Perhaps this is part of a much larger conversation.
Perhaps delving into immigration as a lead-up to a discussion about taxation in real estate is far too existential in nature.
But maybe, just maybe, it’s the perfect introduction to today’s topic.
You decide.
So let me ask you, and there’s no need to answer outside of your own mind:
What type of people are we looking to attract to this country?
That’s a vague question as well as a broad one.
Do we want skilled labourers?
Do we want doctors?
What about tradespeople?
How about the people that will “do the jobs that nobody else wants to do?”
Are we looking to attract individuals who have experience in emerging industries and technologies?
Or are we looking to, at least in part, open our doors to refugees and others who have fallen on hard times in other areas of the world?
It’s that last sentence that is the hot-button issue and for a variety of reasons. I don’t bring that up to make a point, but rather to remind everybody that not all immigrants are judged and/or accepted based on their education, industry, or skillset.
Tell me how you would want our immigration program to look and explain to me whom you would want to target or attract the most, but for the purposes of today’s discussion, I’m going to tell a story about two doctors who are clients of mine and represent exactly the type of “immigrant” that we want here in Canada, more specifically, Toronto, but for whom recent legislation has simply sought to drive away and alienate.
Shall we?
John and Alexandra, obviously not their real names, were doctors living in the United States back in early 2023 when they first reached out to me about moving to Toronto.
I’ll save you how various segments of the healthcare industry work, but there is often an effort or a “push” to bring international healthcare workers to Canada, particularly when they are specialists with a skillset that is rare, lacking in Canada, and desperately needed.
This is also common in other industries like post-secondary education, for example, and it should come as no surprise that we don’t always have the home-grown talent here at home that we need, and therefore we often have to look outside our borders.
John and Alexandra came to Toronto for a visit in early 2023 and after conducting their meetings with various hospitals and healthcare figureheads, they met me so that we could go on a wonderful tour of Toronto neighbourhoods!
It was fun!
We spent three hours in the car driving through Harbord Village, The Annex, Summerhill, Rosedale, Moore Park, Leaside, Chaplin Estates, and Bedford Park, and I pointed out every park, school, transit stop, and area amenity that I could think of!
Unfortunately, I also had to discuss Canada’s “foreign buyer ban” with John and Alexandra, as well as the provincial Non-Resident Speculation Tax that applies to anybody without Permanent Resident status.
In December of 2022, the federal government implemented the “Prohibition Of Residential Property By Non-Canadians Act.”
The goal of the Act, and I’m taking this directly from the government website:
…ban foreign investors from buying non-recreational residential property in Canada.
Note the words “foreign investors” here, because this is going to be essential to today’s story.
At the time, Minister of Housing And Diversity & Inclusion (because those things are connected, somehow??) offered this:
“Homes should not be commodities. Homes are meant to be lived in, a place where families can lay down roots, create memories and build a life together. Through this legislation, we’re taking action to ensure that housing is owned by Canadians, for the benefit of everyone who lives in this country. We will continue to do whatever we can to ensure that all residents of this country have a home that is affordable and that meets their needs.”
Alright, duly noted!
“Families can lay down roots, create memories, and built a life together.”
I’m on board with that.
Of course, there are many exemptions to the so-called “ban,” and for good reason. After all, we don’t want to ban newcomers to Canada who are highly sought-after and would tremendously benefit our collective well-being, right?
Those exceptions applied to John and Alexandra:
Temporary residents working in Canada if they:
-hold a valid work permit or are authorized to work in Canada, and
-have 183 days or more of validity remaining on their work permit or authorization at time of purchase, and
-have not previously purchased a residential property in Canada while the prohibition is in effect
I explained the foreign buyer ban to John and Alexandra and mentioned the exceptions.
Then I explained that in Ontario, we had a “Non-Resident Speculation Tax” of 25%.
Alexandra said, “We spoke to our employer, and we’re good on that.”
At the risk of overstepping, I asked, “Do you need any more information on this? Are there any questions I can answer?”
Alexandra simply said, “Nope. The hospital is all good with it.”
Over the next few months, John and Alexandra continued to negotiate with their potential employers and they kept in touch, asking a slew of questions about Toronto. At this point, I wasn’t just wearing the “real estate agent” hat, but rather I was talking to them about education, culture, entertainment, demographics, politics, infrastructure, and even outlining some of the best running routes that the city has to offer. You might not know this, but Americans are delighted to discover our “ravine trails” for running and most say they have nothing like that in cities where they’re coming from.
