruition, the Ontario Line loop wouldn’t be the only transit option connecting to the Toronto airport. UP Express trains already offer a route between downtown’s Union Station and Pearson Airport, and the planned Eglinton Crosstown West Extension, expected to be complete by 2031, is set to have a Pearson connection as well.

The Ontario Government’s second transit proposal would be an even larger undertaking, geographically speaking. The provincial plan lays out an initial concept for an east-west “higher order transit connection” between Burlington and Oshawa. It would run north of Toronto, connecting to existing and planned GO Rail, LRTs, and subways along the way.

“It would transform the regional transit system from today’s radial commuter network centred on Union Station to an expansive grid, so people can get where they need to go without going through the downtown core,” the report reads. “This new line will build on already protected lands for the 407 Transitway, a bus rapid transit corridor parallel to Highway 407.”

The provincial government will carry out a planning analysis for the projects to confirm feasibility, as well as analyze project options and network connectivity.

“This is a plan with purpose, built on the guiding principle to ‘get it right’ because we simply can’t afford not to,” Minister of Transportation Caroline Mulroney wrote in the report. “Those choosing to start a family, move for work or build their business in the GGH area are counting on us.”

The projects laid out in the Ontario plan encompass all transit upgrades planned from now until 2051, meaning it may be a number of decades before the two proposed additions become a reality.

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GTA home prices have increased more than 450% over 25 years

From the launch of the first iPhone, to the world’s population reaching seven billion people, a lot has changed in the past 25 years. In that same quarter-century timespan, the Greater Toronto Area’s housing market has also witnessed remarkable transformation.

In its Quarter Century Market Report released today, RE/MAX Canada says that home sales have doubled while prices have soared over 450 per cent in the GTA since 1996, growth that has been supported by market demand and limited home supply. The report examined home buying activity in the nine Toronto Regional Real Estate Board (TRREB) districts which make up the GTA.

Between 1996 and 2021, over two million GTA homes have been sold, equal to a dollar volume of $1.1 trillion. The number of residential sales has grown 118.2 per cent between 1996 (55,779 transactions) and 2021 (121,712 transactions).

Meanwhile, the average home price has risen 453 per cent over the same 25-year period, with prices climbing from $198,150 in 1996 to $1,095,475 in 2021, a compound annual growth rate of 7.08 per cent.

“Performance of the GTA housing market over the 25-year period has been nothing short of remarkable,” said Christopher Alexander, president of RE/MAX Canada, in the report. “This is especially so when considering this time period was characterized by the tech meltdown of 2000, 9/11, SARS, the Great Recession of 2008, Ontario’s Fair Housing Plan and the on-going pandemic.”

New construction, transportation contributes to Toronto’s real estate growth
Upon examining TRREB’s market districts, RE/MAX’s Quarter Century report found that land availability, particularly within the city’s core, has “waned.” Meanwhile, migration, low interest rates and housing affordability have continued to play a critical role in the growth of the Toronto region.

In the last 25 years, Toronto Central, Halton Region, York Region, Simcoe County and Dufferin County have reported triple-digit sales increases, rising 156.9 per cent to as high as 1,123.7 per cent. Average GTA sale prices have also reached new highs in the last quarter-century, from a low of 301 per cent to a high of 874 per cent.

New construction has been a “significant factor,” in the sales gains seen throughout GTA regions such as Peel, Durham, Halton and York. The GTA’s 905 communities evolved to be affordable alternatives for freehold property purchasers, with starter homes on smaller lots enticing first-time buyers outside of the 416 area, RE/MAX Canada explained. Transportation initiatives like the expansion of the GO train system and 400-series highways have also supported growth, bringing new life to older cities like Milton, East Gwillimbury and Innisfil.

“If you build it, they will come, and they sure did,” said Alexander. “Bolstered by historically low interest rates, a strong economy, grit and determination, buyers both young and old have moved to the city’s bedroom communities.”

GTA housing and development to evolve with land availability
With land in limited supply within the GTA’s 905 areas, the emphasis is moving from freehold homes to high-density properties, RE/MAX Canada noted.

For instance, condos represent one in two sales within Mississauga, while more condo developments are in the works for areas like Brampton, York Region and Pickering’s City Centre.

