Toronto land transfer tax hurting housing market: Realtors
i don't necessarily agree with the TLTT, but there is a rebate to first time buyers.
the article should really be focusing on the high TO r/e prices and the 5% r/e commissions as more deterents than the ~1.5% LTT
http://www.moneyville.ca/article/1202492--toronto-land-transfer-tax-hurting-housing-market-realtors
By Susan Pigg | Tue May 29 2012
Toronto’s land transfer tax may be costing the economy $250 million in economic spinoffs, driving down home sales in the 416 region and contributing to a shortage of new listings, according to the Toronto Real Estate Board.
While it’s “encouraging†that Toronto’s budget chief is pondering phasing out the “double tax†by 5 per cent a year, starting next year, a quicker end is needed, says Von Palmer, chief government and public affairs officer for TREB.
Toronto is the only city in Canada that imposes a land transfer tax on top of the provincial one. That translates into $15,086 in up front costs when buying the average home in Toronto, now worth $572,159. That’s $7,100 more than it costs to buy the same home in the suburbs.
In fact, the tax has been far more lucrative for the city than originally anticipated, thanks to the hot housing market: Originally expected to bring in about $240 million a year, the city could rake in $330 million by the end of this year.
TREB is now tracking what it considers worrisome signs in the GTA housing market that it blames, at least in part, on the tax.
There is now a substantive “discrepancy†between the level of home sales in the 905 and the 416. In February, for instance, home sales were up by 6.3 per cent in the 416 over a year earlier and a whopping 23 per cent in the 905 regions.
In March, the differential was 10 percentage points, with sales up 12 per cent in the 905 regions over a year earlier and up just 2 per cent in the 416, says Palmer.
So far this month, the gap has dropped to about 6 percentage points, and while the lower price of 905 properties is likely another factor, “we know the land transfer tax is playing a role, the question is how much,†says Palmer.
Realtors like Toronto’s Thomas Cook are seeing the impact on the ground. He believes the tax is one factor discouraging homeowners from moving up or downsizing. As a result, there aren’t enough listings to meet demand, fuelling bidding wars which are further driving up prices.
“People who are considering selling and buying up certainly think twice when they see what the land transfer tax expense is,†says Cook who recently had a client abandon their plan to sell their $700,000 home and move up to the $950,000 range after doing the moving math.
Others are opting to renovate rather than move, which is further contributing to the shortage of new listings in Toronto, he said.
A detailed analysis by economists at the C.D. Howe Institute back in 2008 determined that the Toronto tax was responsible for a 16 per cent decline in sales of single-family homes, accounting for about 3,500 lost transactions in its first year alone.
Those lost transactions now number close to 5,800, given the fact more than 36,000 homes sold in the 416 area last year.
It’s been estimated that every resale housing transaction generates more than $40,000 in economic spinoffs, from new furniture to appliances to renovations — which means some $250 million in economic spinoffs are being lost, says Palmer.
“At the end of the day, it comes down to jobs.â€
There’s little doubt the tax is having a substantive impact on the GTA housing market, says Finn Poschmann, vice president of research for C.D. Howe.
“It’s terrific to hear the budget chief talk about a phasing out. He’s headed in the right direction and the rest s a matter of subtle argument about how fast you get there.â€