Vancouver's Real Estate Tax on Foreign Investors Will Come to the GTA - Because it Must

Note to Finance Minister Charles Sousa: when was the last time a Conservative suggested a new tax to you? Well, mark today’s date in your calendar because it’s the answer! I support what the BC government has done to cool the red-hot housing market in Greater Vancouver as an appropriate means of doing the same in the GTA.

If you’ve been home shopping in Vancouver or Toronto in the last 10 years or so, you know how deep your pockets have to be. That recently changed with the August introduction of Greater Vancouver’s new 15% tax on homes purchased by foreign speculators. Offshore buyers had been about 10% of the total purchasers in Vancouver.

Initial reports indicate home sales there dropped almost 30% between July and August, when the tax took effect.

Toronto, pay attention! Foreign capital was already investing here but now, Vancouver buyers are targeting Toronto and our market is on fire.

Most people think of real estate as the pool of available properties from which you purchase a first home or upgrade the one you have. Their attitude is “it is what it is.”

But there are many who don’t see it that way. For them, it’s another investment opportunity. Wealthy people, notably foreign, seek safe places to “park” money. There’s always the stock market but it’s never a place where one invests with the certainty of a good return. The Vancouver and Toronto real estate markets, meanwhile, have provided a bonanza over time. Indications are that those who used the Vancouver real estate market as a sure-fire investment vehicle are pulling up stakes and heading east to the GTA for a better deal. In Ontario, nothing differentiates foreign speculative buying from family home purchases.

This presents Ontario with circumstances that are aggravating an already overheated housing market in the GTA. It is common to see commuters heading into the city daily from north of Barrie, east of Bowmanville and from the Niagara area.

The question is whether Ontario should be looking at the BC example and put limits on the foreign capital influx that has become a major thorn in the side of people who live and work in Canada and share in the dream of owning a family home.My view is that we not only need to act, but that it’s urgent!

To be sure, there are differences between Vancouver and Toronto. Vancouver development is closed because of natural barriers - mountains and an ocean. But, in the metropolitan area around Toronto, artificial barriers have been created by provincial "greenbelt" legislation that mandates the preservation of non-residential lands to prevent urban sprawl. In place for ten years, the greenbelt boundaries were reviewed last year and the recommendation was to maintain them. That means that farmland, forests and meadows have been ruled as inviolate unless the Wynne Government decides otherwise - no different than being unable to expand beyond the natural barriers surrounding Vancouver. So, home prices continue to balloon at lightning speed due, at least in part, to inflated demand resulting from an influx of foreign capital.

To summarize, the GTA housing market has little room for new single family home construction; foreign investment speculation has arrived in the GTA from Vancouver and is causing an additive effect; and, the hope of home ownership for new buyers (as average Toronto homes sell for almost $800,000 and detached for $1.28-million) is faint indeed.

Vancouverites appear extremely supportive of their new 15% foreign buyer’s tax - 90% approve, according to surveys. The feeling is this has given them a fighting chance to get a “piece of the rock”.I believe Torontonians would agree and Ontario should consider following suit. If Queen’s Park introduced this form of tax as a means of dampening speculative buying, I’d expect sales volume to diminish and prices to stabilize, not drop. It’s time for some stability in this churning market so that buyers who want to own property near where they work and play get a fair shot. Prospective buyers find themselves securing savings and mortgage loans only to discover the dream has evaporated because prices rise too fast to keep up.

The BC government levied its 15% tax on the "Greater Vancouver Regional District" in BC’s Lower Mainland, roughly equivalent to Toronto/GTA west to Burlington; east to Bowmanville; and north to Barrie. But studies would have to refine the area and determine whether the rate should be 15%, as BC has, or look to end foreign speculation entirely by going higher. Regardless of how it’s addressed, we must confront a problem that exists here now and that BC’s legislation has fuelled. Real estate is still primarily about housing families and the GTA market is not in need of foreign speculation to maintain strength. Local demand is and will remain high enough to keep this market buoyant.

