Toronto considers new tax on foreign home buyers
Tuesday Jan 23rd, 2024
Toronto is considering introducing a unique tax targeting foreign property buyers in an effort to tackle real estate speculation and enhance housing affordability. The proposed "municipal non-resident speculation tax" is suggested to commence at 10% of a home's purchase price, affecting both foreign individuals and corporations starting from January 1, 2025. City officials argue that this tax is crucial to safeguard Toronto's housing supply, discouraging non-Canadians, especially investors, from dominating the market. This proposal aligns with a 2017 foreign buyers tax implemented by the Ontario government.
While Mayor Olivia Chow supports the tax as a tool to combat speculation, there is skepticism regarding its potential impact. Some experts believe that a more effective strategy would involve a concentrated effort on increasing the supply of housing. The estimated revenue from this tax is anticipated to be up to $15 million in 2025, contingent upon the expiration of a federal ban on foreign home purchases in 2023.
Critics of the proposed tax highlight that it may not significantly benefit locals, as non-Canadians constitute a relatively small share of property transactions in Toronto. Ricardo Tranjan suggests a focus on imposing higher taxes on multiple property owners, identifying them as major contributors to the housing crisis. He questions the rationale behind the proposed 10% rate and advocates for a more aggressive stance.
The report outlines the possibility of adjusting the tax rate based on its effectiveness. Under Mayor Chow's leadership, the city has already implemented various tax measures aimed at reforming the expensive housing market. These include increases in the vacant home tax and higher land transfer tax rates for more expensive homes.
The potential introduction of a municipal foreign home buyers tax, combined with existing taxes, could result in an additional cost of nearly $188,000 for a $500,000 home purchase, escalating to almost $1.4 million for a $3.5 million home. Similar to the provincial tax, exemptions apply to specific categories of foreign nationals, with rebates offered to those who become permanent residents within four years of purchase
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