Skyrocketing home prices in the city of Markham has sparked growing concerns of some homeowners who suggest the city to pass a motion seeking Queen’s Park to implement foreign buyers’ tax. Bob Mok points out that while provincial planning policies in limiting building of low rise homes may play a part in the soaring home prices, Ontario Liberals may tap into the public anger and implement the foreign buyer tax just before the next election.
On February 13, 2017 a motion was moved by Markham Councillor Karen Rea and seconded by Councillor Alan Ho to have the City of Markham Council request the Government of Ontario to implement a foreign buyers tax across the Province of Ontario similar to the City of Vancouver.
This motion brought out many Markham residents to the Council meeting for the first time in many years. Ten people delivered deputations and 78 others wrote to the City on this issue to express their opinions, expressing concerns that there is an affordability crisis in the real estate market and that foreign buyers are the driving force behind it. They also suggest that a foreign buyers tax – similar to that implemented in Vancouver would curb the foreign speculations and cool an inflated market, preventing the problem from spreading beyond the city.
Sadly, some of these concerns were not based on confirmed statistics but fear. There were also distortions when residents cannot distinguish the inherent differences between Vancouver and Toronto foreign buyers. Regional Councillor Joe Li made it clear that the house buying by foreigners in GTA only constitutes 5% of all purchases as identified by the Toronto Real Estate Board. Even though the word “Chinese” was not mentioned, it was the major group of foreigners implicitly inferred in this motion.
In Vancouver, many Chinese mainlanders came to “park” their monies to protect themselves from the devaluation of the RMB. As well, it is necessary to funnel some of their monies out of the country that is taking measures to halt all such activities. The “foreigners” are buying for investments and many regard these purchases as vacation homes from the deadly winter smog. Vancouver is much warmer than Toronto in winter and it is only a short trip for the buyers to examine, purchase, and inspect their investments from time to time.
Toronto is a very long distance from China. Most of the Chinese purchasing these dwellings are permanent residents or immigrants. While it is true that many of the house are being converted into rental units shortly after they are purchased, this situation is not new.
In 2000, my son rented a basement with his student friends near Market Village. At that time, the owner was a new immigrant who lived in the house and rented parts of it to another family. He even converted the garage into a rental unit. This action paid for his mortgages in a few years. I am not here to judge the legitimacy of his actions but rather to give one example of what has been going on for decades.
In the end, the motion in the Markham Council chamber was defeated by a vote of 8 to 4. The major thrust of the motion was to institute a foreign buyers tax across the Province of Ontario. Fanned by the rising house prices, the residents had a genuine concern which was misdirected at the Chinese buyers. The root cause of the problem has to do with the provincial planning to limit the building of detached houses and townhomes over the past decade. The municipalities are partners to this scheme since they can maximize their development charges as well. The supply and demand cycle simply exacerbates the situation and drives the prices of housing through the roof.
This perceived “foreign buyer” problem has not escaped the Provincial Government's radar. With so much resentment and anger exhibited by so many residents on this issue, it is not inconceivable that the Liberals will harness this energy and institute a foreign buyers tax early next year and just in time for the next Provincial Election.
For the provincial Liberals, an immediate “foreign buyers tax” may not be effective for alleviating unaffordable housing but it can be an effective weapon for political gains come election time!
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