Ontario Hikes Foreign Buyer Tax to 25%, Highest in Canada effective immediately
The government of Ontario announced that, effective immediate its foreign buyer tax would be hiked to 25% — the highest of such tax in Canada. The Non-Resident Speculation Tax, which aims to crack down on foreign real estate speculation, previously sat at 20%, marking a 5% hike, but critics say it won’t do much to improve affordability.
The change comes as housing in Ontario remains unaffordable and out of reach for many residents. Applied to foreign nationals, corporations, or taxable trustees who purchase homes in Ontario, the province says the higher tax will strengthen efforts to deter non-resident investors from speculating on the province’s housing market and help make home ownership more attainable for Ontario residents.
This is the second hike to the Non-Resident Speculation Tax seen this year alone, after the government raised it from 15% to 20% in March. At the same time, the province made sweeping changes to where the tax would be applied, expanding it from just the Greater Golden Horseshoe Region to the whole province.
At the time, a number of experts said that raising the tax wouldn’t have any meaningful effect on Ontario’s real estate prices due to such a small percentage being owned by foreign investors. In fact, data from StatCan’s 2018 Canadian Housing Program reported non-resident ownership of housing (when more than 50% of owners on a property title reside outside Canada) at just 2.2% in Ontario. Even when factoring in non-resident participation (when just one of the owners resides outside of the country) that number rose to only 3.3%.
Further to that, CMHC’s 2020 Condominium Apartment Survey, which tracked non- resident ownership of condo apartments in major urban centres from 2016-2020, revealed that out of 17 major markets across Canada, the majority had a foreign buyer presence below 1%. Even in Toronto, which is home to the highest proportion of newcomers annually, it saw just 2.6% of condo apartments with non-resident owners.
Ontario’s budget this year showed that the non-resident speculation tax was projected to bring in $175 million in this fiscal year. In the larger context of the real estate market, hiking foreign homebuyer tax does “very little” to improve affordability compared to the interest rates on mortgages which have tripled in nine months to the extent that no one is speculating on the Canadian market.
