Ontario Premier Kathleen Wynne announced a slew of measures Thursday designed to cool the red-hot housing market in Toronto and the province’s Greater Golden Horseshoe area, which stretches from the Niagara region to Peterborough, Ont.
The policies will likely slow down skyrocketing housing prices in southern Ontario, potentially staving off some of the risks associated with having an overheated real estate market in one of Canada’s economic centres — risks that have implications for the entire economy, according to some economists and policy experts.
But the measures will probably fall far short of Toronto Mayor John Tory’s stated goal of making housing affordable “for all age groups and for all income levels,” commentary from several bank analysts suggested.
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Here’s a look at the winners and losers from some of the proposed policies:
The province is proposing two new tax measures: A 15 per cent foreign buyer tax, similar to that adopted last summer in Vancouver, and levies on both residential property and land left vacant. Both measures could help cool off the market, at least temporarily, according to economists.
“We have been fully in favour” of a foreign buyer tax, BMO economist Robert Kavcic wrote in a research note shortly after Wynne’s announcement.
The new taxes, coupled with measures to increase the supply of new residential units, “should work to moderate house price inflation in the coming years,” according to CIBC’s Benjamin Tal.
Both analysts, however, expect the impact of the measures to be limited.
Foreign buyers likely make up a smaller share of the Toronto housing market compared to Vancouver, which will likely curtail the effectiveness of a tax that targets only non-resident speculators, the two banks noted.
Also, “any moderation in prices linked to the tax in the Toronto area is likely to take longer to materialize than in Vancouver,” wrote RBC economists Craig Wright and Robert Hogue. That’s because Vancouver’s housing market already showed signs of cooling when the tax was introduced, whereas Toronto’s is as hot as ever.
And the tax on vacant homes, which was championed by Tory, won’t “make any material difference in the trajectory of the [Greater Toronto Area]’s housing market,” according to CIBC.
BMO, which offered a similar assessment, also noted that tax will likely be difficult to enforce.
So who wins and who loses from all of this?
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The second broad measure Ontario adopted today was pegging annual rent increases to the rate of inflation up to 2.5 per cent per year. Landlords would be allowed to raise rent by more than that once a tenant moves out.
The government’s move comes after reports of rents doubling overnight in a couple of buildings in west-end Toronto.
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The concern, though, is that the new rent control measures will result in fewer rental units being built and lower tenant turnover, as people stay put in underpriced units, according to BMO.
Here’s who wins and who loses:
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