TORONTO (AP) — Foreign nationals who don't live in Toronto and its surrounding communities will pay an additional 15 percent tax on homes under legislation proposed by the Ontario government.
Ontario Premier Kathleen Wynne made the announcement Thursday in an effort to cool a hot housing market in Canada's largest city.
It matches the 15 percent tax the Pacific coast city of Vancouver has implemented. Wynne said the tax is not about targeting immigrants.
"We're targeting those are who aren't looking to raise a family. They are only looking for a quick profit or a safe place to park their money," Wynne said.
The average price of detached houses in the Greater Toronto Area rose to $1.21 million Canadian (US$900,000) last month. Wynne said when the market jumps 33 percent in a year they know there's a problem.
"There is a need for interventions right now in order to calm what's going on," Wynne said.
The tax will be imposed on buyers in what's known as the Greater Golden Horseshoe area who are not citizens, permanent residents or Canadian corporations. Once the legislation passes, the foreign tax would be effective retroactively to April 21.
Wynne introduced other measures as well. Ontario is also expending rent control, which currently only applies to units built before November 1991. Tenants in newer units have complained of dramatic spikes in rent.
The premier said they are taking aim at speculators and are tackling affordability.
The government doesn't keep statistics on the number of foreign buyers. Asian investment in Toronto reportedly picked after Vancouver introduced its foreign buyer tax last summer.
Benjamin Tal, Deputy Economist at CIBC World Markets, said the foreign tax is a step in the right direction but thinks it could have a minimal impact because the estimated share of foreign buyers in the greater Toronto area is notably lower than in Vancouver. "But if Vancouver is any guide, we might see a short period in which domestic buyers will sit on the sidelines while assessing the impact of the tax. During that period we might see some slowing in sales," Tal said.
Tim Hudak, CEO of the Ontario Real Estate Association, said the measures could help make homes more affordable for residents.
"You can't go to a barbecue in the province without people talking about real estate and how everyone has a son or daughter who can't buy a home and wants to get into the market," Hudak said.
Real estate agent Sabrina Ataullah-Jan said Canadian properties are undervalued and that is why the Toronto area has an influx of foreign investment. She said that poses a challenge for locals bidding for houses that are going for hundreds of thousands over the asking price.
"Last weekend a house sold for 1 million over asking on a 2 million dollar home. Things have gotten crazy," she said. "The new tax will slow down the market a bit, as it did in Vancouver. But for those who have the money to invest and see the high growth potential in Toronto, which is repeatedly voted as the best city to live in, I don't think the 15 percent will be enough of a deterrent."
Associated Press writer Charmaine Noronha in Toronto contributed to this report.