As Toronto’s home prices continue to head for the stratosphere, a new report casts doubt that a foreign home buyers’ tax alone will be enough to bring them back to earth.
A new report by Ryerson’s City Building Institute adds to the growing chorus of voices calling for a strategy to curtail foreign demand in the city and surrounding regions, which some say is pushing home prices beyond what domestic buyers can afford.
The report re-ignites the debate over whether it’s a lack of supply that’s causing double-digit price increases — or a surge in demand caused by foreign investors and speculators targeting the Toronto real estate market.
Author Josh Gordon, an assistant professor at the Simon Fraser University School of Public Policy, says a levy on foreign buyers needs to be done soon to calm the market, but even that might not be enough.
“It’s not going to be sufficient. They also need to have an annual property surtax that is offset by the income tax you pay,” said Gordon.
“Those who own property based on foreign sources of income or wealth are hit by the surtax and everyone else is more or less spared. That discourages foreign ownership and that would bring prices down better than a foreign buyers tax.”
Foreign buyers driving price increases: report
Although a long period of low interest rates has contributed to the issue, Gordon singles out foreign buyers as the main driver behind recent price increases in Vancouver and Toronto.
“Low interest rates definitely play a role in high prices, but other cities didn’t see nearly the price- to-income ratios increases as Toronto and Vancouver,” he said.
And while rates have been low for more than a decade, Gordon points to 2015 to 2016 price spikes that coincide with a massive flight of capital from China.
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