Toronto Land Transfer Tax

Posted: 6th May 2008 by Laurin Jeffrey in Buying Real Estate, First Time Buyers, Real Estate Taxes, Toronto Real Estate
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What is the Potential Impact of the New Tax on Real Estate in the City of Toronto and Suburbs?

2007 was a very strong year for Toronto real estate. The number of downtown condo sales was up about 25% from last year, and the same is true of detached homes in areas such as Scarborough. Prices overall are forecast to increase by about 5-7% in 2008, with the relatively cheaper condo market potentially appreciating even more.

Bidding wars continue to be the norm in some hot Toronto neighbourhoods – and demand for the most part exceeds supply. Employment continues to be at a record high, and interest rates, while higher than a few years ago, remain at historic lows with increasing signals that reductions are in store for 2008.

For the first half of the year we are likely to see the following:

* the Toronto real estate market continues at a respectable clip, as continued low interest rates and near full time employment support consumer confidence
* a reduction in down payment and equity as both first time and repeat home buyers make purchases with less money (paying the new Toronto land transfer tax with money that they previously could have used for a down payment)
* higher demand for turn-key homes as opposed to fixer-uppers, as buyers realize that any renovation money they might have had must now be applied to the new Toronto land transfer tax
* investors and repeat buyers waiting longer before making that second home purchase or investment purchase (to save up enough) – and perhaps more selectivity from investors, since rate of return will not be as favourable once the tax is incorporated
* incentives from major lending institutions to help home buyers – such as banks offering to help pay the new land transfer tax up, or more cash-back mortgages
* more activity in the 905 region near the border with Toronto, as buyers avoid the new Toronto land transfer tax by buying outside the city

In the second half of 2008, it is hard to say, but we may see:

* more development in the 905 region on the city border as developers capitalize on demand by buyers just on the outskirts of Toronto (such as Thornhill, Markham, Mississauga and Pickering)
* smaller and more affordable housing development within the city core to keep the purchase price at a level that attracts first time buyers
* more redevelopment in parts of west and east Toronto that have up to now been neglected by developers, as their relative affordability encourages development

The Bottom Line on the New Toronto Land Transfer Tax

In 2007, the Toronto real estate market was very solid and in some cases was beginning to exhibit some signs of speculative frenzy. We continue to see more demand than supply for decent real estate in the City of Toronto.

The new Toronto land transfer tax can, in some ways, be a good thing. It might cause speculators to be more prudent when making an investment decision. It may also make first time home buyers more cautious about buying beyond their means or jumping in without sufficient equity. While the implementation of this new tax is abhorrent to some, is it possible that it may in fact sustain our real estate boom, by preventing a bubble from forming and/or getting out of control?

In an open letter to Mayor David Miller, the Toronto Real Estate Board raised concerns about a possible home-buying tax in Toronto. They say a Toronto land transfer tax, on top of the existing provincial land transfer tax, would cause homebuyers to pay the same tax twice and encourage homebuying outside city limits.

“A land transfer tax is a home-buying tax. It is a tax charged directly to homebuyers when they purchase a property, which is usually intended to offset costs for providing services directly related to real estate transactions. If the City intends to charge a land transfer tax just to raise additional revenue for general municipal services, is it fair to expect homebuyers to pay for services that the whole community benefits from?,” said Dorothy Mason, President of the Toronto Real Estate Board.

“If the City adopts a land transfer tax, Toronto homebuyers will be faced with a double whammy of land transfer taxes – a municipal land transfer tax and a provincial land transfer tax,” added Mason.

The provincial government already charges a land transfer tax on property transactions. For the average Toronto home, according to the Toronto Real Estate Board’s statistics, the provincial land transfer tax payable is approximately $4,200.

“If the City moves ahead with a second land transfer tax, average Toronto homebuyers could be faced with paying almost $1,900 on top of the $4,200 that they already have to pay for the existing provincial land transfer tax, money that could be spent on other expenses when purchasing a home such as appliances.”

“Mayor Miller and all of City Council should realize that forcing homebuyers to pay a second land transfer tax will have implications for the City. It will make Toronto housing less affordable, and encourage homebuyers to choose to live outside of the City, where they only have to pay the land transfer tax once. This could mean more commuting, more traffic, and environmental impacts, like smog, for the GTA”, said Mason.

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

2007 Toronto CMA Condo Market numbers shattered records – Urbanation’s 2008 outlook sees continuing growth, despite affordability concerns

In the first two months of 2008, the Toronto condo market has seen nine new high-rise condominium openings, compared with five during the same period last year, according to Urbanation.

