Recent Changes in Ontario Regarding the Real Estate Market

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There have been three recent significant changes regarding the real estate market in Ontario that will be addressed here.
Firstly, there was Ontario’s Foreign Home Buyer Tax that began in April, next came the Rental Fairness Act in May, and lastly a new mortgage stress test will begin in January 2018.

Ontario introduced a Foreign Home Buyer Tax in April as a means to rein in the housing market, particularly in the Greater Toronto Area. Often referred to as a foreign home buyer tax, the NRST is a 15% tax that applies to the purchase or acquisition of an interest in residential real property located in the Greater Golden Horseshoe (GGH) area by an individual, foreign corporation, or “taxable trustee”. The tax applies to real property located in Brant, Dufferin, Durham, Haldimand, Halton, Hamilton, Kawartha Lakes, Niagara, Northumberland, Peel, Peterborough, Simcoe, Toronto, Waterloo, Wellington, and York.

The next month, in a step to support renters with rent stability and some measure of protection for rental rights, Ontario passed the Rental Fairness Act, 2017. The Rental Fairness Act includes a number of items, namely no rent increases for any residential rental unit to exceed the provincially legislated annual maximum of 1.5 per cent for 2017, and a standard lease to help both tenants and landlords know their rights and responsibilities.

The last recent change is in regards to mortgages for home owners. Starting in January 1, 2018, Canadians won’t be able to qualify for as large of a mortgage. This new “mortgage stress test” will effectively reduce the size of the mortgage Canadians are able to take on. Canada’s banking regulator introduced the new rules that extended the requirement for a mortgage stress test to ALL homebuyers, including those with larger down payments.

The new guidelines now require federally regulated financial institutions to vet applicants for uninsured mortgages by using a minimum qualifying rate equal to the greater of the Bank of Canada’s five-year benchmark rate (currently 4.89%) or their contractual rate plus 2 percentage points. Furthermore, if the client wants a variable rate (currently at 2.70%), they will need to qualify using the benchmark rate (currently 4.89%). 

If you have any further questions about these changes, please call Sam McDadi Real Estate at 905-502-1500.