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By Greater Fool (Reporter)
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On Wednesday local Ottawa politicians will thumbs-up an empty-house tax. The average property sells for $742,000 now (+35% in a year), so the tax would be $600 a month on a place not rented or owner-occupied for 184 days a year.

Of course, Vancouver does this, too. The tax there is an astonishing 3% of appraised value – in a city where a crap house is $1.5 million. In a few weeks Toronto politicians will finish designing their vacancy tax to apply in the country’s largest city where thousands of condo units are used by business travelers and others – all to be taxed extra.

In a few months the federal government will bring in its own 1% annual tax on the value of all properties it thinks are vacant or “under-utilized” owned by non-residents. In addition, Ontario has a 15% tax on the purchase cost of real estate in the high-density areas. British Columbia does the same, but at 20%. And there are enhanced property taxes in Vancouver, with a similar proposal still on the table in Toronto.

Now the Ontario NDP, sniffing Doug Ford’s precarious political future, is demanding a province-wide additional tax on under-utilized properties owned by anyone, plus a speculation tax on the full value of real estate held by anyone paying most of their taxes elsewhere, like another province.

In Ottawa, as in Vancouver (and soon in Toronto and likely Mississauga), all 307,000 property owners will have to declare the use of their real estate. If they fail to do so, it will be declared vacant and taxed continuously. In Vancouver some owners are taxed on unbuilt residential units since the city contends they should exist. And of course, you know jealous how the kids feel…

Meanwhile landlords and others see this as a politically-motivated, economically-challenged, brain-dead tax grab of monumental proportions. After all, the vacancy rental rate in the GTA has been sitting at the highest level in 50 years, according to Urbanation. It found almost 6% of all newer purpose-built rental apartment projects completed in the last 16 years are… empty.

“I think these results speak to how drastically the [COVID-19] pandemic altered the rental market in Toronto,” Urbanation’s president said. “Demand was lost due to increased population inflows out the city. We had low immigration, high unemployment, a sharp reduction in the number of post-secondary students. And at the same time, last year, in 2020, we completed a record number of new condominiums.”

In fact, rents have fallen in most urban centres for a year or more. Landlords have been trying to fill suites with inducements like free months, parking and storage units. A new survey by CMHC just found there are almost 75,000 basement apartments in Toronto, many of them illegal, competing with rental units which cannot be filled. Meanwhile Covid-caused delays, confusion and chaos at landlord-tenant tribunals have meant tenants who (a) don’t want to pay or (b) refuse to leave have faced no consequences. Owners have been unable to reclaim units or collect rents, while footing all costs.

In fact during the pandemic a majority of provinces passed no-eviction laws, basically abrogating private property rights. But wait. Canada doesn’t bestow the right to own land, buildings or real estate upon its citizens. So, tough.

In Ontario, by the way, Mr. Ford’s handling of the pandemic has cost him points. The opposition Libs and Dippers are nipping at his heels. A leftist coalition government is a threat – which would make the empty house/non-Ontario owner tax a thing.

There are two points to this post (in case you were wondering).

First, higher taxes don’t make real estate cheaper. The opposite. Heaping on purchase fees, under-utilization taxes, double land-transfer payments and levies at the city, provincial and national levels just ratchets up the insane escalation in property values. Rents climb higher, not lower. And fewer people – residents or non-residents – will want to be investors providing tenants homes. Let’s remember that these days most renters continue to be subsidized by landlords. So why would we whack them? There is zero chance housing will decline in price because governments are Hoovering it.

Second, be careful.

If you’re a landlord, they’re coming for you. If you’ve been considering buying a condo to rent out, bad idea. If you have a vacation property or secondary pad in another city or province, look out. And it you thought you lived in a country where you could do what you wish with an asset you bought, financed, paid for, maintain and pay property tax on, think again. During the most recent pandemic lockdowns in NS and BC, for example, people were forbidden from driving non-stop to their cottages where they’d see nobody. “You are privileged,” the authorities said. It was about class, not public health.

We’re only a few crazy politicians away from far worse.

Be liquid. Always diversified.

About the picture:  “This is Sunny,’ from Red Deer,” writes DB. “12 months old. Part Shepherd, part Husky, part Golden Retriever. All tongue. Adopted from a Saskatchewan reservation at 5 weeks old.”



Source: https://www.greaterfool.ca/2021/06/04/look-out/


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