“In fact,” says Urbanation’s Editor and Executive Vice-President, Jane Renwick, “we are forecasting 19,000 sales in the Toronto new condo market and 17,000 sales in the resale condo market for 2008.”

Other results and projections include:

* 2007 was a record breaking year for the Toronto condo market.
* Annual unit sales increased by 40% (22,654 new unit sales in 2007 vs. 16,114 in 2006 and 16,224 in 2005).
* 104 new condo projects opened in 2007 vs. 84 in 2005, the previous record.
* 2007 Toronto condo prices rose 11.3% in the new sale market and 15.1% in the resale market over 2006 prices.
* The double digit price increase in the new sale market was partly driven by growth in Toronto’s luxury and “super luxury” condo segment, defined as projects that trade over $600 per square foot, which represented 3,784 new units in 2007 and averaged $844 per square foot.
* “Non luxury” unites in the new sale market, by contrast, averaged $360 per square foot, once the luxury units where factored out.
* Price increases in the resale market were even more sustantial, rising 15.1%, from $278 in 2006 to $320 per square foot in 2007.

Balancing the 2007 price increases, mortgages remained affordable, as interest rates stayed at historically low levels. Amortization periods also extended to 40 years, creating lower monthly payments and allowing for the purchase of a more expensive unit at the same monthly carrying cost of a 25-year mortgage.

The definition of a conventional mortgage changed in 2007 from 25% to 20% down, reducing mortage insurance requirements at the same time. Unlike the U.S. subprime market, however, Canadian lenders did not relax their credit evaluation standards, and the Canadian mortgage default rate remained at a very low 0.25%.

Renwick adds, “The Toronto condo market remains buoyant because of low unemployment, low interest rates, high population growth and positive demographic changes that favour condo living.”

Can Toronto continue to absorb high levels of new supply, especially in light of the considerable number of units that will be added to the resale universe in 2008? Urbanation expects the general sales momentum of recent years to hold through 2008, although the sales performance of 2007 will be difficult to duplicate.

About Urbanation
Urbanation is one of Canada’s leading condominium market research firms. SInce 1981, the firm has been analyzing the Toronto condominium market, publishing the “industry bible” – Urbanation’s Condominium Market Survey. This quarterly report tracks new, resale and future condominium projects. Urbanation also provides the development community with essential consulting services, which include site specific market studies, surveys and focus groups.

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

By Garry Choo & Aileen Cassells (www.kml.to)

The Kensington Market today is a diverse and vibrant neighbourhood with an interesting historic past. The development of the market and the Kensington Market area has been strongly influenced by the different waves of immigrants who have come to live and work in the area over the years.

Kensington Market was part of a 156 acre lot bought by Colonel George Taylor Denison in 1815. The Denison family built a house which they named ‘Belle Vue’ in 1815 to north of Denison Square. The Denisons were responsible for building of the St. Stephen’s Church in 1858 because they wanted to have a place to worship. Denison Avenue which runs along the western edge of the market was once the driveway from their family house leading to Queen Street.

The land which made up the Kensington Market area was a wooded area. The St. Stephen’s Church used to be known as St. Stephen’s in the Fields before Kensington Market was developed. At one time, Russell Creek ran across what is now Bellevue Avenue. However, like many creeks in Toronto, it was covered over and became part of the sewer system.

Beginning in 1854, the Denison estate was subdivided into lots which were purchased by English, Irish, and Scottish immigrants. These immigrants were labourers and skilled tradesmen. Many of the street names reflect this early influence (Oxford Street, College Street, Kensington Avenue). In the early 1900s, Jews from Central and Southern Europe began to move into Kensington Market.

The Kensington Market began to exist as a market in the early 1900s. It began with merchants pushing hand carts through the streets to sell their goods. Soon, merchants moved their hand carts in front of their homes on Kensington Avenue. By the 1930s, many of the first floors of houses in the market had been extended to create storefronts.

The Kensington Market continued to evolve and change with each new wave of immigrants. In the 1950s, many Portuguese immigrants settled in the Kensington Market followed by immigrants from the Caribbean in the late 1960s and more recently Latin Americans, Vietnamese, and Chinese immigrants. Some feel that the Kensington Market Lofts development represents the next wave of immigration in the market.

As with most buildings in the Kensington Market area, the buildings that make up the loft development have been used for a wide variety of purposes and have grown and changed since they were first built.

Originally, the lots which now make up 21 Nassau Street and 160 Baldwin Street contained mainly residential housing. However, in 1880, a carriage painter was located at 21 Nassau Street and in the 1940s an automobile service centre operated on the south east corner of 160 Baldwin Street.

