If you’ve been reading the news, you know all eyes have been on the Toronto and Vancouver’s red-hot real estate markets. Let’s take a few minutes to recap what’s been happening in those hot markets because our Kingston real estate market has been a different state of affairs!
Since September 2015, housing prices have increased in Toronto by 20.4% alone, raising the average house price to $755,755. Housing prices in these markets have become prohibitively expensive for first-time buyers, leading experts to brainstorm ways to prevent prices from climbing even higher.
In Vancouver, recent talk has involved targeting foreign buyers. In order to curb foreign buyers from purchasing investment properties and leaving them empty—thus fueling the city’s housing shortage—Vancouver is thinking about introducing a 1% tax on empty homes. The tax would work like this: homeowners would have to declare if a property is their principal residence. If the property isn’t a principal residence, and if it isn’t being rented out, the property would be taxed 1% of its value every year. For example, the average price of a single detached home in Vancouver is currently $1,545,800, meaning that an empty house of this value would be taxed roughly $15,458 per year. This proposal is still awaiting approval, but if it passes it will be the first tax of its kind in Canada.
But are foreign buyers and their empty homes responsible for driving up housing prices? Many real estate experts in Toronto disagree. Research released by Urbanation—a condominium research firm—suggests that foreign buyers are less numerous than originally thought. According to their research, foreign buyers make up only 5% of new condominium sales in Toronto, with local buyers outnumbering them roughly 10-1. It appears that local buyers are also capitalizing on Toronto’s strong real estate market. When homeowners see prices in their market increasing rapidly, it makes sense to invest in another property. Unfortunately, more buyers means more offers on properties, which inevitably leads prices to increase. In a recent interview, Premier Wynne stated that Ontario is exploring different housing proposals, but a tax on foreign buyers would not be beneficial for the province.
Though opinions vary, we can all agree that this is a complex issue with no easy solutions. What are your thoughts on the markets in Toronto and Vancouver? If taxing foreign buyers isn’t enough to stabilize prices, what other strategies could work? Let us know!