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Will a new tax on homes over $1M really help?

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According to the “Generation Squeeze Report” an annual tax could stall a scorching hot real estate market – Not that I am sure I believe it will help at all – but the report says it could help.

The surtax would start at 0.2 per cent of the value of homes worth between $1 million and $1.5 million, and rise to one per cent for homes valued at over $2 million. It works out to an annual amount of between roughly $400 for homes in the $1.2-million range to about $1,000 for homes valued at $1.5 million.

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The levy would be an annual (and deferrable) progressive surtax on these high-cost homes. Allegedly this revenue would bring in $5 billion every year – money the report says could then be plowed back into affordable and co-op housing. In the end, this would advance the CMHC 2030 target that “everyone in Canada has a home that they can afford and that meets their needs.”

Implementing such a measure would hopefully stem the tide of current and prospective owners utilizing their homes as investment assets instead of places to live in, the group said.

“While high and rising home values have a negative impact on affordability for renters and aspiring owners, the same high and rising home values benefit others by increasing their financial security and growing their wealth,” Generation Squeeze said. “When everyday Canadians normalize such benefits, count on them, or pursue them, we reinforce feedback loops in the housing system which further fuel unaffordability and wealth inequalities.”

Along with these measures, Generation Squeeze recommended that Statistics Canada should review “the ‘owned accommodation’ component of its Consumer Price Index (CPI) Calculation, and report annually about the influence of monetary policy on the growing gap between home prices and earnings.”

What we need is more homes, that’s it. When there is more inventory than there are buyers, the costs won’t be so high. As long as there are more buyers than there are homes we’re going to continue seeing the prices rise.

My Take? I’d like to stay neutral, but essentially this is a tax on a detached home in BC and Ontario (where detached homes are the most expensive). When I bought my house in 2019 – it cost us $711,000 – I can’t help the market or inflation, but due to the fact that my assessed value has gone up 40%, my property tax has too – which costs me $1200 more per year already. Why tax me, the person who owns just the one home that I live in?
My thoughts on what would help – limiting the realtors in hot markets (like the GTA) from listing homes well under the assessed value just to start a bidding war. There should be some kind of regulation to stop that nonsense from being allowed.