Goodbye to Toronto Land Transfer Tax?

With the slow down in the economy and the constant implementation of taxes by the government, the real estate industry is starting to suffer. With the City of Toronto scheduled to vote on the City's proposed Budget on March 31, 2009, 65% of Torontonians believe that the new Toronto Land Transfer Tax should be reversed.[i]

With the recent effectuating of Dalton McGuity's new Harmonized Sales Tax, the entire cost of purchasing real estate in Toronto is putting a bad taste in the mouths of Torontonians. This in return has had a negative impact on Toronto's real estate market as housing sales have dropped by 16% and values by 1.5% in 2008 alone.[ii] This statistic is directly related to the new Toronto Land Transfer Tax and does not take into consideration the impact that the new HST tax will have.

Torontonians are finally beginning to speak their concerns and express that this new Land Transfer Tax has definitely had a negative impact on our economy. It has been suggested that the most effective action for the City to help with our economic situation is to essentially roll back the Toronto Land Transfer Tax. Not only would this reversal impact people's decisions in a positive way while deciding whether to purchase a home or not, but it will also positively effect the real estate industry. With over 28,000 sales representatives in the City of Toronto, Realtors will also see the positive results of the elimination of this tax with more people willing to purchase real estate.

Another statistic conducted by the Canadian Real Estate Association demonstrated that one out of every 100 jobs is related to the spending associated with re-sale housing sales.[iii] This translates into approximately 14,000 jobs in the City of Toronto that depend on re-sale housing transactions. [iv] With the considerable amount of people whose livelihood is directly impacted negatively by the taxes related to real estate purchases implemented by both Dalton McGuinty and David Miller, it is with extreme optimism that Toronto City council will take into consideration the positive impact that the elimination of Toronto's Land Transfer tax would have on Toronto's economy as a whole.

[i] TREB – Torontonians want Toronto Land Transfer Tax Repealed:Poll, Toronto, March 30th, 2009.

[ii] Ibid.
[iii] Ibid.
[iv] Ibid.

How will the new Hamonized Sales tax (HST) affect your next real estate purchase?

The question on everyone's mind is how the new harmonized sales tax implemented by Dalton McGuinty will affect your new home purchase. The feeling is quite similar as to when the government implemented the new land transfer tax last year. Everyone was rushing to purchase as quickly as they could to avoid the new tax. A similar situation has been created, however introducing this new provincial plan at a time when the economy is suffering does not make things easier for home buyers. For example to purchase a $500,000 home after July 1st 2010 could end up costing you an additional $40,000 dollars.

Other items that you will notice that will increase in price are newspapers, internet services, airplane fares, and construction costs. When construction costs increase, so will the price of new homes and condos in the City of Toronto. As of now there are only two options in order to avoid this tax in the City of Toronto if you are purchasing pre -construction real estate.

They are as follows:

1. Purchase a condo or new home under $400,000 as units at this price range are exempted from the tax.

2. Purchase a condo or new home before July 1, 2010 in order to avoid the tax.

Another way to avoid this hefty tax is to look at purchasing a resale home or condo. Even though the purchase price is not directly affected by the new tax, buyers and sellers of resale homes will hurt as the harmonized tax would apply to many services that are currently exempt from PST. Such services include legal fees, real estate agent commission, renovation services, land survey reports, home inspections, landscaping and house cleaning services. Also affected would be the cost of labour for installations or repairs, additions, renovations, driveways, roads, fences, swimming pools and patios.

Toronto home buyers have still not recovered from last years imposition of the new City of Toronto land transfer tax. In a market where the volume of home sales has dropped and house prices have softened considerably, the last thing Ontario needs is a new 8 per cent tax on legal fees, agent commission and other costs related to the purchase and sale of new and resale homes. All these costs whether it is a new home purchase or a resale purchase, has made purchasing a very expensive venture.

Toronto Real Estate: A Buyers Market

In today’s economy, owning a home in Toronto has become a more affordable option than ever before. With low interest rates and declining prices, it’s a good time to buy Real Estate in Toronto.

Interest rates are at an all time low – the lowest they’ve been in the past 10 years and they are expected to remain low for the next year or so (and then increase by 2 or 3 %[1]). Although the current rates make home ownership a more attractive option than renting, with the bank putting tighter restraints on lending, having the ability to take advantage of these low interest rates can be a challenge. If you are a buyer with secure employment and a decent down payment, home ownership may be a viable and affordable option if you can prove to your lender you can truly afford the financial obligation.

In addition to the unbelievable interest rates, real estate is also now much more affordable than in the past couple of years. The average price of real estate in central Toronto has decreased by about 10% over the past year alone. In Feb ‘08, the average price was $522,480 and in Feb ‘09 the average was $473,991. This market change now represents a great opportunity for buyers, especially those who couldn’t afford home ownership over the past couple of years.

If you are a first time home buyer, there are a few government incentive programs that can help out with the finances. Programs such as the RRSP Home buyers Plan and the first time buyers land transfer tax rebate can offer a bit of a helping hand when it comes to down payment and costs.

At the top of the market in 2007, it was not unusual to see properties sell the day they were put on the market or to see multiple offers on one property. Today we are seeing much less of this. For the first time in years we are now seeing a buyers market (Too much inventory giving buyers the upper hand). With a buyers market, homes sit on the market for a longer period of time causing prices to fall. With the average days on market in Feb ’09 in central Toronto being 43 days[2], buyers now actually have a chance to comparison shop and truly think through their purchase. It’s a buyers market so buyers get out there and take advantage of this market.

If you are interested in buying or selling Real estate in Toronto or the GTA please contact us.

[1] Economist forecast interest rates will remain lower at least for the coming year. March 30, 2009, The National Post, SR2
[2] Market Watch, February 2009, Toronto Real Estate Board