February 13, 2017
Mayor Frank Scarpitti
City of Markham
101 Town Centre Boulevard
Dear Mayor Scarpitti,
On behalf of the Members of the Toronto Real Estate Board, from across the GTA, and the Members of the Ontario Real Estate Association, we are writing with regard to Motion 1, included on the Council Meeting agenda for February 13, which requests the Government of Ontario to implement a foreign buyer’s tax.
For the reasons that we have outlined below, we urge Markham City Council not to consider this. A foreign buyer’s tax would do little to address the growing affordability challenges in the Greater Toronto Area, and could have negative consequences for our broader economy. As such, we strongly recommend that this motion not be approved by Markham Council.
Foreign Buyers in the GTA
Until recently, there has been little or no reliable data on how much of the market foreign buyers actually make up. For this reason, TREB recently commissioned Ipsos Public Affairs to survey our members with regard to the number of transactions that they facilitated for foreign buyers. This survey shows that only an estimated 4.9 per cent of GTA transactions, in which TREB Members acted on behalf of a buyer, involved a foreign purchaser. The great majority of foreign buyers purchased a home as a primary residence (40% in GTA, 45% in York Region), to rent out to tenants in an extremely tight GTA rental market (25% in GTA and 21% York Region), or for another family member to live in (15% in GTA, 12% in York Region).
According to our research, most foreign buyers are looking to buy a family home for personal use, to supply the rental market or for family members. This is essential to Ontario’s economic success and the cultural vibrancy of Canada. We encourage you to consider this in the context of sound public policy and reliable data.
Housing Supply Factors are a Real Concern
The demand side of the price growth equation should not be considered in a vacuum. Instead, both demand and supply issues should be considered as contributors to the growing affordability challenge. Of particular importance is what could be done at the local and provincial levels to bring more supply into the marketplace. For example, the provincial government should work with its municipal counterparts to look at ways in which the supply of housing could be increased. Areas of research could include:
- Revisiting land use designations in built-up areas to allow for a broader array of home types to be built. It is important to recognize that more than three-quarters of households in the GTA continue to be pointed at some form of low-rise home type.
- Look at ways to streamline the development approvals process.
- Look at ways to streamline the permit process
- Look at ways to incent land owners to develop.
Looking at the GTA in particular, 2016 saw approximately 110,000 residential sales (including condominium apartments) through TREB’s MLS® System in 2016. This second consecutive record sales year was up against approximately 150,000 new listings – a decline compared to 2015. This illustrates the amount of competition between buyers that currently exists in the marketplace today, which has prompted double-digit annual increases in low-rise home prices (MLS® Home Price Index and average prices) and high single-digit increases in condominium apartment prices. With this in mind, even if a demand-focused policy were to reduce sales by between five and ten per cent, we would still experience seller’s market conditions in the GTA, quite possibly with the continuation of double-digit price increases for low-rise home types.
As discussed above, the only sustainable way to bring about more balance, and thereby more moderate annual rates of price growth, in the marketplace would be to develop new or modify existing policies to allow for a greater supply of listings. At current sales levels, we would need to see approximately 200,000 to 210,000 new listings per year to achieve a balanced market, based on historic norms. This would require an additional 50,000 to 60,000 new listings per year.
Mayor Tory and City of Toronto Staff Oppose
Given that the motion before Markham City Council references a City of Toronto motion asking Toronto staff to review the possibility of a Toronto foreign buyer tax, it is important for Markham City Council to have the full picture on this aspect. Firstly, the motion that was moved by Councillor Jim Karygiannis, and only asked for staff to review and report back on a potential Toronto Foreign buyer tax. This was in no way an expression of support for such a tax, in principle, by Toronto City Council. Secondly, City staff have reported on this issue during the City’s recent budget process, and it is important to note that the staff report raised numerous concerns with implementing such a tax. Thirdly, on numerous occasions, Mayor Tory has been on record as opposing the implementation of a foreign buyer’s tax, as has Premier Wynne.
Legal Concerns Have Been Raised in B.C.
Notwithstanding the very different British Columbia real estate market, an Ontario foreign buyers tax could be subject to some of the same legal challenges that have arisen there. With this in mind, it is not clear that the B.C. foreign buyer’s tax will survive potential legal challenges based on international trade agreements, the limits of provincial jurisdiction, and discrimination.
In summary, REALTORS® encourage Markham City Council reject this motion and ask you to promote Markham as a welcoming destination for all those looking for a better future.
Thank-you for your consideration of our views.
c.c. Markham City Council
Premier Kathleen Wynne
The Hon. Charles Sousa, Minister of Finance
The Hon. Bill Mauro, Minister of Municipal Affairs and Housing
Patrick Brown, Leader, Ontario Progressive Conservative Party
Andrea Horwath, Leader, Ontario New Democratic Party
Lynn Dollin, President, Association of Municipalities of Ontario
Clark Sommerville, President, Federation of Canadian Municipalities
Ontario Home Builders Association
Building Industry and Land Development Association