Although the new legislation affecting our housing market has not yet been enacted, once it passes it will likely have some effect on some segments of the market.
The luxury housing and luxury condo market will see very little change as a result of the proposed changes. A fifteen percent foreign buyers tax has proved to cause little change in other cities around the world who have instituted similar policies. Our luxury market sees less than four percent of buyers who are off shore, non – resident purchasers. Despite our lower dollar value, and low interest rates, the off -shore investor doesn’t see a great return on investment (ROI) in our high end purchase. The majority of foreign buyers in the luxury market plan on living in Toronto, and often are Canadian residents. As most of our purchasers of luxury product are local, we anticipate virtually no impact in the long term.
Where we may see some push back is in the investor product. These are generally condos that are purchased as rental suites. The cap on the rental increase for condos that are recently built mean low returns, generally between 2 -4 % on a cash investment. While this is not unusual in most cities around the world, an additional 15% on top of the purchase, as well as a high land transfer tax in Toronto, coupled with no ability to raise the income in any significant way, could slow the demand for presale suites for the foreign buyers. Basic economic theory would tell us that this will hurt the rental market overall in Toronto, causing a greater strain on an already low inventory of affordable rental options.
It is arguably “too little – to late” on the part of our provincial government in their attempt to cool our market. Local purchasers in the mid market price range will continue to enjoy low interest rates, and a competitive buying opportunity. Downsizers will continue to feel concern over where to move to that is economically feasible, while wanting to “cash out” and sell while the market remains strong.
We are happy to discuss this, please contact us if you have any questions or concerns.
wordpress theme jazzsurf.com