In 1836, the entire south side of Nassau Street which was then called Cambridge Street was made up of individual houses. In 1922, the homes in the lots from 1 to 21 were torn down. After the property was vacant for a few months, the Toronto Board of Education bought the lots. It was at this time that the property became known as 21 Nassau.

The Toronto Board of Education had bought the property in 1923-1924 to build a public school. Construction began on the building in 1924. The building was named the William Houston Public School after William Houston who was a member of the Board of Education, a political writer for The Globe and Mail, and a witness to the fatal shooting of George Brown.

The school was opened on September 2, 1925. The school had about 12 classrooms and held about 650 children. Even back then declining enrolment was a problem and the school closed less than 10 years after it opened.

After being unoccupied for two years, Harbord Collegiate used the building as an annex from 1935-1936 and then in 1936, the Family Welfare Department took over the building for a period of six years. In the 1940s, the Canadian government began to use the school for military purposes as a signals’ school and for troop accommodation and during the Second World War, the air force held training for new recruits in the building from 1942 to 1946.

After the war, the Ontario College of Art took over the building for a period of five years from 1946 to 1950.

In 1948, the Ryerson Institute of Technology which was then known as the Toronto Rehabilitation Training Institute was looking for more space for its construction trades training program and for its automotive mechanics training program. The property was purchased by the federal government and leased to the provincial government in 1952 for the use of the Provincial Institute of Trades.

During 1953 and 1954 the second and third buildings were constructed. Construction work was done partly by the students and teachers of the school.

George Brown College grew out of the Provincial Institute of Trades and the Provincial Institute of Trades and Occupations. George Brown College was established by the provincial government on November 22, 1967 to serve the City of Toronto as part of the new province-wide system of Colleges of Applied Arts and Technology.

William Davis, the Conservative Minister of Education at the time, recommended that the college be named after George Brown. George Brown (1818-1880) was a 19th century Liberal party leader, father of Confederation and founder of The Globe newspaper which was the forerunner of The Globe and Mail. George Brown died in 1880 after having been shot in the leg by a disgruntle employee. His wound had not appeared serious but he died about six weeks after being shot.

In 1968, George Brown College made the Kensington Market buildings one of their five campuses in Toronto. In 1970 the title for the property officially transferred from the provincial government to George Brown College. While the Kensington Market campus was in operation, more than 1,000 full-time and 600 part-time students used the buildings.

Due to the growing enrolment at the College during the 1960s and 1970s, many of the programs offered by the College were operated out of the building. Child care, English as a Second Language, Fashion, Hospitality, Automotive Repair were all offered in the Kensington Market buildings. At one time, a Retail Meat Cutting course was run out of the basement of the 160 Baldwin Street building which sold meat to many of the institutions in the central Toronto area. The buildings also housed a full restaurant and a child care centre as well.

Most of the College programs had moved out of the Kensington Market campus by the end of 1994. The College performed a variety of work to prepare the buildings for sale and in 1998-2000 the buildings and property were developed by Context Development as the Kensington Market Lofts development.

The Kensington Market Lofts is a condominium development that is located in the heart of Toronto. It is situated in the centre of the ‘Market’ and close to other vibrant neighbourhoods such as Chinatown, Little Italy, The Annex and Queen Street West.

Today, the Nassau Building is a 61-unit, 4-story building with terraced street level units and 1-2 bedroom lofts. The Baldwin Building is a 6-story building with 79 condo apartments with the top level set back to create terraced penthouses.

The Kensington Market Lofts feature a rooftop garden to help reduces heating and air conditioning costs as well as reduce rainwater runoff. The buildings are heated and cooled by an efficient central system which reduced energy consumption overall. Water is also heated in a central source to reduce energy costs.

The interiors of the original Kensington Market Lofts suites contain many recycled and environment-friendly elements such as recycled concrete and glass counter tops, bamboo and cork floors.

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

More Authentic Live/Work Lofts Come to Carlaw Avenue

Atria Developments is just completing the Garment Factory Lofts, a new live/work industrial conversion that has revitalized a former garment factory. Garment Factory Lofts is located in the Queen Street East neighborhood, one that is undergoing an exciting resurgence between Logan Avenue and Leslie Street to form a hip Downtown Toronto East.

This neighbourhood is fast on its way to becoming an urban success story. Garment Factory Lofts is just down the street from the Distillery District, and steps from Leslieville. In the vicinity are eateries such as Verveine and Gio Rana’s Really, Really Nice Restaurant.

