It’s been quite a week in real estate.
British Columbia has imposed a “foreign buyers tax” of 15% of the purchase price of residential properties.
There is one thing I can tell you with certainty: the overall effect of this tax will be hard to determine even if the market cools and housing prices in Vancouver stabilize.
The factors that determine the price of real estate are many. The basics are supply and demand. Add to the mix low interest rates, a solid local economy and slowing growth of new construction and you have a hot market at any time.
Real estate sales are a seasonal business. By imposing this tax at this time of year and expecting to see results as fewer homes are listed for sale, as the normal course of the selling season begins to wane, is foolhardy at worse.
Will a “Foreign Buyers Tax” Come to Ontario?
In Ontario, of course, the government is watching this tax on the effect of the BC housing market.
But in Toronto we have a different set of circumstances that have compounded the price of home ownership.
Restrictive land use policies, a booming local economy and a steady stream of immigration has added to the population and added to the desire of becoming a home owner, bringing the result of higher demand that drives prices up.
I don’t expect the provincial government to act quickly, rather to have a “wait and see” attitude about a buyer’s tax.
Investing now will still bring an excellent return on investment and, if the government does decide to bring in a buyer’s tax in the future, now is the time to make that investment in local real estate to realize tens of thousands of dollars in savings.