Ontario Finance Minister Charles Sousa says a foreign buyer tax is “just one” of the measures being considered to cool off the Toronto area’s red-hot housing market.
“Just one” suggests there are other moves being discussed ahead of the spring budget. BNN asked several economists and market watchers about what other levers the government could pull.
Never popular with the voting public, but definitely an area where the province can exert influence. David Madani of Capital Economics says a foreign buyer tax doesn’t make much sense, given foreigners only account for a fraction of home sales in the Greater Toronto Area. A new provincial sales tax on home resales, and/or raising the existing provincial sales tax on housing-related transactions would put the focus on the domestic buyer and work to cool the market.
TARGET THE SPECULATORS
Again, likely through a tax measure but one that hones in on a specific group of buyers looking to make a quick buck on real estate, and not the young people or families seeking a place to hang their hats. CIBC Capital Markets Senior Economist Benjamin Tal has advocated (for some time now) a flipping tax on foreign investment – saying while the true extent of all foreign investment is not known, foreign speculators are not constructive for the housing market.
TAKE AIM AT EMPTY BEDROOMS
Paul Smetanin, president of the Canadian Centre for Economic Analysis, says taxes and regulations would likely only provide temporary relief for Ontario’s housing woes. The Toronto area, he says, has a significant “over-housing” problem that’s crowding others out. Think of two people, maybe a boomer couple, still living in the four-bedroom house they raised their kids in. Smetanin says encouraging “right-sizing” would provide much needed housing resale supply, adding it’s something the government “needs to consider seriously.”
As Ontario sifts through its options, Sousa does concede that he’s concerned about any unintended consequences from actions the government could take to tame the housing market.