Analysis:                                              “We Owe, We Owe … It’s Off to Work We Go” By Peter Shurman Hope, it’s said, is never a strategy. So, Finance Minister Charles Sousa, without appearing to change course, is playing the long game…looking towards Election 2018. Budgets are, after all, political documents. The Wynne government, typically late with budgets, tabled its 2016 plan, "Jobs for Today and Tomorrow" with more than a month to spare. Sousa said there’s much to do and needs an early start. The “spin” begins now, a year away from the government’s self-imposed balanced budget deadline and two years before the next election. Somewhat inauspiciously, we’ve crossed the $300-billion debt line. Most of us don’t comprehend $300-billion, but the Wynne government insists it’s manageable. Economists tend to agree. Crucial is "Debt-to-GDP ratio"… debt as a percentage of our annual output of goods and services. It’s just under the 40% magic number I used to thunder about when squaring off with Mr. Sousa in the Legislature. Only Quebec and Newfoundland have higher ratios. But that percentage is notional. Check this out...USA: 105%; Japan: 245%; Italy: 133%; France: 97%. So 40% isn’t ‘good’ but it’s in range. Sousa promises improvement in 2017 on his path to a stated 27% objective. Cyclical debt is good … borrow and leverage by investing in assets that gain in value – like your mortgage loan. But Ontario has borrowed money to finance program spending, creating a structural deficit, one from which escape is more difficult - like depending on your Visa card for food shopping. hoping you might strike it rich. In this financial plan though, we see a tendency to move towards true investment for specific returns. An enlarged “re-announcement” of $160 billion over 12 years for infrastructure; $11 billion for school improvements; $12 billion for hospital construction: all needed. As for my referencing the 2018 election, the Liberals are acutely aware of the need to capture support at either end of the age spectrum and in rural areas. Could they attract youthful support better than with free post-secondary tuition for kids from lower income families? Senior Ontarians will appreciate increased home care, palliative care, and hospital funding but providing the expensive shingles vaccination at no cost is a real winner. Recipients of Ontario Disability and Ontario Works (welfare) benefits get an increase, as does funding for public housing. And rurally, where Liberals don’t match their urban voter success, the Minister is upping special infrastructure funding for smaller municipalities. It’s called covering your bases. The downside is that we pay huge interest, now nearing $12 billion annually and there’s no capital repayment, so it stays around. Think about the massive enhancements to health, education, and social services $12 billion could buy every year! Sousa’s 2015/16 budget was based on real GDP growth of 2.7%. He appears to have been on the high side but still delivered a reduced deficit. Now he’s aiming for a more realistic 2.2%. In his Fall Economic Statement, the Minister promised a $7.5-billion deficit instead of the forecast $8.5-billion but now says it’ll be $5.7-billion and next year $4.3-billion that he insists will be the final forecast deficit he’ll deliver. People don’t worry as much as politicians do over words like debt and deficit. They usually stare blankly and say “we have politicians…let them fix it, but don’t raise my taxes or cut my services”. This budget comes pretty close to those marching orders but here’s what it will mean for everyday Ontarians. Taxes will hold fairly steady other than minor “sin tax” hikes on cigarettes and wine. As for the charges governments impose without calling them “taxes”, the government had already announced a new “cap-and-trade” carbon market costing average families about $13 per month more with some balance to that through elimination of the “Drive Clean” program; dropping the Debt Reduction Charge on utility bills; and funding assistance for home energy conservation retrofits. Ontario will become part of the ‘Western Climate Initiative’ with Quebec and California, ostensibly to improve our environment. Liberal thinkers say it’s about what we breathe but some scientists claim the cost/benefit for Ontario ratepayers is minimal. Since we know the added costs on natural gas and fuel ($13 per month), Premier Wynne likely has a good idea of total net effect if, as she’s suggested, this new $1.9 billion revenue stream really goes to halt the rise of or even reduce electricity costs. Ontarians should monitor government accounting…when they begin selling credits next year, we need to see the ‘flow-through’ as opposed to finding it magically getting into general revenues in aid of the promised zero balance budget. You can’t pay bills with budget titles like “build Ontario up” or “secure our future” but you can educate more young people, and so this year’s “jobs” title is more relevant. The question is when we can really expect to turn Ontario around and, meanwhile, how to govern it so we all get the biggest bang for our bucks. Stay tuned. Budgets are indeed political documents but management and luck remain the key factors. Peter Shurman was the Ontario Progressive Conservative Finance Critic from 2011 to 2013. Posted date : February 26, 2016

I've Never Met Glenn Frey...Why am I So Sad?

