Maybe I’m late to the party on this one, but then again, perhaps it’s better to discuss now, then after the very first mention when it all seemed like conjecture.
Last week, rumours started to circulate about the potential for a Vancouver-style “foreign buyer’s tax” here in Toronto, or throughout Ontario.
And while I did write a blog post in August of 2016 about why this would not happen, I am now 100% certain that’s coming.
Let me explain why the tax is coming, and why it has less to do with housing prices, and everything to do with politics…
There’s that old adage, that there are two things you do not discuss in public: money and politics.
We talk about money on TRB all the time.
And simply because of why I believe the Ontario foreign buyer’s tax is coming, I have no choice but to delve into my own political beliefs.
Having read my opinions on TRB for a day, a week, a month, or coming up to ten years, you may think you know where I stand politically. So rather than leave it to guesswork, let me come right out and say it: I am a social liberal, and a fiscal conservative.
I was a fan of a lot of Stephen Harper’s policies, but not his social ones.
Mandatory minimum prison sentences? No thank you.
If a 17-year-old wants to smoke a 5-piece with his girlfriend on a Saturday night, I don’t think he should “automatically” get sentenced to two years in prison, if he gets “caught.”
But having said that, Justin Trudeau’s fiscal policies are reckless, wasteful, and unfair for those Canadians that actually work hard and pay taxes. I’m not sure what/who I’m less a fan of: Justin Trudeau’s fiscal policies, or Stephen Harper’s social policies.
There is no “perfect” politician.
I believe Stephen Harper felt he was morally superior to everybody in Canada, and that he knew what was best for each and every one of us. He truly was a “party of one.”
But I think Justin Trudeau is of below-average intelligence, and his agenda, really and truly, is to be remembered as the “most popular” Prime Minister of all time, no matter what he does to our country. If you want to challenge me on his intelligence, only do so after watching this:
So what am I getting at here?
Why the preamble about my political views?
Because I want to put my views in context, when I tell you the following:
A foreign-buyer’s tax on the purchase of real estate will be instituted in Toronto, and possibly Ontario, and it is 98% a political move.
Yes, the tax will bring some relief to the housing market, but the origin of the tax will have little, if anything, to do with real estate.
The origin, as is with much political legislation these days, has to do with re-election.
Specifically, the re-election of Kathleen Wynne as Ontario Premier in 2018.
I am not a fan of Premier Kathleen Wynne, nor was I a fan of her predecessor, Dalton McGuinty. I am not a fan of the provincial Liberal party, their policies, or their actions. Again, I say this so you may evaluate my hypothesis that the foreign buyer’s tax is a political move, namely, that you may have to “take it with a grain of salt.”
In October of 2016, Kathleen Wynne’s approval rating dropped to 14%.
Within that same poll, subtracting the 9% who “have no opinion,” we learned that a whopping 77% of people disapprove of the job that she is doing.
Politicians rarely roll over and die.
It’s the one quality that I admire about politicians: they never give up.
So armed with that 14% approval number, Ms. Wynne had roughly 20 months between that October, 2016 poll, and the June, 2018 Ontario provincial election, to turn things around.
She started in January of 2017 by vetoing Mayor John Tory’s plan for road tolls, about which noted Globe & Mail columnist, Marcus Gee, wrote, “Wynne’s Veto of Toronto Road Toll Plan Is An Act of Political Cowardice.”
Here’s an excerpt:
This was an act of pure political cowardice. Ms. Wynne knows the city desperately needs better public transit. She knows governments need to find a way to pay for it. She knows what it took for Mr. Tory to propose something as visible as tolls, sure to rile up suburban car commuters.
Yet, to try to save herself, she has overruled the mayor and crushed what was the signature initiative of his first term, the bravest political step by any mayor since the birth of the modern city in 1998. Pathetically unpopular, battling a tax revolt over electricity rates, facing obliteration at the polls next year and under attack from opposition parties threatening to make tolls a big election issue, she ran for the hills. Mr. Tory, and the city he governs, is the victim.
This was an act of pure arrogance, too. These, after all, are Toronto’s highways. The provincial government downloaded them to the city. Toronto owns them. Toronto pays to fix them. Yet now, thanks to Ms. Wynne, Toronto cannot toll them. It cannot charge a fee for the use of its own asset, even if the money would help maintain that asset.
In February, 2017, Ms. Wynne again tried to buy back some favour with the voting public, by “slashing” hydro rates by 25%.
Define “slash” though.
25%? Sure, maybe that’s a “slash.”
But since this plan really just amortizes the entire cost of hydro across a longer time period, she’s not really giving people anything back.
In essence, she’s charging people more in the long run.
But as we’ve learned by watching President Trump (I still can’t get over those two words together…), much of the general public today are to naive, uninformed, lazy, uninterested, or incapable of doing anything but taking everything at face value. President Trump can say anything he wants – the sky isn’t blue, he was born on the moon, former President Obabma wire-tapped his phones, and roughly 50% of the United States’ population will simply take it as given.
