I am sure by now you have heard the news. For months we’ve been anticipating changes at the Ontario level to cool the hot Toronto real estate market. Now, as part of the Fair Housing Plan, some 16 measures were announced to help people find more affordable homes. These measures really have no meat and potatoes and will not address the affordability crisis. You can read more about them here.
Will this plan crash the market? Will prices go down drastically? Will it be the doom and gloom of Toronto Real Estate market we’ve been hearing for years? The answer in my humble opinion is a big no. It may spook some buyers, it may press the pause button on some buyers for a while but that’s about it
Few things to point out:
Non Resident Speculation Tax (NRST)
Going forward, a Non-Resident Speculation Tax (NRST) of 15% will be applied to home purchases by non-Canadian citizens, non-permanent residents and non-Canadian corporations. Now, Skilled workers in Ontario Immigrant Nominee Program and Refugees, anyone obtaining permanent residency within 4 years after purchasing, and International students enrolled full time for a minimum of 2 years you are eligible for a NRST rebate. The NRST does not apply to commercial properties. Are non-residents buying a large portion of the Toronto Real Estate market? Nope, this is a small percentage of the market.
Rent Control For All Buildings This is irrespective of construction date. Currently, buildings built after 1991 aren’t subject to a maximum annual rent increase. Rent increases for all buildings will be set by the province and capped at 2.5%. They also announced a standardized lease document for all tenants and more rules for landlords. In my opinion, landlords can still increase their rent beyond the allowable 2.5%. Just more work … but doable!
Regulating Assignments As assignment sale is when a buyer of a pre-construction condo or house, assigns their agreement of purchase and sale to another buyer before occupancy or closing. This is usually for a profit. Not much clarity on this yet, but most probably the new buyer now has to pay land transfer tax on the full new purchase price amount and the original buyer selling his or her assignment has to claim capital tax gains on their profit. More details to come on this later.
Developer Incentive To Build Rental The government will be providing tax breaks to developers to encourage them to build more rentals. More data to come later.
Vacant Property Tax Not much data on this yet.
Developing Existing Provincially Owned Lands This could be used for affordable and rental housing development.
In summary, the Ontario government wants to be seen as having done something in order to gain more popularity and hence more votes in near future. What they have introduced is really not an affordability solution to the housing crisis. Let’s wait and see how this plays out.