The New Tax
Ever since Vancouver’s real estate market cooled following the introduction of a Foreign Buyer’s Tax, Torontonian’s have been wondering whether a similar tax will be implemented in Toronto. Late April, it was announced that Toronto will indeed be getting their very own Non-Resident Speculation Tax. So, what does this mean, who will it affect, and what will it do to the market?
What does it mean?
The tax affects properties in the Golden Horseshoe (including The GTA, Hamilton, Niagara, Simcoe, and Waterloo) and only on 1-6 residential units purchased by a non-resident. Therefore, this tax wouldn’t apply to a building with at least 7 units, vacant land or commercial properties. The 15% tax is in addition to any land transfer taxes (provincial or municipal).
Who does it affect?
The tax affects non-resident, non-citizens of Canada. So, if you’re a Canadian living abroad, this tax doesn’t not apply to you. It’s important to note, that even if a non-resident wishes to buy a property with a resident, they will be required to pay the tax on the entire purchase price, not just their contribution. Likewise, if they’re co-signing for a someone (a child perhaps) that is a resident or citizen, and take any percent of the home on title, they are required to pay the tax on the entire purchase price.
There are some cases where rebates will be available. Ie. If the person becomes a resident within 4 years of closing, or the person is a full-time student enrolled in a Ontario institution for at least 2 years after closing.
How will it affect the market?
That’s the big question on all our minds. The tax was certainly introduced after Toronto’s market skyrocketed 33% from last year. Premier Kathleen Wynne has said that the government will be monitoring the housing market carefully and assess if further changes need to be made.
It’s still too soon to tell but some real estate professionals can feel the beginning of a shift or slowdown in the marketplace. I’m by no means implying a bubble burst, but perhaps it could be the start to a correction. Only time will tell.