With steadily rising residential sales prices, the Ontario government of Kathleen Wynne has implemented a new Non-Resident Speculation Tax (NRST) in an effort to cool the market down.
The NRST took effect on April 21, and imposes an additional 15% tax upon the purchase or acquisition of a residential property by those who are neither citizens nor permanent residents of Canada, or by foreign corporations or taxable trustees.
This tax will apply to all residential property located within the Greater Golden Horseshoe (GGH) area, which essentially spans from the Niagara Region through Peterborough. Those who qualify will be subject to NRST as well as Ontario’s general land transfer tax.
Premier Wynne has insisted that this tax is not intended to target immigrants; a rebate will be available for those who pay the NRST and subsequently obtain permanent resident status or citizenship.
Instead, she says this tax is meant to target those looking for quick profit/investment but not a place to raise a family.
This move follows a rise in GTA housing prices of 33.4% in the past year, to an average price of $1.21 million.
Wynne has future plans to expand rent control, which currently applies only to units built before November 1991, to include all private rental units under annual rent increase guidelines. She also plans for a 5-year, $125 million program to rebate a portion of development charges to encourage rental construction. Finally, she intends to review the rules governing real estate agents, looking in particular at those surrounding ‘double-ending’.
Through these measures, the Wynne government intends to make housing more affordable for the young, and more secure for those of advanced age.
Though many support the tax as a tool to cool a hot market, some criticize Wynne for opposing New York’s proposed buy-American provisions only to implement her own buy-Canadian policy, which they call “anti-NAFTA”. In fact, there is a proposed lawsuit against BC based on its foreign buyer tax, claiming that the tax is unconstitutional per Section 15 of the Charter of Rights and Freedoms, and that it perpetuates “prejudice and stereotyping”. Critics remind us of Canada’s signature on over 30 international treaties committing to treat foreign nationals as citizens.
Here in the Barrie and District Area, the average sale price of residential homes increased 36.9% between March 2016 and March 2017, to an average of $547,847. The number of transactions has also grown, with the area selling 705 units in March of this year, 27.5% higher than March of last year. These together have led to a whopping 82.9% increase in the total dollar value of all March 2017 home sales from the same month last year.
To find out more about the NRST and how it will affect yourself or your clients, visit: https://www.fin.gov.on.ca/en/bulletins/nrst/nrst.html
By: Jacklyn Tuckey, Student-at-Law