Home Realty: Don't Blame Foreign Homebuyers For High Prices
By NextHome Staff
April 26, 2017
April 26, 2017
Affordability issues won’t be solved by taxing non-resident purchasers.Housing prices in the GTA are totally out of whack. Detached homes in the region sold for an average price of $1.2 million in March and prices are expected to grow by as much as 20 per cent this year alone.The situation is causing much consternation, primarily for first-time buyers and young families who realize they’ll likely have to forgo dreams of owning a house in the Toronto area — for now at least.This predicament has prompted politicians to spring into action. Ontario Finance Minister Charles Sousa, with a nod to what was done in B.C. last summer, has said he is reviewing the option of introducing a foreign homebuyers tax.
While that might sound good to some, there’s one small problem: there really aren’t that many “foreign” buyers in the GTA market. According to the Toronto Real Estate Board, just 4.9 per cent of housing transactions in the region last year involved a foreign purchaser, versus Vancouver, where 15 per cent of sales involved foreign nonresident buyers.The GTA has never been more attractive to immigrants, but let’s be clear: these are not foreigners looking to buy up our precious housing stock from overseas; they are actual GTA residents, looking to own homes here, while also working and paying taxes.Besides, foreign buyers can’t be blamed for sky-high housing prices. The GTA’s affordability issue has been decades in the making and today it’s by and large the result of a critical lack of supply amid ceaseless demand. Things have been exacerbated by ever-growing bureaucracy and backlogs as municipal governments struggle to process stacks of new housing project applications and issue approvals. The Fraser Institute estimates that approval timelines in the GTA average 14.4 months and in the City of Toronto it’s typically 17.7 months.The province’s Places to Grow and Greenbelt policies, introduced a decade ago, took big chunks of land off the table, making it increasingly more difficult for builders to find sites on which to put up new housing stock.A foreign homebuyer tax can’t solve these problems. The only true solutions are those that will help to increase supply. Government can facilitate matters by designating areas for denser development, then unfreezing these lands and pushing for them to be brought into official plans much faster than is currently the case in most municipalities. This could help to avoid costly and time-consuming fights with local opponents, battles that inevitably end up at the Ontario Municipal Board, creating yet more delays and added costs, which are also passed down to buyers.It’s highly debatable whether a tax on foreign buyers would work, and it’s quite possible it could backfire. When the B.C. government implemented its 15 per cent tax on foreign homebuyers for the Vancouver region last summer, it reportedly ended up driving away the kinds of workers the province is seeking to attract, like those in tech. And some believe it was responsible for a decline in detached home sales in early 2017.Blaming foreign buyers for driving up home prices might make fed-up house hunters feel a bit better, but it won’t do anything to fix the GTA affordability crisis. Unfortunately for our politicians, this one is all on them.
Debbie Cosic, CEO and founder of In2ition Realty, has worked in all facets of the real estate industry for over 25 years. She has sold and overseen the sale of over $15 billion worth of real estate and, with Debbie at the helm, In2ition has become one of the fastest-growing and most innovative new home and condo sales companies. In2ition has received numerous awards from the Building Industry and Land Development Association and the National Association of Home Builders.
While that might sound good to some, there’s one small problem: there really aren’t that many “foreign” buyers in the GTA market. According to the Toronto Real Estate Board, just 4.9 per cent of housing transactions in the region last year involved a foreign purchaser, versus Vancouver, where 15 per cent of sales involved foreign nonresident buyers.The GTA has never been more attractive to immigrants, but let’s be clear: these are not foreigners looking to buy up our precious housing stock from overseas; they are actual GTA residents, looking to own homes here, while also working and paying taxes.Besides, foreign buyers can’t be blamed for sky-high housing prices. The GTA’s affordability issue has been decades in the making and today it’s by and large the result of a critical lack of supply amid ceaseless demand. Things have been exacerbated by ever-growing bureaucracy and backlogs as municipal governments struggle to process stacks of new housing project applications and issue approvals. The Fraser Institute estimates that approval timelines in the GTA average 14.4 months and in the City of Toronto it’s typically 17.7 months.The province’s Places to Grow and Greenbelt policies, introduced a decade ago, took big chunks of land off the table, making it increasingly more difficult for builders to find sites on which to put up new housing stock.A foreign homebuyer tax can’t solve these problems. The only true solutions are those that will help to increase supply. Government can facilitate matters by designating areas for denser development, then unfreezing these lands and pushing for them to be brought into official plans much faster than is currently the case in most municipalities. This could help to avoid costly and time-consuming fights with local opponents, battles that inevitably end up at the Ontario Municipal Board, creating yet more delays and added costs, which are also passed down to buyers.It’s highly debatable whether a tax on foreign buyers would work, and it’s quite possible it could backfire. When the B.C. government implemented its 15 per cent tax on foreign homebuyers for the Vancouver region last summer, it reportedly ended up driving away the kinds of workers the province is seeking to attract, like those in tech. And some believe it was responsible for a decline in detached home sales in early 2017.Blaming foreign buyers for driving up home prices might make fed-up house hunters feel a bit better, but it won’t do anything to fix the GTA affordability crisis. Unfortunately for our politicians, this one is all on them.Debbie Cosic, CEO and founder of In2ition Realty, has worked in all facets of the real estate industry for over 25 years. She has sold and overseen the sale of over $15 billion worth of real estate and, with Debbie at the helm, In2ition has become one of the fastest-growing and most innovative new home and condo sales companies. In2ition has received numerous awards from the Building Industry and Land Development Association and the National Association of Home Builders.