Welcome back everyone to Thoughtful Mondays here at Blog Medley! I hope you had a fun relaxing weekend! This week I wanted to talk about the Canadian Housing Market after reading about how Vancouver just became Canada’s first city of millionaires. As some of you know, Canada’s housing market has been very hot over the last decade and prices have risen to unbelievable heights in certain regions like Vancouver and Toronto for example. Recently, the provincial British Columbia government passed regulations to allow municipalities to charge a 15% Foreign Buyer Tax in an attempt to prevent foreigners from overheating the market but the damage as everyone can see has already been done. Vancouver and other cities in B.C. are essentially for the rich to live and those that wants to buy a house in the area because they work there cannot afford the prices. Here in Ontario, we’re having the exact same issues where housing prices (whether it’s a detached house or condo) have risen significantly over the past few years although the situation hasn’t been as extreme as the one in British Columbia. Today I’ll be listing three good reasons why Ontario should adopt the same 15% foreign-buyer tax policy as the one issued in B.C.
- Dwindling supply and rising prices
Let’s face it, Chinese buyers over the past ten years have been a huge problem for Vancouver as they’ve been snapping up homes and condos left, right, and center with their new found riches. With the new tax policy in place, they’ll need to find a new place to sink their cash and the closest place with a large Chinese population is in Ontario or more specifically Toronto, Markham, Richmond Hill, and other nearby cities in the area. In the latest numbers released for August 2016, sales went up 23.5% in the Toronto area and prices also increased a significant 17.7% from August 2015. A study is currently underway to determine the effects of foreign buyers driving prices up but these preliminary results show that there is no denying that foreign buyers are a cause for concern as forecasters don’t see the housing market cooling down anytime soon. A 15% tax on foreign buyers would certainly help as recent data has shown in Vancouver where a 26% decrease in sales occurred after the tax was implemented in August 2016 compared to August 2015. Unless we want another “city of millionaires” arising, Ontario should seriously consider implementing a 15% foreign-buyer tax.
- Empty homes and condos – housing issues
Housing prices spiraling out of control is just one issue. A secondary issue that accompanies this is empty houses and condos as Vancouver and other B.C. cities have found to their dismay. Yesterday’s edition of the Globe and Mail took a look at the situation and from a city study which they quoted, 9750 condos were literally empty for an entire year. This added additional pressure to Vancouver’s housing issues as rental apartments have dwindled and rents have risen significantly over the past few years. If the B.C. government had allowed a 15% foreign buyer tax earlier, there would obviously be less empty houses and condos since most of them are owned by foreigners or rich speculators. The primary reason for these homes to be empty is simply because the owners do not need the income hence there’s no reason for them to rent their properties out and incur income taxes that they don’t need or want. The various municipalities in B.C. have been looking at the feasibility of implementing a “empty home tax” but like Toronto’s municipal government with the Gardiner highway issue they’ve been dragging their feet for far too long. Therefore we might as well make it unpleasant for foreign buyers in Ontario with a 15% tax and avoid this issue altogether.
- House rich, wallet poor
The Canadian economy has been sagging ever since the drop in oil prices and is currently still stuck in a rut as our Prime Minister tries to invigorate it by purposely tabling a deficit incurring budget. However, one of the biggest problems that I’ve observed that is holding back the growth of the economy is that young couples that have bought a house or condo to start their new lives are house rich and wallet poor. In other words, they’ve sunk all their savings into their new home and their monthly paychecks are being used to pay mortgage expenses on top of daily necessities. That doesn’t leave them much to spend on “wants” like having a nice dinner at a fancy restaurant or buying that new TV that just came out. Instead they’re barely making ends meet as they try to make mortgage payments in time which means the economy will be stuck until this crisis is solved. After all, economies don’t run on people’s “needs” but their “wants”. If houses become cheaper, Canadians will have more money to spend on themselves and loved ones which means more money for businesses which in turn means money to hire new staff (more jobs!) or money to expand (more equipment, land, etc.). However, to get this cycle going again, Ontario will need to first cool the housing market down and it will be wise for the province to do so sooner than later due to the ever growing provincial debt.
In summary, the overheated housing market in B.C. has shown us just how terrible the effects can be. If Ontario wants to avoid all these problems it will have to take a strong look at implementing a 15% foreign buyer tax on all properties. Well this wraps up today’s segment, I hope you enjoyed reading it! As for those that are interested in anime, remember to drop by on Wednesday over at Anime Wednesdays here on Blog Medley!
© 2016, Anson Wu. All rights reserved.
The post Three reasons to implement a foreign buyer tax in Ontario appeared first on Blog Medley.