OTTAWA – Canada’s federal government lobbed the problem of Toronto’s hot housing market back to Ontario after its new budget did nothing to rein in real estate speculators, boosting expectations a foreign buyers tax may soon be imposed in Canada’s largest city.
Prime Minister Justin Trudeau said earlier this week a federal solution to a local problem was not the best way to address concerns about high housing prices in response to criticism Wednesday’s budget had not done anything to help cool high home prices.
“We recognize the tools of the federal level are necessarily pan-Canadian, and there are tremendous differences and variances between the housing markets in Vancouver and Toronto and housing markets in other cities,” Trudeau told reporters in Toronto Thursday.
“So we’re working very closely with provinces and municipal authorities to ensure that the impacts that we need to have in certain areas of the country don’t result in unwanted impositions or negative impacts on other parts of the country,” Trudeau said.
Toronto prices have shot up 113 percent since early 2009, while Canadian prices as a whole have jumped 65 percent, according to the Teranet-National Bank price index.
Vancouver housing prices have declined since the province of British Columbia imposed a 15 percent tax on foreign buyers in that city in August, mostly targeting people from mainland China, and many expect Ontario will soon impose a tax in Toronto.
Ottawa has repeatedly tightened mortgage lending rules in recent years on concerns about a housing bubble, but the boiling Toronto market has barely slowed.
Ontario Finance Minister Charles Sousa last week urged federal Finance Minister Bill Morneau to consider raising capital gains taxes, among other measures, to rein in speculation.
But developers and other market observers expect the next move to come from Ontario, or perhaps the city of Toronto itself, because the national market has cooled.
“I somehow think a foreign buyers tax is coming,” said Ben Myers, senior vice president at Fortress Real Developments in Toronto. “I think they should make some kind of move now, even if it is small, to signal that ‘we’re on this.’ And I think it should be something Ontario-based.”
A Sousa spokeswoman did not immediately respond to requests for comment. Toronto Mayor John Tory will consult with experts next week to consider options and get feedback on how a foreign buyers tax has been working in Vancouver, spokesman Don Peat said.
Robert Kavcic, senior economist at BMO Capital Markets in Toronto, said he believes a foreign buyers tax is the best and quickest fix for Toronto because even if it only affects foreign investors, a small portion of buyers, it sends a broader signal that the government will act to stop speculation.
“The foreign buyers tax is a good first pass because we already have the precedent from Vancouver, it’s pretty fast and easy to implement … the message alone will target domestic speculation as well,” Kavcic said.