It happened…. The 15% Non-Resident Speculation Tax has been implemented. All residential properties in what the Ontario Governments specifies as being the Golden Horseshoe will be subject to the tax as of April 20th, any BINDING agreements of purchase and sale signed AFTER this date will be subject to the tax.
I have been a proponent of such a tax and have written a few posts in this blog on the subject. I read an article in the Toronto Sun today, which I feel is trying to sensationalize a drop in market activity since the tax’s implementation. The article is by Tess Kalinowski, Fri, May 26th, 2017. The headline reads: GTA HOME SALES PLUNG AS MUCH AS 61 PERCENT. Now you have to watch the statistics as they can say whatever you want them to say. In reality, The GTA as a whole Single family residential home sales dropped 26% from April 20th, until May 20th. I say, this is a good thing. It seems as if some of the speculative buying may have been curtailed.
I account this trend with a bit of nervousness. Buyers tend to pull back when faced with the unknown. Sure, we will see a dip in sales, but most of those sales where the crazy panic type sales which threatened to destroy our real estate market. These Buyers who have pulled back, will most likely jump back into the market, but under conditions that are much more predictable and stable. No more multi hundred thousand dollar over asking price bids. Things will get bid up, but it won’t be from buyers who have more money than the typical Ontarian trying to buy their first house etc.
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The market will remain vibrant. Realosphy stated an overall decrease of 5-6%. However, this is still a massive increase over last years prices when you consider that prices were jumping 30+ % annually in the GTA. There has been a jump in product, which is a good thing as well.
We saw a slight decline in activity in Niagara, but not enough to predict a trend. I know I’ve been very busy, as has our office. We have a few more listings coming onto the market, which is a good trend.
How the tax works. THE NRST applies to FOREIGN ENTITIES OR TAXABLE TRUSTEES, who purchase or acquire property in the GGH – Niagara is included. A foreign entity is either a foreign national or a foreign corporation – as defined in the Immigration and Refugee Protection Act, which is an individual who is not a permanent resident of Canada. ( Do they pay the majority of their taxes in this country? ). A foreign Corporation is a company not registered in Canada. Let’s say 3 people buy a property together, all of them must be permanent residents of Canada.
It’s interesting to note that a student who has studied in Canada for 2 or more years is not subject to the tax. Interesting when you consider what happened to NDSS.
Let’s continue to watch what happens, I think we will be much better off. I’d like to see normal increases back in the 7-10% range.