Foreign buyers who want to purchase a home in Toronto could soon face an even steeper price tag if city council approves a new municipal tax that aims to curb real estate speculation.
The Municipal Non-Resident Speculation Tax (MNRST), is currently under consideration for approval at the upcoming executive committee meeting, proposing an additional 10% levy on the purchase price of residential properties starting in January 2025.
The implementation of the MNRST is contingent upon whether the two-year federal ban on foreign home purchases, initiated by Justin Trudeau's Liberal government in 2023 is extended.
The primary objective of the MNRST is to safeguard residential housing supply availability and maintain affordability in the real estate market by discouraging international buyers, especially those not intending to reside in the purchased property or engaging in speculative motives.
The proposed municipal tax is modeled after the province's Non-Resident Speculation Tax (NRST), enacted in 2017, which imposes a 25% tax on the purchase price of certain properties across Ontario for foreign buyers. Similar exemptions and refunds as outlined in the provincial tax will apply to the municipal tax, including a rebate for foreign buyers who attain permanent residency within four years of the purchase.
Excluded from the MNRST are multi-residential apartment buildings with more than six units, agricultural land, commercial land, or industrial land. Additionally, properties jointly purchased by a foreign national and a spouse who is a Canadian citizen, permanent resident, nominee, or protected person will be exempt from the tax.
Previously available rebates for international students and foreign nationals working in Ontario were phased out in 2022 and will not be included in the proposed municipal policy. While the primary goal is to reduce real estate speculation rather than maximize revenue, it is estimated that the MNRST could contribute up to $15 million to the city's coffers in its first year.
Since the introduction of the provincial non-resident speculation tax in 2017, Ontario has collected over $1 billion, with approximately half of this revenue attributed to home purchases in the City of Toronto. The staff report recommends implementing the MNRST on January 1, 2025, following the expiration of the two-year federal ban on home purchases by foreign buyers.
According to the city report, only 533 residential transactions in the city would have been subject to the tax in 2022.
