Long-term effects of foreign buyer tax yet to be seen

9.1 per cent of homes sold in York Region bought by non-Canadians in May

Between April 24 and May 26, 2017, foreign buyers accounted for 9.1 per cent of homes bought in York Region, according to a new report from the Ontario Ministry of Finance. This figure is higher than that of Toronto, where foreign buyers accounted for 7.2 per cent of home sales.

These numbers reflect the period directly after the province implemented a 15 per cent surtax on foreign buyers on April 20. However, according to Jason Mercer, the director of market analysis at the Toronto Real Estate Board (TREB), it’s too early to see how this surtax has affected the market in both Toronto and York Region, which has seen a dramatic dip in home sales since July 2016.

“The jury is still out on the overall impact of what this policy move is going to be, on not only supply, but also on sales,” said Mercer, “[because] the deals [reflected in the ministry’s latest report] were probably signed before the implementation of that policy.”

The housing market in Richmond Hill has seen dramatic movements in 2017. According to TREB’s data, home sales doubled between January and March. However, July has seen a 53 per cent decline in sales since.

“People only think it’s the 15 per cent tax that’s created the change in the market,” said Daryl King, a realtor with Royal LePage. “It was starting to do that already. The mortgage rules have gotten tougher, and that’s had an adverse affect on everybody too.”

According to King, the dip in home sales was inevitable after the dramatic increases from the beginning of the year.

TREB is waiting until more data comes out before it makes a call on how much the foreign buyers will continue to shape the housing market. According to Mercer, it can take from six months to a year to get a complete picture of the impact of a housing correction policy.

“We certainly see some buyers take a step back, but it’s possible at least some of these individuals who are on the sidelines may move back into the marketplace over the next 12 months or so,” said Mercer.

King sees these next few months as an opportunity for buyers.

“Prices will be priced more correctly,” King said. “You’ll see houses being sold around the listing price. It’s going to take longer to sell. But that’s what a normal market is: start to finish, it was always three to five months anyway. So we’ll probably go back to one of those types of markets, and that’s OK.”