Remember 2017?

I will admit, the last few years have seemed to blur together, but if I think hard enough about individual aspects of my life – job, relationship, family, etc., I can probably distinguish between that year and the ones that preceded and followed.

One thing I most certainly do remember from 2017 was that this was the year when all the talk of “foreign buyers” driving up real estate prices in Canada truly began.

For as long as I’ve been in this business, there’s always been a boogeyman.

Nobody ever wanted to believe, or admit, that market forces were the reason why the price of Canadian real estate continued to increase.

While we have spent the last decade blaming property speculators (there’s a tax on that now), flippers (there’s a tax on that too), developers (who are taxed to death), and real estate agents (surely a tax is coming), the first really big boogeyman was the evil foreign buyer.

Discussions about foreign buyers running our real estate market ramped up after 2017, and calls for taxes on foreign buyers or outright bans began thereafter.

Plans for these taxes and bans were discussed pre-pandemic, but it wasn’t until 2022 that we saw the first tax implemented, with a 25% “Non-Resident Speculation Tax” introduced by the Ontario Government, which was followed by a federal ban on foreign buyers in 2023.

In the years leading up to this, I said, time and time again:

With the market going up, everybody wants foreign buyers banned.  But the moment the market starts to go down, Canadians will be clamouring about how unfair it is to punish and exclude would-be buyers, regardless of where they’re located.

And that is where we currently find ourselves.

What would Alanis Morissette say?

(don’t you think?)

It was only a matter of time before the tide turned, whether it was public sentiment, economists, or just little ‘ole Jane & Tim who want to sell their farm in Prince George but can’t find a numbered company, owned by a trust, whose sole shareholder is based in the Cayman Islands, to buy the land…

I long figured that it would, in fact, be individual property owners who began to call for foreign buyer taxes and bans to be rolled back, but perhaps it should come as no surprise that it’s developers who are shouting the loudest.

As we all know, the pre-construction housing sector is dead.

“Dead” is usually used as an extreme exaggeration, but with Urbanation Inc. detailing that “new condo sales in the City of Toronto in Q1 were the lowest since 1990,” I think it’s fair to say that pre-construction is, at best, on life support.

Folks like myself and Ben Rabidoux have been calling this for years, of course.  The pre-construction house of cards was always going to fold, and as an agent who has never sold a single pre-construction condo in twenty years, I think I have a leg to stand on here.

But that’s a topic for another day, and I’ll regale you one final time with my thoughts on pre-con after Labour Day in a two-part blog post.

I have also noted many times on Toronto Realty Blog that much of the reason for the increase in pre-construction prices over the last decade is because of our three levels of government.

35.6%.

That’s the percentage of the price of a new home in Ontario that’s made up of taxes.

Have a read, in case you missed it, December 9th, 2024: “The Increasing Tax Burden On New Ontario Homes”

Developers have tried to lobby the government to decrease the tax burden.

Even before I wrote that blog post, we saw developers coming up with ideas to “pass savings along” to pre-construction buyers, if only the government would exclude some of the taxes.

We discussed this last fall.

September 9th, 2024: “Tax Breaks For Developers Are Not Going To Be Popular Words”

Well, most people have their heads buried in the sand anyway.

People want to trust their elected officials, and people want to believe that their collective government wakes up every morning and says, “How can I improve the lives of my constituents today?”

So who would ever want to think that the government has driven up the price of real estate, when it’s easier to blame “evil, greedy, corporate interests” instead?

With the bright idea of “decreasing the tax burden” on new home construction out the window, it seems that developers did their best Matthew McConaughey impression:

Rather than decrease taxation in order to pump up sales, it seems developers want to loosen taxes and bans on foreign investment.

This article ran last month in the Globe & Mail:

“B.C. Developers Press For Easing Of Foreign Investment Laws To Avoid Crash In Construction Industry”
The Globe & Mail
July 30th, 2025

From the article:

Major players in B.C.’s housing industry are calling on federal and provincial governments to loosen restrictions on foreign investment in Canadian homes to avoid a crash they say will deepen the country’s housing crisis.

