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.

 

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