Housing tax impact mostly psychological: Sousa

TORONTO — Ontario’s Fair Housing policy, including its 15 per cent foreign speculation tax, has cooled the Toronto area’s overheated housing market, but its impact has been largely psychological, Finance Minister Charles Sousa said Wednesday.

“We are tempering not only nonresident Canadians ... but we’re also saying to local speculators you are going to have to disclose everything you’re doing to the Canada Revenue Agency,” Sousa said.

“That in itself tempered some speculation locally, as well.”

Sousa spoke to reporters following the first of four planned provincial housing forums — a day after the Liberal government reported that 4.7 per cent of home sales that closed in the Golden Horseshoe in the month following its April 20 housing announcement involved foreign buyers.

The government had to act because housing prices were pushing families out of the market, he said.

“We couldn’t just sit back and not provide some degree of safety, especially for those in the lower price points,” said Sousa.

It remains unclear which municipalities are experiencing higher-than-average market speculation and how big a disincentive the new foreign speculation tax presents, but Sousa said the government will track those impacts going forward.

“What we do know is that the spike of property values was tremendous year over year — up to 33 per cent in Toronto alone, higher in the surrounding areas — it is now around 14 per cent since we put those measures in place,” he said.

“Market forces will always prevail.”

The Bank of Canada’s pending decision on whether to raise interest rates will also have an impact on housing demand, he said.

Sousa dismissed concerns the Ontario economy is too dependent on housing, saying demand is high, but fundamentals are strong with exports growing and low unemployment.

“The measures we have taken are designed to provide for stability and sustainability,” he said.

The province is using Teranet land registry data on closings, and provincial and municipal land transfer tax information to determine foreign transactions.

Some realtors are skeptical about the real impact of the for- eign investment tax given the relatively low level of activity.

“Will (the tax) make a difference in the market? Yes,” said Tom Storey of Royal LePage Signature Realty.

“But if we’re talking about 4.7 per cent of total foreign buyers — how many of those 4.7 per cent is it going to affect their decisionmaking (on whether to buy)?” Storey added.

Overseas investors might rethink leaving a property empty given the tax, but for some it will simply be the cost of parking their money, he said.

Vancouver, which introduced a foreign buyer tax last summer, saw an 11.5 per cent home sales dip in June compared with a record high set a year ago.

The Real Estate Board of Greater Vancouver said Wednesday that 3,893 properties changed hands last month compared with 4,400 residential property sales in June 2016. Sales in June this year were down 10.8 per cent compared with May, when 4,364 homes were sold.

However, the board says last month’s sales were still 14.5 per cent above the 10-year sales average for the month of June.

On Thursday, the Toronto Real Estate Board is set to announce its revised 2017 forecast and June sales figures, which are expected to have declined further since May.

It had been predicting 10 to 16 per cent growth in prices this year compared to last, but it released a survey last month showing that many first-time buyers are postponing their purchases.