Impending tax drives home sales through the roof
Housing purchases jump 21% in what is usually a slow fourth quarter, but slowdown expected after tax takes effect in February
Lori Mcleod - Globe and Mail
Buyers racing to beat Toronto’s incoming land transfer tax created an uncharacteristic spike in home sales over the holiday season, but a slowdown is on the horizon after the tax comes into effect.
“The fourth quarter of any calendar year tends to be very slow for the real estate market, but this was anything but slow,” said Phil Soper, president and chief executive of RLP. “It is painfully obvious that the new tax that’s being imposed on people in Toronto’s 416 area drove activity.”
As of Feb. 1, Toronto home buyers will pay a new fee to the city in addition to the existing provincial land transfer tax. It will nearly double the tax bill for home buyers, raising the tab on a $375,000 home to $7,575 from $4,100.
“The rate of activity in areas where the tax will not impact people was much lower than in neighbouring areas where the tax comes into effect,” Mr. Soper said.
Housing unit sales were up approximately 21% in the GTA in the fourth quarter, compared with 7% in surrounding areas, according to data from the Toronto Real Estate Board.
The strong fourth quarter helped the Toronto real estate market shatter previous sales records in 2007, according to data released by RLP. The average price of a two-storey detached home in the city hit $506,900, up 8% from last year. The price of a detached bungalow rose 8.9% to $413,375, and that of a condo unit rose 10.4% to $280,505.
Two years ago a two-storey home in the city averaged $461,282, while a bungalow went for $362,611 and a condo unit $242,202.
After the current wave of buyers subsides, both price gains and sales should start to decline, Mr. Soper said.
“We do expect real estate activity in Toronto this year to fall by about 4 to 5% versus 2007,” he said. “We don’t expect to see a year like 2007 in terms of raw activity for a few years to come.”
Things could start to cool down in popular areas such as Riverdale and the Beaches, Mr. Soper said. Markets that could be poised for better-than-average price gains this year include Parkdale and Corktown neighbourhoods along with Don Mills, which could get a boost after the ongoing renovation of the Don Mills shopping centre is completed.
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