Glenn Frey, if you didn't know, was (with Don Henley) a founding member of The Eagles. He died on January 18, 2016 and it hit those who knew of him and were Eagles fans hard because the news was unexpected and came suddenly. He was only 67 but had been ailing, it seems, and that was kept under wraps. Besides, it appears his friends and family expected him to recover.

When I read a tweet in the late afternoon that said he'd passed, I thought it might be another hoax - but I checked around and the news was everywhere. A wave of emotion washed over me and I shed tears. That has never happened before. Why now? I didn't know Glenn and, while I'd always wanted to attend an Eagles concert and expected to, I haven't...and now I never will. 

Glenn Frey left us within a short period of early 2016 that's been marked by the loss of a number of high profile people in the arts. David Bowie, another musician, but better known as a person who lived life his own unique way and taught us all that this was a good thing, died of cancer at 69. Rene Angelil, the man who discovered Celine Dion, bet everything on her, married her, and with her, created an entertainment phenomenon has also gone. So too the well known British actor of distinctive voice, Alan Rickman.

In each case, a body of work lives on. In each instance, I have no personal connection. But, I've paid attention...seen, heard, and known of these people for much or most of my adult life. With Glenn Frey, there was a lifetime relationship through his music. I posted on Facebook (and I have never done this) that his music had been a major part of the soundtrack of my life. Who, in this generation, cannot understand that? I once visited a place called Winslow Arizona...the first thing I did as I strolled through the centre of town was to say to people with me "I was standing on a corner, in Winslow Arizona...what a fine sight to see! There's a girl, my Lord, in a flatbed Ford, slowed down to take a look at me". Right out of The Eagles song book! Even now, I am learning to play guitar (guitar for seniors??) and one of the pieces I practice and play is "Peaceful Easy Feeling".

So, losing Glenn Frey is losing a piece of my youth. And losing that is a reminder that the clock only runs one way. One friend of many years responded to my Facebook post by saying "I'm starting to get up there in years. I keep looking at the clock every time I see another of these death notices." Another began ominously too but ended with an upbeat thought."Ask not for whom the bell tolls. It tolls for thee. John Donne had it right. So, we may as well get on with the business of living."

I asked someone I know if it was a silly thing to feel emotional about losing one of our contemporaries, even one so influential in our lives through his artistic ability. He said no, that as time wears on, he finds himself occasionally tearing up over a Hallmark card because that's what people do!

I hope this is not coming across as corny or maudlin...I do not mean it to be. This is simply the downside of generational change and the routine side of adjusting to the fact that none of us actually is immortal, regardless of the fact we felt we were not so very long ago.

I recently wrote a book, "Millennials: Boom'er Bust". It's about turning things over to a new group of people who, as surely as we once did, now outnumber their parents in the work force and in the population too. I did the research and so I know the numbers and I have faced the naked reality. But, as it turns out, that's not enough. You have to actually lose some of the icons of your time and watch beacons along your own road fade away before you truly realize that the train of life never stops and that you may just be staring at the caboose!

Oh Peter, some readers must be saying...were you going to take the gas pipe now or, at least, have a good dinner first? Fear not. I am planning to have many more good dinners and never go willingly. Still much too much to do! But that doesn't stop me from tipping my imaginary hat to contemporaries who have preceded me to the exit and those who yet will. The forces that shape us are both harsh and subtle. Harsh is the demanding professor or the strict parent or the business that failed, no matter how devoted and hard-working we may have been. Subtle are the wonderful places we've visited, friends we've made, movies and plays and (of course) music that have all contributed to our character...who we are and how we think.

To Glenn Frey, thank you...I do have that Peaceful, Easy Feeling and I try always to Take It Easy. I am well aware that Love Will Keep Us Alive. Your work, to which we've all been exposed for about 45 years, will ensure it and ensure that you live on with us.

Peter