* Similar tax led to price decreases in Vancouver
* Rent controls will be applied to all homes
* Vacant home tax will also be implemented
* Economist says measures will slow down activity
(Adds comments from Ontario minister, economist)
By Matt Scuffham
TORONTO, April 20 Ontario's provincial
government on Thursday introduced a 15 percent tax on property
purchases by foreign buyers as part of 16 measures designed to
cool Toronto's red-hot housing market.
A rapid acceleration in home prices in Toronto had prompted
some economists to voice fears that the real estate market in
Canada's most populous city is in a bubble and raised concerns
about the ability of first-time buyers to afford a home.
Ontario's Liberal government, trailing the Progressive
Conservatives in opinion polls ahead of an election in June
2018, had also come under pressure to respond to growing public
frustration about the role foreign buyers are playing in the
"I have three millennials at home, adults in their 20s. They
wonder how they are ever going to get their starter home," said
Ontario Finance Minister Charles Sousa.
"I think the public is concerned about speculation and
speculators crowding out families that want to own a home," he
added in an interview.
Sousa said the tax would take effect on Friday.
Toronto prices rose 33 percent in March from a year earlier
and the average price of a detached home topped C$1.2 million
($903,000) last month. Bank of Canada Governor Stephen Poloz has
warned the level of price increases is unsustainable.
Sousa acknowledged the government faced a difficult
balancing act finding policies that would stabilize prices
without damaging the market.
"Nobody wants to crash the market. I'm very mindful of any
unintended consequences from the measures that we take," he
A similar tax introduced by British Columbia last July led
to a sharp decline in sales activity and a fall in prices.
Prices in Vancouver were down 9 percent in March from a year
ago, according to the Canadian Real Estate Association.
Sydney, Singapore and Hong Kong have also introduced foreign
Ontario's government also said it would expand rent controls
to all private rental units, including those built after 1991,
which are exempted under existing rules.
Rent hikes on new buildings will be limited to 1.5 percent
above the inflation rate, which was 2 percent in February.
The province will implement a tax on vacant homes in Toronto
as part of measures to address a lack of supply of affordable
homes. It will also introduce a C$125 million ($93 million)
five-year program to encourage apartment construction.
"This is a complex issue," Ontario Premier Kathleen Wynne
told reporters. "There wasn't one single thing that we could do
that would resolve the issues that we're confronting."
CIBC Deputy Chief Economist Benjamin Tal said the measures
were "reasonable and potentially helpful."
"We expect the measures to slow down activity in Toronto’s
housing market in the near term, not only due to their direct
impact but also due to the impact of the uncertainty regarding
their ultimate impact on potential buyers," he said.
Souza met with his federal counterpart, Bill Morneau, and
Toronto Mayor John Tory on Tuesday to discuss potential measures
($1 = 1.3486 Canadian dollars)
(Additional reporting by Denny Thomas; Editing by Meredith
Mazzilli and Peter Cooney)