In the fall of 2023, John and Alexandra returned to Toronto for another tour of homes, and this time around, we actually went inside some houses!
Sidebar here: many Americans are confused by why we only have bedrooms on the second floor of a house, and why we consider any bedroom on the main floor or a basement a “plus one.” Picture a sprawling home in South Carolina where the primary bedroom is off the family room on the main floor, and there are another four bedrooms on the second level. Sure, we have backsplit and sidesplit homes in Mississauga and the like, but this isn’t the same thing.
By late-2023, John and Alexandra told me that they would, in fact, be moving to Toronto, so our property search became more serious.
They didn’t love the idea of buying a home right away, since they still wanted to get familiar with neighbourhoods, so we looked specifically at high-end rental properties and focused on The Annex.
We secured them a fantastic lease for a beautiful Victorian home, walking distance to work.
Now, here’s a parallel story. Two, in fact.
From the same referral source, I was introduced to two other couples, all of them sought-after specialists in the fields of medicine and healthcare.
Luca and Dina were coming from the west coast.
Oren and Eden were coming from the east coast.
The net had been cast wide and far to attract such highly sought-after professionals!
I had spoken to these folks throughout 2024 and taken them both on tours, but they were a little behind John and Alexandra in terms of timing. If they made the move to Toronto, it would be in 2025 at the earliest.
Fast-forward to the fall of 2024 and John and Alexandra reached out to say that they were approaching the end of their initial one-year lease and that they were very excited to purchase a home.
Both John and Alexandra were thriving in their fields, loving all that Toronto has to offer, and their children were both attending private schools in Toronto and happier than they’d ever been.
Simply put: John and Alexandra were ready to call Toronto “home,” long-term.
We started to look at houses in the fall of 2024 and in the $4,000,000 price bracket.
John asked about this thing called “land transfer tax,” which was a novel concept to him, and I had the unfortunate job of explaining to him that, for some reason, buyers of a $4,500,000 house in Toronto were required to pay the province and the city $217,950.
He wasn’t pleased, but he clearly understood what Toronto is, and what Canada is, for that matter, and accepted the tax as it was.
But then, something incredible happened. And I mean “incredible” in the traditional sense, like “extraordinary,” or “unbelievable.” I don’t mean it’s necessarily good.
I said to John, “This is in addition to the ridiculous 25% provincial speculation tax you’ll have to pay,” and he replied, “Yeah, but that doesn’t apply to us.”
I paused for a moment and wondered how I could be wrong on this.
I asked John, “Sorry, did I misunderstand? Have you received your Permanent Resident status yet?”
John said, “No, but we applied.”
The part that’s incredible comes next.
John said, “The hospital put us in touch with an accountant who said that the tax doesn’t apply to us.”
Incredible.
Look, I’m just a lowly real estate agent, so what the heck do I know, right? I’m not the person who’s trying to attract some of the world’s most sought-after surgeons and medical specialists, standing on a mountain of cash, making job offers and promises. But I do know that anybody coming from outside Canada who does not have their Permanent Resident status is going to pay a 25% tax to the provincial government.
Oh, and as of 2025, they’ll also pay a 10% tax to the city of Toronto, but that’s besides the point.
I explained this to John and Alexandra, and a week later, they came back to me and said, “You’re right.”
In an unbelievable twist, the accountant who the hospital put them in touch with screwed up, and John and Alexandra were under the impression that they did not have to pay the speculation tax.
More than a little “oopsie,” right?
Coming from the United States, which is a more litigious society than ours, John and Alexandra felt that they had been misled and they used a little, shall we say, “leverage” to get the hospital to make this right.
In December, John and Alexandra purchased a home for $4,600,000 and will pay the province of Ontario $1,150,000 in the form of a “speculation tax” and then pay the city of Toronto $460,000 in yet another speculation tax. Because if there’s one thing we’ve grown accustomed to in Canada, it’s paying a tax to one of the three levels of government, and then paying that same tax again to another one.
In John and Alexandra’s case, the hospital is going to pay the $1,610,000 on their behalf, and then get it back when John and Alexandra secure their permanent resident status.
Wait….what?
“Get it back?”
Yes!
Oh, sorry, did I gloss over this point?
