As real estate prices soar across Ontario, a Toronto city councillor is about to introduce a motion asking the provincial government to bring in a speculation tax aimed at putting a chill into the red-hot housing market.
Mike Colle, who represents Ward 8, Eglinton–Lawrence, told CBC News he’ll make the move when city council meets later this month.
“$1.3 million for a starter home in Toronto. This is insanity,” said Colle. “I’m asking the province to look at this as a way of slowing things down and ensuring that reasonable people with reasonable incomes have a chance at a house.”
The price of homes in Toronto is showing no sign of letting up. According to the Toronto Regional Real Estate Board, the average selling price for all home types combined in November rose by 21.7 per cent year-over-year to $1,163,323. (CBC)
As CBC News recently reported, investors now make up the largest segment of home buyers in Ontario; 25 per cent of homes are being snapped up by investors speculating that prices will only keep rising.
Colle is calling on the Ontario government to introduce a speculation tax on the sale of homes that are not principal residences to deter speculators and what he calls “home flippers.”
It wouldn’t be the first time a tax like this was introduced in Ontario. The Bill Davis government brought in a speculation tax in the 1970s to cool Ontario’s real estate market.
While some experts say the province needs to address sky-high prices that have outpaced incomes, they caution such a tax could have an “aggressive” impact. They further say the rate of the tax and how it’s implemented are crucial.
Others warn it could crash the market and that any measure to deter investors could have unintended consequences.
‘Blowing up the market’
Ontario already has a 15-per-cent non-resident speculation tax that applies when foreign corporations, or individuals who are not citizens or permanent residents of Canada, purchase or acquire property located in the Greater Golden Horseshoe Region.
Colle doesn’t say how high he believes the proposed tax should be, but he’s calling for a broader levy that would also target domestic investors who buy or flip multiple homes, treating housing like a “bitcoin-type commodity.”
“We’re talking about people that are in the buying and flipping of houses and condos for their income,” said Colle.
“These people are just essentially blowing up the market in Toronto.… There are other factors, but this is one factor that I want the provincial government to wake up and look at.”
WATCH | The Canadian Real Estate Association reports double-digit increases this fall
Canadian Real Estate Association finds home prices continue to rise
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The Canadian Real Estate Association confirmed what so many frustrated house hunters already know — prices just keep going up. In some markets, like Toronto and Vancouver, people are just giving up in the face of million-dollar prices. 1:53
The Bank of Canada recently acknowledged for the first time that a sudden influx of investors is the likely contributor to rapid increases in housing prices.
“There are consequences on the other side if you just let an asset price run well in excess of what’s justified by income and employment,” said Robert Kavcic, senior economist with BMO Capital Markets.
Earlier this year, Kavcic co-authored a report that called on policy-makers to act “immediately” to address home prices across the country. The report makes a series of recommendations — the main one being for the Bank of Canada to increase interest rates.
Also on that list was some form of speculation tax.
Kavcic says while it would work to cool the market, it wouldn’t be the No. 1 recommendation.
“We did caution that the rate of the tax matters a lot, over what period the tax cut gets phased out matters a lot, whether it’s deductible against capital gains and various other aspects ultimately do matter a lot,” he said.
“You really do have to be very careful how you craft such a measure, because it can be pretty aggressive and have a pretty big impact on the market.”
The shock of April 1974
Real estate lawyer Bob Aaron remembers that impact vividly. He was just a few years out of law school when the Bill Davis government introduced a 50-per-cent speculation tax on non-principal residences. It was later decreased to 20 per cent, then scrapped altogether.
“That was April 9, 1974 — the worst day of my career,” said Aaron, who remembers fielding endless calls the next day. They were from buyers trying to get out of purchases and from sellers wanting to make sure the deals were still going through.
“There were years of litigation after that. There was … blood in the streets when people saw the equity in their home was just evaporating overnight,” he said.
Real estate lawyer Bob Aaron remembers the flood of calls he received in 1974 after then-Premier Bill Davis introduced a provincewide speculation tax. He says reintroducing a similar tax would bring on a market crash and long-term consequences for homeowners — just like it did back then. (Farrah Merali/CBC)
Any similar tax would bring on a market crash and long-term consequences for homeowners, Aaron says, much like he saw in 1974.
“I think what Mike Colle wants to do is repeal the law of supply and demand. I don’t know of any legislature in the country that is going to be able to do that,” he said.
Aaron also doubts how effective such a tax would be in the long term. That’s a concern shared by Murtaza Haider, a professor of data science and real estate management at Toronto’s Ryerson University.
Haider adds there could also be unintended consequences — the biggest one being the removal of a large amount of rental stock supplied by investors.
“We solve the problem for just a short period of 12 to 18 months for the would-be owners, but may end up creating a bigger problem for renters,” said Haider.