“The GTA’s housing stock continues to evolve based on land availability. Builders and developers are faced with the harsh reality of a land supply-crunch as affordability remains top of mind with the vast majority of buyers,” said Alexander in the report.

Vertical growth has played a “significant role” in climbing sales levels within the 416 region, as condo apartments and townhomes now account for 76 per cent of sales in Central Toronto. Builders and developers look to existing buildings for potential demolition as many of the existing parking lots and vacant land have been bought up. In other cases, RE/MAX explains that developers have gutted and redeveloped existing structures for housing, such as The Britt in Toronto, formerly the Sutton Place Hotel.

“While the preference may be freehold, the necessity to build vertical communities has never been more apparent in a city where the population has grown by two million people since 1996 and is expected to ramp up in coming years,” said Alexander.

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Where Does the World’s Ultra-Wealthy Population Live Today?

The pandemic, geopolitical tensions, and supply chain disruptions have thrown the world into disarray in recent years, but that hasn’t stopped the world’s ultra-wealthy population from growing at a strong clip.

New data from this year’s Wealth Report by Knight Frank shows that the number of Ultra-High Net Worth Individuals (UHNWIs) grew 9.3% between 2020 and 2021. Nearly all regions saw an increase in ultra-wealthy people over the time period.

The above visualization from the report explores the global distribution of uber-affluent people. Below, we’ll also look at how the populations are projected to grow in the future.

The World’s Ultra-Wealthy, by Region
UHNWIs are defined as having net assets of $30 million or more, including their primary residence.

With over 230,000 UHNWIs in 2021, North America has the largest subset globally, followed by Asia at nearly 170,000. Over the last year, the ultra-wealthy population rose 12.2% and 7.2% across these regions, respectively.

Following North America and Asia is Europe. In 2021, the top countries for the ultra-wealthy were France (30,000), Germany (28,000), U.K. (25,000) and Italy (17,000). On a per capita basis, Monaco is the highest worldwide, at five people per thousand residents.

Interestingly, the ultra-rich in Russia & CIS (6,500) grew the second fastest across all regions, at 11.2%. Rebounding oil prices, property prices, and stock market valuations likely bolstered this growth. However, the crippling sanctions and economic fallout resulting from the invasion of Ukraine could substantially impair oligarch wealth for many years to come.

Growing Fast
How will UHNWI populations change in the next five years?

Globally, the number of ultra-rich is projected to increase a staggering 28% by 2026. (Still, it’s worth noting that growth between 2016-2021 was almost three times this rate, at over 75%.)

Asia is projected to have the highest growth rate, along with Australasia. In five years, UHNWIs are set to rise 33% in both regions. Singapore is projected to see its ultra-rich population grow 268%, while the ultra-rich living in mainland China are anticipated to grow over 42%.

Meanwhile, North America is projected to see 28% growth, or reaching a total of 300,000 UHNWIs by 2026.

Significant growth is also projected across Latin America. Amid rampant hyperinflation, Argentina is estimated to see a 38% expansion in its ultra-wealthy population.

Behind the Scenes
What is fueling this growth in UHNWIs worldwide?

Sky-high asset prices and a real estate boom are two drivers behind this trend, according to Knight Frank. Ultra-low interest rates, which declined during the pandemic, is another.

Given cheap borrowing costs, the ultra-wealthy have more leverage to build their wealth, such as buying more property or investing in financial assets. In fact, the average UHNWI owns 2.9 properties.

It’s worth noting that strong GDP projections often underlie wealth projections. The IMF predicts that a post-pandemic recovery will be robust. However the crisis in Ukraine could pose meaningful risks to the global economy, especially for inflation and financial markets.

For instance, Russia contributes 12% to the global oil supply, a key factor behind inflation. At the same time, Ukraine supplies 90% of America’s neon—an essential material used in the semiconductor industry—which could further exacerbate supply chain issues.

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The world’s top performing luxury residential markets

Knight Frank just released the 16th edition of its Wealth Report along with the disclaimer that, with everything going on in Ukraine right now, this outlook is of “little relative importance” and kind of doesn’t matter in the grand scheme of things. In any event, it includes the latest edition of their Prime International Residential Index (PIRI 100), which looks at the annual % change in luxury residential prices around the world. The chart is interactive, but I screenshotted (above) the top risers and fallers.