The speculation tax is paid by people who are seeking to become Permanent Residents but it’s given back to them after they have secured Permanent Resident status.
From the Ontario government website:
If you have applied to become a permanent resident of Canada, but you have not obtained that status at the time your home transaction closes, you must pay NRST unless you are eligible for an exemption. If you become a permanent resident of Canada after the home transaction closes, you may qualify for a rebate of the NRST if you meet specific requirements. Please see our Non-Resident Speculation Tax rebates and refunds page.
How long does it take to become a Permanent Resident?
Your guess is as good as mine.
John and Alexandra were lucky.
Luca & Dina and Oren & Eden were not, unfortunately.
During my conversations with Luca & Dina, and then Oren & Eden, I couldn’t help but draw on my experience in helping John and Alexandra with their home purchase.
I asked both couples if they had been told that the Non-Resident Speculation Tax did not apply to them, and both said “Yes.”
At this point, some of you might suggest that the story here is really about the monumental screw-up on the part of the hospital’s accountant, but that’s merely the delivery device to get us to the crux of the matter.
Neither Luca & Dina nor Oren & Eden decided to move to Toronto as a result of their recruiter notifying them that they would have to incur a “speculation tax” of up to 35% on the purchase of a home here in Canada.
And thus, Toronto has lost four exceptionally rare, sought-after specialists in the medical and healthcare field because our three levels of government have put measures in place to deter them.
When the national foreign buyer ban was extended for two years in 2024, here’s what we were told:
“By extending the foreign buyer ban, we will ensure houses are used as homes for Canadian families to live in and do not become a speculative financial asset class. The government is intent on using all possible tools to make housing more affordable for Canadians across the country.”
The Honourable Chrystia Freeland, Deputy Prime Minister and Minister of Finance
Note the words “speculative financial asset class.”
Now, again, this is the foreign buyer ban, which provides exceptions and allows folks like Luca & Dina, Oren & Eden, or John & Alexandra to purchase here in Canada.
But what about the municipal Non-Resident Speculation Tax?
And what about the provincial Non-Resident Speculation Tax?
In case it’s not obvious, I need to drive home this point:
None of Luca & Dina, Oren & Eden, or John & Alexandra are speculating!
They are moving here with their children and their dogs!
They are buying family homes, in which they will reside with their families, while working, paying taxes, and contributing to the greater good of our society.
Why in the world are we driving these people away?
In a subsequent conversation with John and Alexandra, when we were discussing how and why they came to believe that this tax didn’t apply to them, Alexandra very simply, calmly, and quietly said:
Well…..I mean……we’re not speculators.
Doesn’t she have a point?
The tax is called the “speculation tax,” after all.
John said, “I would understand if we were buying a property to park some cash, but we’re coming here to live, hopefully for the rest of our lives. How is there any confusing this with speculating?”
Great question, John!
Unfortunately, I don’t have the answer.
Both the province of Ontario and the municipality of Toronto have got this one wrong.
Every tax that the government levies on real estate is just another political gambit and an opportunity for politicians to tell us how hard they’re working for us.
“Our government is taking action to bring home ownership within reach for more hardworking Ontario families, and I look forward to sharing our plan in the near future,” said Steve Clark, Minister of Municipal Affairs & Housing in 2022.
“Our government is working to increase supply and help keep costs low for Ontario families and homebuyers, not foreign speculators looking to turn a quick profit,” said Peter Bethlenfalvy, Minister of Finance.
But are we actually able to differentiate between “families” and “foreign speculators looking to turn a quick profit?”
I know that this was a classic sound byte and all, especially with the addition of “looking to turn a quick profit,” but tell me that the government understands the need to attract massive contributors to our economy, education system, healthcare system, technology sector, and other impoverished areas of our country. Tell me that the government understands that slapping these people with a ridiculous 35% tax isn’t the way to attract them.
Picture that immature little 6-year-old boy who has a crush on a girl in his class. He doesn’t know what to do to show her he wants her, so the best idea he has is to pull her hair at recess or throw mud at her.
From where I stand, our three levels of government are acting like children who don’t know how to act in the presence of those that they desperately want to attract.
If we’re serious about making Canada a place where highly skilled and sought-after workers, who would call our country “home” in the long-term, actually want to go, then we need to re-define the word “speculation” as it pertains to these two ill-advised, misguided, political spectacles masquerading as “taxes” that protect us all…