Murtaza Haider, a professor of data science and real estate management at Ryerson University, says there could be unintended consequences to a speculation tax — particularly for renters. (James Dunne/CBC)
“What really needs to be done is you have to inundate the market with new supply, so that those price pressures could ease. Anything other than that, it’s just going to be Band-Aid solutions trying to hide the problem.”
As for whether a speculation tax is on the table, Ontario’s Ministry of Finance told CBC News it does not “speculate” on tax policy, adding that there already is the non-resident speculation tax.
TORONTO – The Toronto Regional Real Estate Board says home sales in October surged as buyers continued moving off the sidelines amid lower interest rates.
The board said 6,658 homes changed hands last month in the Greater Toronto Area, up 44.4 per cent compared with 4,611 in the same month last year. Sales were up 14 per cent from September on a seasonally adjusted basis.
The average selling price was up 1.1 per cent compared with a year earlier at $1,135,215. The composite benchmark price, meant to represent the typical home, was down 3.3 per cent year-over-year.
“While we are still early in the Bank of Canada’s rate cutting cycle, it definitely does appear that an increasing number of buyers moved off the sidelines and back into the marketplace in October,” said TRREB president Jennifer Pearce in a news release.
“The positive affordability picture brought about by lower borrowing costs and relatively flat home prices prompted this improvement in market activity.”
The Bank of Canada has slashed its key interest rate four times since June, including a half-percentage point cut on Oct. 23. The rate now stands at 3.75 per cent, down from the high of five per cent that deterred many would-be buyers from the housing market.
New listings last month totalled 15,328, up 4.3 per cent from a year earlier.
In the City of Toronto, there were 2,509 sales last month, a 37.6 per cent jump from October 2023. Throughout the rest of the GTA, home sales rose 48.9 per cent to 4,149.
The sales uptick is encouraging, said Cameron Forbes, general manager and broker for Re/Max Realtron Realty Inc., who added the figures for October were stronger than he anticipated.
“I thought they’d be up for sure, but not necessarily that much,” said Forbes.
“Obviously, the 50 basis points was certainly a great move in the right direction. I just thought it would take more to get things going.”
He said it shows confidence in the market is returning faster than expected, especially among existing homeowners looking for a new property.
“The average consumer who’s employed and may have been able to get some increases in their wages over the last little bit to make up some ground with inflation, I think they’re confident, so they’re looking in the market.
“The conditions are nice because you’ve got a little more time, you’ve got more choice, you’ve got fewer other buyers to compete against.”
All property types saw more sales in October compared with a year ago throughout the GTA.
Townhouses led the surge with 56.8 per cent more sales, followed by detached homes at 46.6 per cent and semi-detached homes at 44 per cent. There were 33.4 per cent more condos that changed hands year-over-year.
“Market conditions did tighten in October, but there is still a lot of inventory and therefore choice for homebuyers,” said TRREB chief market analyst Jason Mercer.
“This choice will keep home price growth moderate over the next few months. However, as inventory is absorbed and home construction continues to lag population growth, selling price growth will accelerate, likely as we move through the spring of 2025.”
This report by The Canadian Press was first published Nov. 6, 2024.
HALIFAX – A village of tiny homes is set to open next month in a Halifax suburb, the latest project by the provincial government to address homelessness.
Located in Lower Sackville, N.S., the tiny home community will house up to 34 people when the first 26 units open Nov. 4.
Another 35 people are scheduled to move in when construction on another 29 units should be complete in December, under a partnership between the province, the Halifax Regional Municipality, United Way Halifax, The Shaw Group and Dexter Construction.
The province invested $9.4 million to build the village and will contribute $935,000 annually for operating costs.
Residents have been chosen from a list of people experiencing homelessness maintained by the Affordable Housing Association of Nova Scotia.
They will pay rent that is tied to their income for a unit that is fully furnished with a private bathroom, shower and a kitchen equipped with a cooktop, small fridge and microwave.
The Atlantic Community Shelters Society will also provide support to residents, ranging from counselling and mental health supports to employment and educational services.
This report by The Canadian Press was first published Oct. 24, 2024.
Housing affordability is a key issue in the provincial election campaign in British Columbia, particularly in major centres.
Here are some statistics about housing in B.C. from the Canada Mortgage and Housing Corporation’s 2024 Rental Market Report, issued in January, and the B.C. Real Estate Association’s August 2024 report.
Average residential home price in B.C.: $938,500
Average price in greater Vancouver (2024 year to date): $1,304,438
Average price in greater Victoria (2024 year to date): $979,103
Average price in the Okanagan (2024 year to date): $748,015
Average two-bedroom purpose-built rental in Vancouver: $2,181
Average two-bedroom purpose-built rental in Victoria: $1,839
Average two-bedroom purpose-built rental in Canada: $1,359
Rental vacancy rate in Vancouver: 0.9 per cent
How much more do new renters in Vancouver pay compared with renters who have occupied their home for at least a year: 27 per cent
This report by The Canadian Press was first published Oct. 17, 2024.
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