Should The Provincial Government Institute A “Speculation Tax?”

This is probably the most interesting and insightful real estate piece I’ve read this year.

The Financial Post’s Garry Marr wrote an article this week called, “Ontario Tried A Speculation Tax On Property And The Market Collapsed Overnight,” and it once again brings up the question of the role of government in an extremely active market-place.

B.C.’s Premier, Christy Clark, recently vowed to eliminate the practice of “double-ending” in organized real estate, so we know that governments are looking to intervene.

But there’s a massive difference between regulation, and taxation.  Is there not?

Speculation

If you haven’t read the article yet, read it in full HERE.

The concept of a “speculation” tax is in part, absurd, and in part, fair.

The comments section on the Financial Post article highlight the same-old, same-old:

1) Blame foreign investors
2) Differentiate between true “speculators” with empty houses, and “investors”
3) Everybody who buys real estate is “speculating” on future growth
4) The government already taxes us enough

I’m on vacation until Thursday, so forgive me if I light the fire and then run away…

But I’m curious to know what you think about the concept of a speculation tax at the most basic level, and whether it has merit, but also about the potential disaster created once the government gets to define “speculation” and “speculators,” and whether this is designed to affect the market, or whether it’s simply a cash-grab…

5 Comments

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  1. Maggie says:

    The government could force larger companies to open their new HQ in other centres like London or Quebec City in order to spread the population growth to other communities and thereby reduce demand in the main centres.

  2. ML says:

    People want to live where it is convenient to do so. A better approach might be to improve infrastructure (e.g. transit, schools, walkability) in other areas in and around Toronto that don’t currently have as much demand. Do that and more people will want to live in those places instead of the parts of Toronto where prices are increasing the most.

    Penalizing speculators will unavoidably also penalize existing homeowners. Instead, there should be some mechanism to force speculators who don’t live in their houses to rent them out. Having empty houses in prime areas hurts everybody.

    1. Mike says:

      Uhm, I hate to poke holes in your plan but how do you plan on building more infrastructure? Anything you propose is going to cost billions and require some type of new tax so that just brings you back to debating a speculation tax. The city just came up with a plan to close more than 20 schools so that’s not really part of the problem.

      Removing the capital gains exemption on houses occupied for less that 5-years is not going to punish anyone. In fact the CRA has been pushing this more and more in the courts so changing the law would be easy. This way you’re not punishing developers because the’re building in corporations and not subject to the exemption. In theory there would be no affect on the rental pool apart from those who nominate their rental property as their primary residence to avoid tax. The people would be punished are those who have “life moments” (change in family situation, death, move jobs et al) but taxes have never been fair to all.

    2. daniel says:

      I think the idea in general is a good one, however, if you look at the housing price data that just came out you’ll notice that homes in the 905 are rising even faster than in the core. Scarborough bungalows are $700k. Not sure where the areas of cheap housing are that just need infrastructure to become viable.

  3. Kyle says:

    Most of the housing measures that the Government has put in place has either not worked or ultimately ended up further increasing prices. The basic reason house prices in Toronto are rising in Toronto, is that demand keeps growing while inventory keeps shrinking. The only new supply of inventory is coming from Developers (i.e. speculators), so i don’t quite see how taxing them is going to lower prices.

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