Land-transfer tax questioned as real estate market slows
Realtors are questioning the Toronto land-transfer tax as the real estate market is predicted to slow.
Published Wednesday, June 20, 2012 10:38PM EDT
Last Updated Wednesday, June 20, 2012 10:42PM EDT
With a predicted housing market slowdown in Toronto on the horizon, a real estate lobby group is pushing Mayor Rob Ford to keep his promise of eliminating the municipal land-transfer tax.
Though housing sales in Toronto remain strong, the average homebuyer pays an additional $7,000 in land-transfer tax at the time of closing, something the Toronto Real Estate Board says can make a difference when people are deciding where to buy.
"The reality is that people are concerned about the tax," said Von Palmer, spokesperson for the Toronto Real Estate Board. "We know that it's having an impact. People cannot afford the tax. They're not getting any additional services for paying that tax."
The real estate board said the tax may already be dissuading homebuyers from purchasing in Toronto. Currently, anyone who buys a home in Toronto pays the tax, while people buying a home in the outlaying regions of the GTA do not.
Year-to-date home sales are up 12.3 per cent in the 905, compared to 3.3 per cent in Toronto, the board said.
City Hall introduced the land-transfer tax in 2008 and Toronto Mayor Rob Ford has since vowed to phase it out.
This move, however, may be more difficult after the tax helped the city post a surplus in 2012, bringing in an estimated $336 million.
Some coucillors see the tax as an integral part of the city's budget.
"That revenue is required in the city of Toronto to make sure that we have the infrastructure that we need for the intensification and growth that's occurring in the city of Toronto," said Coun. Janet Davis.
Norm Hum, who put an offer in for a condo in Liberty Village on Tuesday, said the municipal land-transfer tax was one of many factors he considered while condo shopping in the GTA.
"Initially, you kind of weighed out the pros and cons, calculated how much the tax was going to be, compared to what I would pay for outside the city, where I don't have to pay that," Hum said.
In the end, Hum picked Toronto, but many others did not.
Mid-June home sales showed an increase of 5.6 per cent in the 905 and a drop of 8.3 per cent in Toronto, according to numbers from the Toronto Real Estate Board.
However, Toronto real estate agent Robert Crocione points out that Toronto property taxes are actually lower than in some surrounding municipalities, so the land-transfer tax could balance out in the long run.
The problem is that the land-transfer tax has to be paid at time of closing, at the same time that a buyer has to pay many other costs associated with purchasing a new home.
"Some of them have made the decision, look at it, I don't want to pay this tax, so I am going to move to the Durham region," said Crocione.
Ford hasn't given many details on his promise to eliminate the land-transfer tax, saying only that he wants to begin phasing it out before the end of his term, maybe by starting with a 25 per cent reduction.
With files from CTV Toronto's Natalie Johnson