Tax hike on foreign home buyers
March 30, 2022 Buying
The Ontario government has increased the tax for foreign homebuyers to 20 per cent from 15 per cent and has closed a loophole that allowed foreign students and workers to get a tax rebate on real estate purchases, in an attempt to crack down on speculation in the housing market.
The changes take effect on March 30, 2022 and have been expanded to cover all residential properties across the province. Under the previous rules, just the Greater Golden Horseshoe Area, which includes Toronto and other heavily populated regions in Southern Ontario, was covered.
The moves bring Ontario’s policies closer to those of British Columbia, which has had a higher foreign-buyers tax for years.
Since the pandemic started, home prices in the country are 52 per cent higher. And in parts of the Greater Golden Horseshoe Area such as Cambridge and Barrie, the typical home price is at least 80 per cent higher than two years earlier.
It is not clear how much of an impact the changes will have. Foreign owners of real estate accounted for 2.2 per cent of all residential property in the province in 2020, according to the most recent data from Canadian Housing Statistics Program. In Ontario, the highest foreign homeownership rate was in the city of Toronto, where non-residents owned 3.8 per cent of all homes and 7 per cent of condos, according to CHSP.
Under the new law, a non-resident speculation tax or NRST rebate is no longer available to international students unless they become permanent residents of Canada within four years after the tax became payable. As well, foreign workers are no longer eligible for the rebate.
Previously, foreign students were allowed to get the rebate if they had been enrolled full-time in a school in Ontario for a continuous period of at least two years from the date their property was purchased. And foreign workers were allowed to get the rebate if they had worked full-time under a valid work permit in Ontario for at least one year since the date of the home purchase.
The province says that the changes would help “deter non-resident investors from speculating on Ontario’s housing market.” They’ve also indicated that tax relief would be available for those who were committed to “laying down roots” in the province.