The letter, signed by companies such as Beedie Living, Westbank, Amacon, Cressey and Polygon, argues that having some level of foreign investment to provide the capital for the early stages of condo projects is key.

“New condo development requires presales to meet financing thresholds, part of which relies on investor-focused buyers.  Closer to occupancy, sales typically shift more toward owner-occupiers.

“In the absence of foreign investors, fewer projects will meet presale financing thresholds, suppressing supply delivery, which serves no one in a housing crisis as projects will not start,” the letter says.

Wow, I have so much to say about this.

But hold the phone, for just a moment…

“While we understand that the ban was implemented to protect housing supply for Canadians, it has unfortunately impacted the construction industry,” it says.

Ah, yes, this is called a “consequence.”

Then this:

People who are looking to buy are generally unwilling to tie up large sums of money for a long time before a project is completed.

“To rely on the end user is asking too much, to have to make a buy decision four or five years before,” he said.

Exactly.

So maybe developers can use their own money to build condos first and then sell them when they’re finished?

Nah.  That’s never going to happen.

Investors have driven the pre-construction for twenty years, and that’s not going to change.

So why then can’t we rely on domestic investors?  Why the need for foreign investors?

But let’s go back to this quote:

“Closer to occupancy, sales typically shift more toward owner-occupiers.”

So what this developer is saying, is: “We need foreign money to buy pre-construction units, 4-5 years ahead of completion, and then flip or “assign” their agreements, pocketing a profit, that may or may not be taxed appropriately, to on-the-ground Canadians looking to move into the units.”

Then comes the implied threat:

“We have not seen layoffs for builders like this in more than a decade,” said Mr. Gardner. “I think people in government don’t understand how serious this is and how rapidly things are unwinding.”

But he and many others in the development industry say if foreign investment is allowed once again, policy makers should learn from the mistakes of the past that led to huge numbers of single-family homes and condos being bought up and left empty.

“We know what went wrong and now we have to do it in a way that’s going to work for British Columbians,” said Mr. Gardner. “We should be open to investment but it shouldn’t be a free-for-all.”

I’m not following the part about “single-family homes and condos being bought up and left empty.”

Is Mr. Gardner referring to the safety deposit box that Canada had become for foreign money?  The ghost neighbourhoods in B.C.?

I believe the suggestion here is that we need to find a way to allow foreign investment in pre-construction, but not in resale.

Having said that, I still don’t necessarily agree.

This would only serve to benefit developers, and while we do need more housing built, I don’t like the way this argument is being laid out.

“We have not seen layoffs for builders like this in more than a decade,” we’re told.  Things are “rapidly unwinding.”

This too seems like a house of cards.  Or a trail of bread crumbs that leads to a mousetrap.

Here’s the logic:

Layoffs need to be fought off by building more condos, and building more condos needs to be achieved by making more sales, and making more sales is the result of a relaxed policy toward money flowing in from mainland China, the Middle East, and other well-known financial hot spots…

I don’t think so.

The foreign buyer ban and the foreign buyer “speculation” taxes are misplaced in many ways.

February 17th, 2025, I wrote: “Do The Speculation Taxes Actually Target Speculators?”

In this story, I wrote about two sought-after doctors who moved to Canada, full-time, with their families, only to find that they weren’t allowed to purchase a home.  It seemed that some misguided legislation, likely introduced in order to gain favour with voters, was actually working against the ability of our country to attract much-needed professionals.

I think we can agree that every piece of legislation, no matter how effective or warranted, has its unintended consequences, and that every piece of legislation could be tweaked here or there.

But should we, as a country, allow a foreign entity to purchase five houses, in a row, within a beautiful residential neighbourhood in North Toronto, tear them down, and leave a giant hole in the ground for three years?

We would be crazy to allow that, and yet over the last decade, we have allowed that and more.

The problem with these foreign buyer bans and taxes is that they don’t have the right exceptions, and at the same time, they leave the door open for foreign money to purchase real estate in Canada through intermediaries.

