Photo: John Pasalis
Early this April, outspoken Toronto broker John Pasalis blogged about his hopes for polikcymakers to finally step in and cool demand in Toronto’s fevered housing market.
When later that very month Ontario Premier Kathleen Wynne announced Ontario’s Fair Housing Plan, a 16-pronged policy to calm choppy real estate waters, one might have thought it’d be welcome news for Pasalis.
But the plan, which proposes a foreign-buyer tax for the Greater Golden Horseshoe, a large swath of southern Ontario, including Toronto, wasn’t what Pasalis was hoping for.
“The Fair Housing Plan didn’t really do anything to cool demand at all,” Pasalis, the co-founder of the Realosophy Brokerage, which publishes market commentary via its Move Smartly blog, tells BuzzBuzzNews.
The foreign-buyer tax of 15 per cent doesn’t get his praise either. “When you look at it closely, there’s so many exceptions,” Pasalis says. “There’s so many loopholes that it’s not really going to slow demand on that front.”
Non-residents who are employed in the province and international students alike will be able to apply for a tax rebate, according to the government backgrounder.
Students made national headlines last year after nine snapped up $57 million worth of prime coastal real estate in Vancouver’s upscale Point Grey neighbourhood, so concerns raised about offering rebates appear founded.
Applying the foreign-buyer tax more broadly or “not allowing students to buy million-dollar properties is sort of the obvious avenue” for curbing demand, says Pasalis.
On the domestic front, Pasalis prescribes “just making it harder to buy investment properties.”
He suggests increasing downpayment requirements again (the federal government did so most recently in early 2016) and slapping an additional tax on homebuyers when they purchase more than one home — but not applying it to all residential properties.
“It’s different if someone’s buying a tri-plex or a four-plex — something that’s a proper rental property,” he clarifies.
“But buying single-family homes the way a lot of investors are doing, they’re basically buying them for capital appreciation because the rent doesn’t cover the expenses, and I think that’s kind of the problem we’re in,” Pasalis continues.
His focus on demand may seem at odds with the real estate industry, as organizations such as the Toronto Real Estate Board (TREB) and Ontario Real Estate Association (OREA) have put attention towards supply.
Also, realtors make a commission on transactions.
Even though he realizes “it seems counter intuitive,” Pasalis says many other agents are on the same page. “A lot of agents feel like even TREB and OREA aren’t even representing their interests,” adds Pasalis, who does support increasing supply but says it won’t have a much-needed impact in the near term.
In April, the average price of a GTA home was $920,791, up a face-melting 24.5 per cent from a year earlier. Although higher prices bring heftier commissions, Pasalis says realtors have good reason to support cooling the market.
“It brings instability,” he says of recent price gains. “They (agents) want something that brings in a little more balance,” he adds, noting even annual price growth of 5 to 8 per cent is not “normal.”
And it doesn’t matter if a large chunk of a realtor’s clientele is made up of investors, in Pasalis’ experience. He’s received calls from agents who say half their buyers are investors while agreeing with him all the same that investment needs to be curbed, he recalls.
“You would think, Why did this person want a tax to cool that down? Well, because, they’re just concerned about the market as a whole,” Pasalis says.
“They live in the city as well, right? And they see prices going up 30 per cent… and they don’t think that’s right or normal.”