Think Foreign Buyer Taxes Don’t Work? Look At Windsor & Toronto Real Estate: BMO

Ontario’s non-resident speculation tax (NRST) is expanding in size and location. The NRST was a 15% tax on the purchase of residential real estate in the Golden Horseshoe (Greater Toronto). As of March 30, 2022, it’s now 20% and applies to the whole province. Low revenues might have some believing it hasn’t been very effective, but that’s not the case. BMO wrote to clients this week to urge people to look at Windsor real estate if you want to see its impact.

Windsor Real Estate Is Gaining On Toronto

Windsor real estate provides fuel for an interesting case study. They look at the ratio of home prices in Windsor and Toronto. A higher ratio means the gap with Toronto has widened, and a smaller one means Windsor is getting closer. Since Toronto and Windsor are at different economic phases, a smaller gap might indicate Windsor values are getting frothy. 

Toronto real estate prices cooled almost immediately after the foreign buyer tax. “The vertical line marks the introduction of the non-resident tax in the Toronto region in the spring of 2017,” says Douglas Porter, BMO’s chief economist. “It basically instantly doused a fiery housing market in the area, while—arguably—fanning a fire in the rest of the province.” 

Canadian Real Estate Investors Look To The Suburbs

The roadblock for international investors in Toronto sent them to the suburbs. In the chart above, the first leg of the falling ratio is due to prices briefly correcting. The second half of the decline in ratio was due to Windsor outperforming for annual price growth. A similar trend can be seen across the province, in small towns just outside the reach of the tax.

Investors began to look outside of Greater Toronto to avoid the tax, according to the bank. “Soon enough, investors began migrating outside of the GTA,” explains Porter. “Smaller cities like Windsor, London, and Barrie soon began to see blistering gains, which only gathered steam after rates were slashed in 2020. Some of these cities have seen prices double in the space of three years, washing away decades of underperformance versus Toronto.” 

Porter doesn’t elaborate on this point, but they’ve said it enough times — this is about market psychology. Removing foreign capital has a knock on effect, greater than the size of capital taxed. By taxing foreign buyers, they didn’t just deter them. They forced investors to consider where that money would go next.

Similarly, as those foreign investors moved to new regions, domestic capital observed. They followed the trend, producing a greater impact than foreign capital itself. Foreign investors clearly know something others might not. 

As the non-resident tax applies to the rest of the province, it’s likely to have a big impact. An impact greater as a psychological tool, than the capital driven elsewhere.



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  • Claire 2 years ago

    Watch out Alberta, here we come!

  • AtroubledCanadian 2 years ago

    Good luck to the Halifax and Calgary FTHBs.

  • Agent bob 2 years ago

    There should be a 2 year moratorium on non residents as the Trudeau government promised and then reneged on.
    They must do this in the upcoming budget.

  • Chris 2 years ago

    I just sold my home in Windsor last week and happy to have done so after reading this article. I see an upcoming slide here with this new 20% tax considering we are a border city. I assume many Michiganer’s own properties here as well as other foreigners. I feel like these prices will not sustain into 2023. Definitely will shake things up here.

  • Nicole 2 years ago

    What are the actual numbers of foreign investors in those areas? Seems like this is a gross assumption.

    Suburbs started booming and experiencing higher than average home price growth because they were the only places people could afford homes. Add in the WFH change that happened with covid, and people’s realignment of their values, and that allowed people to move to places they wouldn’t have been able to consider.

    We love to think that people live in Toronto because it’s a “world class city”, but in actuality there are many people who didn’t want to live there (or close to it) but had to for work.

    I worked with a firm that looked at the total level of investment in each Ontario GTA city during the 2016 boom, and what we found was that there was less than 15% of homes in Toronto being bought by investors. Period. The NRST had an impact on sales in the short term, but not because it was deterring foreign investors, but because buyers were all spooked about what this NRST could potentially do.

    Homes in outer areas are now growing at a faster rate for a few reasons:

    1. More Toronto buyers cashing out and going somewhere they can get more bang for their buck
    2. More people retiring to a smaller town (and many taking early retirement)
    3. Prices in these smaller towns and cities being the only entry point for many first time buyers

    It’s gotten to the point now where homes in Ontario are basically the same price wherever you go. Is this sustainable? Probably not, and that’s probably why the rest of Canada is seeing an influx of Ontario buyers migrating to different provinces. If people are forced to go back to the office and can no longer become location independent, then these areas will undoubtedly suffer.

    Stop spreading misinformation when you have no facts, data, or boots on the ground to corroborate your story.

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