Toronto realtors don’t want a foreign buyers tax and Tuesday morning they released a report they maintain shows overseas buyers have had little impact on the market.
The Toronto Real Estate Board commissioned research firm Ipsos in November, 2016 to survey its members, who acted on behalf of home buyers during the preceding 12 months. The results show about 4.9 per cent of Greater Toronto Area transactions, in which TREB Members acted on behalf of a buyer, involved a foreign purchaser.
“A foreign buyer tax in the GTA would be misguided,” the board said, in its release.
The Ontario government has been watching a decision by the government in British Columbia to impose a 15 per cent additional foreign property transfer tax in metro Vancouver — a move critics say has sped up a downturn in the city which recorded a 34 per cent year over year decline in sales in December. This past Sunday, the British Columbia premier, Christy Clark, backtracked on her foreign tax by saying foreigners with work permits who live and work in B.C. would be exempted.
Speculation has swirled that many of the would-be Vancouver buyers would head to Toronto to invest and avoid the punitive tax but the Ipsos results show only two per cent of realtors have been involved in a transaction for a foreign buyer which they knew was impacted by the foreign buyer tax in British Columbia.
“An additional land transfer tax on foreign buyers could have unintended consequences, including tighter market conditions and stronger price growth in neighbouring communities/regions without a tax, less rental supply, because the number of investors looking to purchase and rent out a property could decline and potential negative impact on immigration,” said TREB. “It is important to remember that population growth in the GTA, on net, is driven by immigration.”
While Vancouver also has a vacant home tax that went into effect on Jan. 1, the TREB survey found a large majority of foreign buyers in the Toronto area plan to use their homes. Among those buyers, 40 per cent purchased a home as a primary residence, 25 per cent to rent out to tenants while another 15 per cent bought for a family member to live in.
Overall, TREB is forecasting more than 100,000 sales for the third consecutive year in 2017. Between 104,500 and 115,500 home sales are expected this year, with a point forecast of 110,000 – down slightly from 113,133 sales reported in 2016.
“While changes to federal mortgage lending guidelines and higher borrowing costs may impact some would-be home buyers, the big impediment will be the lack of inventory,” said Jason Mercer, director of market analysis for TREB. “Active listings at the end of December were at their lowest point since before the year 2000. It is unlikely that the shortage of listings will improve to any great degree over the course of the next year. This will put a ceiling on sales growth.”
At the same time, strong demand and restrained supply is expected to drive double-digit annual price growth The average selling price will be between 10 and 16 per cent with an average price range between $800,000 and $850,000.
The Ipsos results show people are bracing for those higher pricing by saving more. The average home buyer is planning on making a substantial down payment – 27.6 per cent for all recent home buyers combined and 23.9 per cent for first-time home buyers.
“The sources of home buyers’ down payments were also quite diverse, including savings within and outside an RRSP, gifts from friends/family and equity built up in their current dwelling,” according to the release.
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