Popular nightspots include Barrio, where regulars sip martinis and enjoy tapas-style treats while a DJ spins music on Saturday night. When the proposed changes to the Toronto Film Studio suroundings become reality, that entire area will be home to new retail, residential and live/work housing, adding to the urban tapestry.

Designed by award-winning Core Architects Inc., the eight-storey Garment Factory Lofts meld the original brick facade of the warehouse with modern steel and glass to create a striking whole that is greater than the sum of its parts. The building terraces back begin at the third floor, and are distinguished by an acid green canopy that will grace the entry on Carlaw and extend back into the lobby. Every hard loft offers a glazed balcony or spacious terrace with amazing views.

The Garment Factory Lofts features 150 authentic lofts comprised of studios, one-bedroom, one-bedroom plus den/workspace, two-bedroom, and two-bedroom plus den/workspace, and penthouses with views of the lake. Ranging in size from 525 to 1,303 square foot, they offer some of the lowest prices per square foot of any authentic loft in the city.

Some of the lofts contain examples of the building’s interesting architectural details such as the original fluted columns, ceilings that soar up to almost 12 feet, and large windows. The kitchens will feature modern Wenge-stained cabinetry, a stone backsplash and island with a stone top. There is also a gas stove, gas BBQ hookup, and an optional gas fireplace.

Atria Developments is known as the creator of i-Zone live/work lofts, located across the street from Garment Factory Lofts. i-Zone was a major catalyst for change in the surrounding neighbourhood, and is now home to artists, filmmakers, photographers, and other creative spirits. The development of the Garment Factory Lofts will bring a further greening to this former industrial neighbourhood with the inclusion of a parkette that backs onto Boston Avenue.

Atria Developments is a family-owned and operated company specializing in the revitalization of former industrial urban areas by renewing existing sites.

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

By Derek Raymaker – Globe and Mail

You have probably heard by now. The sky is falling. Bummer.

The first swath of real estate market data for 2008 hit the street over the last couple of weeks. All tallied up, it has been spun by the doom-sayers to indicate that not only is the great Canadian real estate boom over, it’s also a harbinger of a coming recession. I’m not exactly sure how some market experts – particularly those employed by real estate brokerages – thought that the double-digit percentage increases of the last few years in new home sales, resales and prices could be sustainable in the long term in any way, but there you go.

A lot of economists and analysts were predicting a tightening or correction of the real estate market going back to the fall of 2001, after the Sept. 11 terrorist attacks.

It turns out that not only were they wrong, that was when the real estate market really took off as the middle-class stopped piddling around with the stock market and decided to invest in something a little more stable… like flipping houses.

That is an exaggeration, of course. Only a small fraction of home buyers treated their purchases as investment vehicles to try and turn a quick and dirty profit based on quick and dirty renovations. But it would be a mistake to assume there was no manic speculative component to the market, which is never good when trying to establish a stable foundation.

The professional real estate market watchers who did predict a slowdown or flattening grew so tired of being proven wrong again and again that they stopped trying to introduce reason based on data into the dialogue on the real estate market. Who can blame them? Who wants to be the canary in the coal mine? But with the pendulum now, finally, swinging back, is the market really declining as badly as the data indicate? My fearless prediction is… wait for it… it’s too early to say.

Toronto has fared better than most other Canadian cities in the Great Real Estate Correction of Early 2008. Residential sales here dropped 13.4% in the first quarter, compared with the fourth quarter of 2007, according to the Canadian Real Estate Association. But in Calgary residential sales dropped 35.9% and in Edmonton they dropped 29.8%, with new listings going up by 29.8% and 52.1%, respectively. All of those Tim Horton’s cashiers making $14 an hour in Ed Stelmach’s booming petro-economy might want to take note.

When it comes to newly constructed houses, the price data indicate that it’s a little early to hail the end of the boom.

Throughout Greater Toronto, the average cost of a new single home was $520,504 in the first two months of 2008, up 8.7% from $478,768 in the same period in 2007, according to Canada Mortgage and Housing Corp.

The biggest price rise occurred in Durham Region, where the average single price rose 9.1% to $403,993 from $370,206.

But York Region, historically a region with steady price growth in new housing, reported a 1.3% decrease in the price of an average single for the first two months of 2008, down to $501,270 from $507,699 in the same period in 2007.

Several factors weigh heavily in where the new real estate market is heading in Toronto in these uncertain times. The biggest, as always, is interest rates remaining historically low.

The other is that the building of new low-rise housing over the last two years has slowed down due to labour costs and new regional planning regulations affecting land supply in the outer suburbs, while high-density building like condominiums has taken off.

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