In any event, the Premier of British Columbia, David Eby, responded to the “open letter” by developers by basically saying, well, um, no.

“Eby Rebuffs Developers’ Calls To Loosen Foreign Investment Rules In Housing”
The Globe & Mail
July 30th, 2025

From the article:

The Premier was responding to an open letter from B.C. developers this week that was also sent to Prime Minister Mark Carney and federal Housing Minister Gregor Robertson.

The letter noted that without the loosening of the rules, the construction of new housing will become more difficult at a time when the country is grappling with a housing shortage.

Developers are struggling with high construction costs, high land prices, municipal fees and erratic U.S. tariff policies and need foreign investments in the early stages of projects. Without this, the pace of construction will increasingly slow, and housing prices will start to rise as a result, the letter notes.

But Mr. Eby noted Wednesday that his province chose to impose a tax rather than institute a complete ban on foreign housing investment, as the federal government did in 2023 for larger metropolitan areas.

“We put an aggressive tax in place and said, ‘Look, if you’re a foreign buyer, you want to buy, you want to benefit from our public services, from our police services, from our schools, from our hospitals. You don’t get to just buy a property here and pay your income tax somewhere else and not support those services,’” he said, speaking at a news conference on a new liquid natural gas facility in northern B.C.

He said the previous lack of curbs on foreign investment resulted in a glut of empty condos and single-family houses owned by offshore buyers. The Premier also argued that speculative foreign investment had created a housing market of unaffordable homes.

At least this article noted the “municipal fees” that developers have to pay.  I think this might be the first time I’ve seen that, although they left out a slew of other taxes.

Good for Mr. Eby, however, I would note that the federal foreign buyer “ban” and the provincial foreign buyer taxes are often at odds with one another, and here in Toronto, we also have a municipal foreign buyer tax as well.

These are called “Non-Resident Speculation Taxes” but that’s a nice way of saying “foreigner.”

As noted above, the idea of who is a “resident” and who isn’t is catastrophically incorrect.

But I like what Mr. Eby says about “benefitting from public services,” and I wonder why more Canadians don’t take this attitude.  I’m not afraid of sounding too patriotic here, or what many call “nationalistic,” but there’s a difference between giving and being taken advantage of.  I’m actually quite surprised to see the B.C. of a left-leaning province say something like this.

There was another article written last month that referenced the notion of the government “intervening” in the new housing market.

This was from the Star:

“Our Shoebox Condo Market Is Finally Crumbling.  Mark Carney Should Be The Least Surprised Of All Of Us.  Now He Needs To Correct The Errors Of The Past.”
The Toronto Star
July 24th, 2025

This was far more of an opinion piece, and essentially blamed all the “micro-condos” developed over last decade on foreign investment.

I need to make two distinctions here, first and foremost:

1. The reason why condos have become smaller is 100% because they are marketed to investors, who want the cheapest condos, regardless of size.
2. This was not, however, unique to foreign investment.  This was even more true of domestic investment.

From the article:

All true, and all things we’ve discussed before here on TRB.

I’ll skip the section where the author talks about how brilliant and successful Mark Carney is, and how Mr. Carney basically saved the world, then I’ll vomit a little…

But here’s a solid take:

The only part of this and other opinions like it that’s missing is the fact that 35.6% of the cost of new construction is made up of taxes.  That’s unsustainable, and it speaks to a larger issue in our country, best summed up by Margaret Thatcher:

“The problem with socialism is that, eventually, you run out of other people’s money.”

Our three levels of government have a massive spending problem, and tax revenue from real estate has enabled them to throw money around at will over the last decade.

But they can’t close Pandora’s Box.  Canadians are far too comfy right now, and cutting public services to make up for lost tax revenue isn’t going to be popular.

And if we can’t cut the fat on that 35.6%, then developers simply aren’t going to build.

I see that “open letter” from developers, asking the government to loosen restrictions on foreign investment, as something else: a starting point.

An influx of foreign money will barely make a dent in what needs to be done in order for development to make financial sense again.

So then, what’s the next special idea?