Vancouver’s real estate market was similar to Toronto in many ways: high demand for housing, peaked interest from foreign buyers, and a limited supply. One radical legislative move set the cities apart: rapidly rising prices caused the British Columbia government to impose a 15 percent foreign buyer real estate tax.
Sales of super luxury homes over $3 million in Toronto rose 86 percent in the first nine months of the year. While price appreciation and trade-up buyers are a significant portion of the Toronto real estate market, so are foreign buyers. Immediately after the tax levy became active in August, Vancouver luxury sales cooled while Toronto sales continued to rapidly rise.
The Real Estate Board of Greater Vancouver reported in October that since the tax took effect, year-over-year home sales declined nearly 30 percent. Demand for homes in the $1 million-plus range from overseas buyers has slowed.
Meanwhile, in Toronto 759 homes priced $2 million or higher changed hands from July 1 to Sept 30, or 365 more than the same time period in 2015. It’s unclear how many of the buyers were from overseas, but a correlation between Vancouver’s tax combined with the following decline in their market and a bump in Toronto’s can easily be made.
New federal regulations aimed at toughening the mortgage lending process and claiming tax exemptions are amongst the latest measures to reduce risk and some believe to deter foreign buyers. While Ottawa or Ontario may impose other measures aimed at addressing Toronto’s rapidly rising sale prices, it is unlikely the city or provincial government will impose a similar foreign buyer tax.
The coming months will continue to demonstrate the foreign buyer tax impact on the Vancouver and Toronto markets. Demand from local and foreign buyers will steer Toronto real estate for the remainder of the year regardless of the latest government measures.
Foreign buyers interested in Toronto real estate trust Barry Cohen to navigate the competitive local market and advise on legislative changes. Contact Barry today about buying or selling in Toronto.