Would a foreign-buyers tax cool Toronto’s market? Mayor Tory says he’s not sure

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Toronto Mayor John Tory says he doesn't believe Queen's Park is planning to impose a foreign-buyers tax on home sales any time soon and that he needs more data before deciding if such a move would actually help cool Toronto's bubbling-hot real estate market.

Mr. Tory was asked Friday about remarks a day earlier from Ontario Finance Minister Charles Sousa, who said he was growing increasingly concerned about the housing market and that a foreign-buyers tax, like the one imposed in B.C., was on the table. The mayor said his office contacted aides to Mr. Sousa on Friday morning to clarify the remarks, which Mr. Tory said had been overblown.

The mayor said all three governments – Mr. Tory spoke with federal Finance Minister Bill Morneau just this week – continue to monitor the housing market. A range of possible actions are under consideration, the mayor said, but no decision on a foreign buyers' tax or any other measure has been made.

"I think people often think when you are watching something carefully it means you are doing nothing," Mr. Tory told reporters. "What we're trying to do I think is to be sensible, be responsible about this."

While the idea is opposed vehemently by the real-estate business, pressure from elsewhere has been mounting for the Ontario government to follow B.C.'s lead and impose a 15 per cent foreign-buyers tax to pour cold water on the market.

But so far, politicians have been cool to the idea, even as some, including bank economists, are urging action and warning of a real estate bubble in Toronto that is now potentially being inflated by offshore money pushed out of Vancouver – where the tax is being credited with helping cool things off.

On Thursday, Mr. Sousa said he was once content to "let market forces prevail" but that recently he had grown more concerned about the prevalence of bidding wars and the "ability of young people to enter the marketplace." He was quoted as saying that a foreign-buyers tax was one of several options on the table.

The remarks appeared at odds with comments last fall from Premier Kathleen Wynne, who rejected the idea in October, in advance of her government's move last fall to double land-transfer tax rebates for first-time home buyers.

"We're not going to go down the road that British Columbia has gone down," Ms. Wynne said at the time. "I'm not interested in doing something that would have an unintended consequence in Ontario – something that was designed for a totally different market."

However, sources say Mr. Sousa was not signalling any new policy direction with his latest comments.

Mr. Sousa's spokeswoman, Jessica Martin, said on Friday that the Finance Minister had only "reiterated what he has said many times – that we are monitoring the housing market closely and are interested in examining the market forces that are affecting home prices."

The government has yet to finalize reforms, announced last fall, that would see it to use its land-transfer tax system to track foreign home purchases and whether buyers intended to live in or rent out their properties. Mr. Tory asked Queen's Park to start collecting this kind of data last September, to allow policy makers a better handle on whether a foreign-buyers tax is needed in Toronto. The system is supposed to be unveiled this spring.

While it is hard to know precisely what effect the tax is having in Vancouver, homes sales have dropped off since it was imposed in August. Last month they were down 40 per cent with prices for detached houses down by 5 per cent. Fewer foreign purchasers "likely contributed to the cooling in prices," according to a report by Bank of Nova Scotia senior economist Adrienne Warren.