Canada looks to provinces to cool hot housing market

By Andrea Hopkins
| OTTAWA, March 23

Canada’s federal government
lobbed the problem of Toronto’s hot housing market back to
Ontario on Thursday after its new budget did nothing to rein in
real estate speculators, boosting expectations a foreign buyers
tax may soon be imposed in Canada’s largest city.

Prime Minister Justin Trudeau said a federal solution to a
local problem was not the best way to address concerns about
high housing prices in response to criticism Wednesday’s budget
had not done anything to help cool high home prices.

“We recognize the tools of the federal level are necessarily
pan-Canadian, and there are tremendous differences and variances
between the housing markets in Vancouver and Toronto and housing
markets in other cities,” Trudeau told reporters in Toronto.

“So we’re working very closely with provinces and municipal
authorities to ensure that the impacts that we need to have in
certain areas of the country don’t result in unwanted
impositions or negative impacts on other parts of the country,”
Trudeau said.

Toronto prices have shot up 113 percent since early 2009,
while Canadian prices as a whole have jumped 65 percent,
according to the Teranet-National Bank price index.

Vancouver housing prices have declined since the province of
British Columbia imposed a 15 percent tax on foreign buyers in
that city in August, mostly targeting people from mainland
China, and many expect Ontario will soon impose a tax in

Ottawa has repeatedly tightened mortgage lending rules in
recent years on concerns about a housing bubble, but the boiling
Toronto market has barely slowed.

Ontario Finance Minister Charles Sousa last week urged
federal Finance Minister Bill Morneau to consider raising
capital gains taxes, among other measures, to rein in

But developers and other market observers expect the next
move to come from Ontario, or perhaps the city of Toronto
itself, because the national market has cooled.

“I somehow think a foreign buyers tax is coming,” said Ben
Myers, senior vice president at Fortress Real Developments in
Toronto. “I think they should make some kind of move now, even
if it is small, to signal that ‘we’re on this.’ And I think it
should be something Ontario-based.”

A Sousa spokeswoman did not immediately respond to requests
for comment. Toronto Mayor John Tory will consult with experts
next week to consider options and get feedback on how a foreign
buyers tax has been working in Vancouver, spokesman Don Peat

Robert Kavcic, senior economist at BMO Capital Markets in
Toronto, said he believes a foreign buyers tax is the best and
quickest fix for Toronto because even if it only affects foreign
investors, a small portion of buyers, it sends a broader signal
that the government will act to stop speculation.

“The foreign buyers tax is a good first pass because we
already have the precedent from Vancouver, it’s pretty fast and
easy to implement … the message alone will target domestic
speculation as well,” Kavcic said.

(Additional reporting by Anna Mehler Paperny in Toronto and
Leah Schnurr in Ottawa; Editing by Jeffrey Benkoe)

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