Toronto Condo and Real Estate Blog

Is the new Toronto Land Transfer Tax going to make people buy sooner?

By Astrid Poei, 24 Hours

Toronto real estate buyers and sellers looking to hold onto their last dollar may be rushing to buy or sell their home before the new Toronto land transfer tax comes into effect at the end of this year.

The controversial tax, passed in a 26-19 vote by city council on Monday night, will be collected on purchases that are signed after Dec. 31.

The tax affects 0.5% on the first $55,000 of residential property values, 1% on the next $345,000 and 2% on more than $400,000. First-time buyers do not pay on the first $400,000.

Buyers trying to avoid paying for the new levy would need to sign on the dotted line before the new year and sellers hoping to make their asking price more attractive for potential investors, may be placing their homes on the block sooner rather than later.

“Anytime there’s a market destabilizing force like the implementation of a new tax, you do tend to see correlative changes in consumer behaviour,” said Kevin Gaudet of the Canadian Taxpayers Federation. “People thinking to buy a house next year because they wanted to save a few extra bucks (for a larger down payment) may facilitate the decision in moving forward (sooner)… these types of taxes have an impact.”

Von Palmer of the Toronto Real Estate Board said the tax will have an economic impact of up to $33,000 per purchase to other industries such as furniture, which thrive on home sales. He also added that buyers will be forced to place smaller down payments or carry larger mortgage payments over time.

He said it still remains to be seen whether or not the impending tax will result in an upward or downward spike in Toronto real estate sales.

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Contact the Jeffrey Team for more information - 416-388-1960

Toronto City Council has approved a municipal land transfer tax that will be levied on top of the provincial land transfer tax. The Toronto Real Estate Board worked very hard to oppose this tax and commends the efforts of Toronto real estate agents on this issue. The Toronto Real Estate Board took a strong position to oppose this tax as unfair in principle and refused to compromise. As a direct result of this strong position, City Council was forced to make a number of amendments to the City’s original proposal, including rebates for first-time buyers, a reduced rate, and grandfathering for existing transactions.

The City has not yet provided detailed information on administration or implementation issues. The following is based on currently available information. Some information from the City is available here.

What was approved by City Council?

A second land transfer tax, on top of the provincial land transfer tax, at the following rates:

Residential:
* 0.5% of the amount of the purchase price up to and including $55,000
* 1% of the amount of the purchase price between $55,000 and $400,000
* 2% of the amount of the purchase price above $400,000

(Check our new Toronto Land Transfer Tax Calculator here)

Commercial / Industrial / Etc.:
* 0.5% of the amount of the purchase price up to and including $55,000
* 1% of the amount of the purchase price between $55,000 and $400,000
* 1.5% of the amount between $400,000 and $40 million
* 1% of the amount above $40 million

When does this take effect?

February 1, 2008.

Are existing transactions grandfathered?

Yes. Any transactions where the purchaser and vendor have entered into an Agreement of Purchase and Sale for the property prior to December 31, 2007 will be rebated the full amount of the Toronto land transfer tax. The City has not yet provided clarification on how rebates will be administered. If your clients have concerns, they should check with their lawyer. Once the City of Toronto provides clarification, more information will be provided.

What about Agreements of Purchase and Sale signed after December 31, 2007 with closing dates before February 1, 2008?

Purchasers with a Purchase and Sale agreement signed after December 31, 2007 with a closing before February 1, 2008 will not be required to pay the Toronto land transfer tax.

What about Agreements of Purchase and Sale signed after December 31, 2007 with closing dates on or after February 1, 2008?

Purchasers with a Purchase and Sale agreement signed after December 31, 2007 with a closing on or after February 1, 2008 will be required to pay the full Toronto land transfer tax.

Where does this apply?

The Toronto land transfer tax only applies to transactions within the City of Toronto. This does NOT apply to property transactions outside of the City of Toronto.

Are first time home buyers affected?

First time home buyers of new AND re-sale homes will receive a rebate of the Toronto land transfer tax of up to $3,725 (this equals a 100% rebate on homes purchased for up to $400,000). The City has not yet provided clarification on how rebates will be administered. If your clients have concerns, they should check with their lawyer. Once the City of Toronto provides clarification, more information will be provided.

More detailed information will be provided once it is made available by the City. If you have questions, contact the City of Toronto at Access Toronto at 416-338-0338.

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Contact the Jeffrey Team for more information - 416-388-1960

Toronto Realtors unhappy that public opinion on new Toronto land transfer tax ignored

Toronto real estate agents are concerned about the potential impact of the City of Toronto’s recently approved second land transfer tax and disappointed that the public’s opinion of this tax was ignored.

“Toronto real estate agents have been working hard to provide the facts about this unfair idea and the public responded with action. An overwhelming majority of Torontonians believe that this tax is a bad idea,” said Maureen O’Neill, President of the Toronto Real Estate Board. “The public made their voices heard loud and clear but, unfortunately, they were ignored.”

A poll conducted by the Environics Research Group, commissioned in part by the Toronto Real Estate Board, showed that 62% of Torontonians think that a land transfer tax is an unfair solution to the City’s financial challenge and that 61% of Torontonians wanted their Councillor to vote against it.

“Torontonians deserve to be treated fairly. A second land transfer tax is an extremely unfair way to address the City’s financial challenges. It forces a relatively small group, home buyers, to pay for services for everyone. That, simply, is unfair,” added O’Neill.

The Toronto Real Estate Board also raised concerns about the potential impact of a second land transfer tax.

“Home ownership is something that the City should be trying to encourage, not discourage. The second land transfer tax will make it more difficult for people to achieve that dream and it could hurt property values for some current home owners,” said O’Neill. “It could also have far-reaching impacts on the City’s whole economy by reducing the amount of money that home buyers have to spend on things like furniture, renovations, and energy-efficiency upgrades.”

The Toronto Real Estate Board is disappointed that the City is choosing new taxes instead of more prudent solutions. Specifically, the Toronto Real Estate Board believes that the City should have waited for the Mayor’s panel to report on alternative options. The Environics poll showed that 78% of Torontonians think that City Council should have waited until the Mayor’s panel finished its work before deciding on new taxes.

“This is a classic example of putting the cart before the horse: tax now, save later. That, simply, doesn’t make sense,” said O’Neill. “The Mayor appointed a panel to look for savings and other options and we applaud him for that. The panel is something that the Toronto Real Estate Board, and the public, called for, but they should have been allowed to finish their work so that fair options could have been considered instead of a land transfer tax.”

The Toronto Real Estate Board has consistently supported fair options for dealing with the City’s financial challenges, including a more fair deal with senior levels of government, and continues to support City efforts in this regard.

“Unfortunately, we disagree with the City on the land transfer tax, and we will continue to oppose it. We continue to believe that it is not fair,” said O’Neill. “Let’s not forget that this tax doesn’t solve the City’s financial challenge. We look forward to working with the City towards fair solutions. We will continue to push for a fair deal for Toronto from senior levels of government, as we always have.”

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Contact the Jeffrey Team for more information - 416-388-1960