Toronto is 4th in the Americas and 7th globally with a 20.3% year-over-year increase.

Miami is also no surprise and came in 4th globally.

The top three cities were Dubai, Moscow, and San Diego.

Thankfully though, the number two city is in serious jeopardy right now and I suspect that its position will look quite different next year.

Money will go where it feels safe and secure.

 

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GTA home prices have increased more than 450% over 25 years: RE/MAX Canada

From the launch of the first iPhone, to the world’s population reaching seven billion people, a lot has changed in the past 25 years. In that same quarter-century timespan, the Greater Toronto Area’s housing market has also witnessed remarkable transformation.

In its Quarter Century Market Report released today, RE/MAX Canada says that home sales have doubled while prices have soared over 450 per cent in the GTA since 1996, growth that has been supported by market demand and limited home supply. The report examined home buying activity in the nine Toronto Regional Real Estate Board (TRREB) districts which make up the GTA.

Between 1996 and 2021, over two million GTA homes have been sold, equal to a dollar volume of $1.1 trillion. The number of residential sales has grown 118.2 per cent between 1996 (55,779 transactions) and 2021 (121,712 transactions).

Meanwhile, the average home price has risen 453 per cent over the same 25-year period, with prices climbing from $198,150 in 1996 to $1,095,475 in 2021, a compound annual growth rate of 7.08 per cent.

“Performance of the GTA housing market over the 25-year period has been nothing short of remarkable,” said Christopher Alexander, president of RE/MAX Canada, in the report. “This is especially so when considering this time period was characterized by the tech meltdown of 2000, 9/11, SARS, the Great Recession of 2008, Ontario’s Fair Housing Plan and the on-going pandemic.”

New construction, transportation contributes to Toronto’s real estate growth
Upon examining TRREB’s market districts, RE/MAX’s Quarter Century report found that land availability, particularly within the city’s core, has “waned.” Meanwhile, migration, low interest rates and housing affordability have continued to play a critical role in the growth of the Toronto region.

In the last 25 years, Toronto Central, Halton Region, York Region, Simcoe County and Dufferin County have reported triple-digit sales increases, rising 156.9 per cent to as high as 1,123.7 per cent. Average GTA sale prices have also reached new highs in the last quarter-century, from a low of 301 per cent to a high of 874 per cent.

New construction has been a “significant factor,” in the sales gains seen throughout GTA regions such as Peel, Durham, Halton and York. The GTA’s 905 communities evolved to be affordable alternatives for freehold property purchasers, with starter homes on smaller lots enticing first-time buyers outside of the 416 area, RE/MAX Canada explained. Transportation initiatives like the expansion of the GO train system and 400-series highways have also supported growth, bringing new life to older cities like Milton, East Gwillimbury and Innisfil.

“If you build it, they will come, and they sure did,” said Alexander. “Bolstered by historically low interest rates, a strong economy, grit and determination, buyers both young and old have moved to the city’s bedroom communities.”

GTA housing and development to evolve with land availability
With land in limited supply within the GTA’s 905 areas, the emphasis is moving from freehold homes to high-density properties, RE/MAX Canada noted.

For instance, condos represent one in two sales within Mississauga, while more condo developments are in the works for areas like Brampton, York Region and Pickering’s City Centre.

“The GTA’s housing stock continues to evolve based on land availability. Builders and developers are faced with the harsh reality of a land supply-crunch as affordability remains top of mind with the vast majority of buyers,” said Alexander in the report.

Vertical growth has played a “significant role” in climbing sales levels within the 416 region, as condo apartments and townhomes now account for 76 per cent of sales in Central Toronto. Builders and developers look to existing buildings for potential demolition as many of the existing parking lots and vacant land have been bought up. In other cases, RE/MAX explains that developers have gutted and redeveloped existing structures for housing, such as The Britt in Toronto, formerly the Sutton Place Hotel.

“While the preference may be freehold, the necessity to build vertical communities has never been more apparent in a city where the population has grown by two million people since 1996 and is expected to ramp up in coming years,” said Alexander.

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