The number of properties purchased by non-residents in the Greater Toronto Area (GTA) appears to have decreased since the foreign buyer tax was implemented two years ago, according to new data released by the Ontario government.
The foreign buyer tax was created in response to skyrocketing home prices in the GTA in the hopes that it would slow down the increase in non-resident Toronto real estate purchases and maintain affordable housing costs for the region’s residents.
The most recent information shared by the province shows that from mid-February 2018 to the end of March 2019, 1,788 homes were purchased in the region that were covered by the foreign buyer tax. The provincial government received $221 million from the 15% tax on applicable home sales during that period.
Over the course of around 13 months, the total value of properties purchased by non-residents in the region was approximately $1.47 billion.
Fewer Purchases by Foreign Buyers
Based on the numbers, it seems that non-residents are purchasing fewer properties than they did immediately after the foreign buyer tax was put in place.
Foreign buyers purchased 1,393 homes from late April 2017 to mid-February 2018, for which the province received $173 million through the foreign buyer tax.
Figures from the Toronto Real Estate Board indicate that about 1.8% of real estate purchases in the GTA have been made by non-resident buyers since April 2017, when the foreign buyer tax was first implemented.
Industry experts estimate that before April 2017, 5-10% of homebuyers in the GTA were non-residents, and according to the province, 4.7% of home purchases in the region in the first month after the tax was implemented were made by non-residents.
The numbers do differ somewhat among the various areas of the region, which includes the city of Toronto, as well as the regions of Durham, York, Halton, and Peel. In the Peel, Halton, and Durham regions, foreign buyers make up less than 1% of home purchases since April 2017, while in the York and Toronto regions, they account for more than 2.7% in that time frame.
Foreign Buyer Tax Overview
The foreign buyer tax, or the Non-Resident Speculation Tax (NRST) as it’s officially known, was introduced on April 21, 2017 and is paid in addition to the regular land transfer tax required in the province.
According to the Ontario government, the initiative places a “15% tax on the purchase or acquisition of an interest in residential property located in the Greater Golden Horseshoe Region (GGH) by individuals who are not citizens or permanent residents of Canada or by foreign corporations (foreign entities) and taxable trustees.” The tax is applicable to the transfer of land that contains between one and six single family residences.
Cases in which someone would be exempt from the foreign buyer tax include:
- those nominated under the Ontario Immigrant Nominee Program;
- those with refugee status;
- and those purchasing jointly with a spouse who is a Canadian citizen, nominee, or refugee.
Others may qualify for a rebate of the tax if:
- they are foreign nationals who become permanent residents within four years of purchasing the property;
- are international students;
- or are foreign nationals who are legally working full-time in Ontario.
Other Impacts of the Tax
The Ontario government was not the first provincial government to implement a foreign buyer tax. Having similar concerns about housing affordability related to home purchases by foreign buyers in the Vancouver area, the British Columbia government passed Bill 28 in August 2016. It also included a 15% property transfer tax on any homes purchased by non-resident buyers.
Some experts point to the introduction of the foreign buyer tax in Vancouver as a possible reason for an influx of real estate purchases in Toronto by non-residents around the same time.
New data is now shining a light on how the foreign buyer tax in Vancouver and Toronto is potentially impacting other markets, Montreal in particular. It’s thought that non-resident buyers are now looking at purchasing luxury properties in Montreal, especially in the city’s downtown condo market.
The most recent figures provided by the province suggest that the foreign buyer tax implemented in Ontario is having the desired effect on non-resident home purchases in the GTA, possibly leading to a more affordable housing market for those in the region. At the same time, non-resident buyers may be looking at some of Canada’s other large cities for their next real estate buy, where a foreign buyer tax doesn’t yet exist.