So when it comes to Ms. Wynne’s hydro “relief,” a lot of people Ontarians simply read the headlines, and thought, “that’s great, a 25% cut,” while many of us saw it for what it really was: more political maneuvering.
Then to rub salt into the wound, she went on to use taxpayer money to run self-congratulatory ads on TV.
It must be nice eh?
You get to make a poor decision, tell people it’s a good one, and then use their own money to advertise, yet again, how great a decision it was.
And now, this brings me to the Ontario Foreign Buyer’s Tax, or “OFBT” which I’m sure it’ll be called by the Ontario Liberals, once they jazz up a shiny OFBT logo, probably in in the colour of money and sunshine together.
In order for Ms. Wynne to regain the public’s favour (I know the word “trust” usually follows “regain” but I can’t imagine people actually trusting her), she can’t rely solely on road tolls and hydro bills.
She has to do something monumental.
She has to do something that affects everybody.
And the one thing all people have in common: they live somewhere.
That’s why real estate is the story that just won’t die. Everybody lives somewhere, and real estate as a topic, conversation, or crisis, affects everybody.
The Toronto market is in a state of hyper-appreciation, the likes of which we have never seen before.
Every single day, in every newspaper, we’re seeing 2-3 ads about the real estate market.
People have never been more discouraged, and it’s not just here in Toronto.
Take a look at the average detached home prices in the month of January, throughout Ontario:
So while this might be the Toronto Realty Blog, and while most of you reading this do, in fact, live in Toronto, consider that home prices throughout the entire province are skyrocketing.
As I’ve mentioned many times before, sarcastically, in times of crisis, the most uninformed, naive part of society always shouts, “The government needs to do something!”
Ah yes! The government! The cause of, and solution to, all of life’s problems.
But this couldn’t not be more perfect timing for Ms. Wynne and her 14% approval rating!
She needs to do something drastic, but something drastic that everybody can relate to!
There’s a reason that the incumbent always has an advantage, in virtually every political election. They get more attention, they have a stronger voice, and being in office – they have the ability to enact change, which any opposition politician, does not.
So imagine the impact of Premier Kathleen Wynne standing in front of a podium and making the following announcement:
As a proud Ontarian, it pains me to see hard-working citizens of our wonderful province suffering day-in, day-out, with rising home prices.
For far too long, real estate has been an investment-vehicle rather than a place of residence, a misfortune that has changed the lives of so many working-class families, struggling to make ends meet, and to find a place to call “home.”
That’s what houses should be: “homes.”
Not places to park foreign capital.
Not structures to leave empty, on tree-lined streets, where the laughter of neighbourhood children used to ring out with an echo.
And while no government before mine, and certainly no government who would seek to take office in 2018, would ever consider such a measure, I am pleased to stand here before you today and introduce the Ontario Foreign Buyer’s Tax….
(cue somebody pulling a red tarp off a giant white billboard, with the OFBT logo)
…which will ensure that if anybody who does not reside in Ontario, pay taxes in Ontario, and want to LIVE in the home they are purchasing, seeks to own real estate in our fair province, then then will pay for the privilege of doing so.
The OFBT will not only raise tax dollars that we will redistribute through the community, for much-needed parks, community centres, sports facilities for children, and long-overdue improvements to our public schools, but it may also result in a lower cost of the average home price in Ontario, so that hard-working families may soon be able to regain the Canadian Dream!
How the hell do you not vote for that woman?
That’s a speech that the Conservative, NDP, and Green party leaders will not be able to make.
And it’s coming, mark my words.
I suppose it should also be noted that no politician, in any country, in any time or place, has seen a source of tax dollars that they did not like.
And when it comes to the “tax and spend Liberals,” you couldn’t honestly argue that they aren’t drooling over the idea of another, newer source of tax revenue.
So Premier Kathleen Wynne and the Ontario Liberals, by instituting a foreign buyer’s tax, get two huge victories, and I’m not sure which is bigger:
1) They regain favour with the voting public.
2) They add a new revenue tool.
Which is a by-product of which?
Now many of you probably read the above – my sarcastic version of what Ms. Wynne would read in front of the podium, the day she institutes the foreign buyer’s tax, and thought, “What’s wrong with this? It makes sense, does it not?”
I’m not saying it doesn’t.
I’m not saying that I’m against a foreign buyer’s tax, which is a whole other topic. And for the record, I would be fine with the tax.
But what I am saying is that I think the foreign buyer’s tax will be borne of politicking, rather than necessity.
And I’m also saying that despite her 14% approval rating last year, I do believe that Ms. Wynne will be re-elected as Ontario Premier in June of 2018, after more moves like this one.
On Wednesday, I want to look back at my post from August of 2016, and the “Six Reasons” I gave why Toronto would not institute a foreign buyer’s tax, and systematically tear down each one. Yes, there’s nothing quite as humbling as tearing apart your own work.
I think you’ll be interested to see how those six points are no longer relevant, or accurate, based on massive changes in our market place.
(TO BE CONTINUED…)