Dear Mayor Tory:
Given recent government and media attention to the issue of foreign investment in
Toronto real estate, I am writing to provide you with the views of the Toronto Real
Estate Board (TREB) on this issue.
TREB represents over 45,000 REALTORS® working within Toronto and the
Greater Toronto Area. As such, our Members are uniquely positioned to provide
knowledgeable commentary on this issue.
As you may know, this issue has predominantly been a priority for public policy
makers in British Columbia and Ontario because of conditions in the Vancouver
and Toronto markets. In this regard, the British Columbia provincial government
recently implemented a 15 per cent tax on foreign buyers of real estate. In addition,
the Ontario provincial government is working closely with the Federal Minister of
Finance’s working group on housing affordability, which has been tasked with
reviewing and making recommendations on this issue. TREB is working with the
Ontario Real Estate Association to provide input to the provincial government and
the federal working group.
Given the importance of this issue to Toronto, we believe that it is also important to
provide our views to you and all of City Council. In this regard, TREB believes
that implementing tax increases on foreign home buyers is a knee-jerk reaction to a
problem that is not yet fully understood. Furthermore, we believe that such action
would do little to address the growing affordability challenges in Toronto, and
could have negative consequences for our broader economy.
For the following reasons, TREB believes that Toronto City Council should not implement public
policy to intervene with foreign investment of Toronto real estate:
Toronto market is intertwined with the GTA market: any City of Toronto Council
intervention could have the result of simply persuading foreign investment to invest more
heavily in regions surrounding Toronto, which in turn could have a corresponding impact
on housing prices in those regions, which would in turn have an impact on Toronto prices.
As such, with the provincial and federal levels of government currently reviewing this
issue, it would be wise for Toronto City Council to allow those levels of government to
make decisions on the need and scope for any public policy changes.
There is a lack of reliable data on foreign buyers: Both at the provincial and federal
levels, there is currently a dearth of reliable data on how much of the market foreign
buyers actually make up. Before making any public policy decisions, it would be prudent
to gather reliable data. In this regard, TREB will be surveying its members in the Fall on
the issue of foreign buyers, and releasing the results of this publicly. These survey results
could be extremely valuable to the all levels of government before they make any policy
decisions on this issue.
Housing supply factors are a real concern: while foreign buyers may be contributing to
the overall pool of buyers in the GTA, the demand side of the price growth equation
should not be considered in a vacuum. Instead, both demand and supply issues should be
considered as contributors to the growing affordability challenge. Of particular
importance is what could be done at the local and provincial levels to bring more supply
into the marketplace. For example:
Reassess Growth Plan and Greenbelt policies with a goal of responsibly easing
restrictions on developable land in the GTA and surrounding areas;
Look at whether or not the Provincial Policy Statement, as it relates to a ready and
diverse supply of housing alternatives, is being enforced;
Look at opportunities to re-designate lands within urban areas for low-rise housing
development; and,
Reduce, reform or eliminate barriers to the purchase and sale of residential real estate
like the Toronto Land Transfer Tax, which, as a significant transaction-related cost,
has acted as a barrier to mobility and has thereby played a part in suppressing the
number of existing homes being offered for sale.
Looking at the GTA in particular, we remain on track for approximately 110,000 residential
sales (including condominium apartments) through TREB’s MLS® System in 2016. This
second consecutive record sales year will be up against 150,000 to 160,000 new listings – a decline compared to 2015. This illustrates the amount of
competition between buyers that currently exists in the marketplace today, which has prompted
double-digit annual increases in low-rise home prices (MLS® Home Price Index and average
prices) and high single-digit increases in condominium apartment prices. With this in mind, even
if a demand-focused policy were to reduce sales by between five and ten per cent, we would still
experience seller’s market conditions in the GTA, quite possibly with the continuation of double digit
price increases for low-rise home types.
As discussed above, the only sustainable way to bring about more balance, and thereby more
moderate annual rates of price growth, in the marketplace would be to develop new or modify
existing policies to allow for a greater supply of listings. At current sales levels, we would need
to see approximately 200,000 to 210,000 new listings per year to achieve a balanced market,
based on historic norms. This would require an additional 50,000 to 60,000 new listings per year.
On the demand side we also encourage the City Council and the province to consider actions
targeted at the segment of the market that is being hurt the most by rising prices – first time
buyers. For example, the City should consider modernizing the land transfer tax rebate for first
time buyers to reflect modern housing prices. In 2008, when the Toronto land transfer tax was
introduced, Toronto first time home buyers paid little or no tax on the average priced home. Eight
years later, Toronto first time home buyers purchasing an average priced home are paying a
balance of close to $6,000 in Municipal Land Transfer Tax, after receiving the maximum City
rebate of $3,725, which has not been adjusted since this tax was implemented.
In addition, the City continues to levy the highest land transfer tax of 2 percent on properties
beginning at $400,000, which is well below the current average price of a Toronto home, which
currently sits at almost $700,000.
In summary, we encourage Toronto City Council to take careful and thoughtful consideration of
all aspects of this issue before any potential action to intervene.
Thank-you for your consideration of our views. We would be happy to meet with you to discuss
this issue in greater detail. Mauro Ritacca, TREB’s Senior Manager of Government Relations,
will contact your office in the near future to inquire about meeting with you on this issue.
Buying, Selling, Leasing or Investing in real estate is sometimes a complex undertaking. Hiring me, a real estate professional will help save you time and money. steven@maislin.com
