Toronto real estate agents respond to City’s plan for new taxes
Canadian Real Estate Association
A new proposal outlined by the City of Toronto to introduce a 0.5% land transfer tax is drawing strong criticism from the Toronto Real Estate Board.
In an open letter to Mayor David Miller, the Toronto Real Estate Board warned that the new tax could drive even more homebuyers out to the suburbs, and have serious consequences for the city’s economy.
The letter says that a Toronto land transfer tax of 0.5% would mean an additional $1,900 in closing costs for the average Toronto homebuyer. Since closing costs hover around 1.5% of a property’s purchase price, the proposed tax represents an increase of 33% in these costs for Torontonians.
Not only is this unfair, says the Toronto Real Estate Board, as it puts an extra burden on homeowners alone for municipal services used by everyone, it’s also counterproductive.
Since the City of Toronto would be the only jurisdiction in Ontario to have this extra land transfer tax, homebuyers would be encouraged to move out to surrounding municipalities. The result would be increased sprawl, increased commuter traffic and an increase in all the environmental problems that go along with that.
Since the City has been trying to encourage intensification as part of its Official Plan, measures that make real estate in Toronto less attractive run counter to other policy objectives. the Toronto Real Estate Board notes that, with the average price of a re-sale home around $378,000, Toronto is already one of the most expensive cities in the country to live in.
A recent study by Clayton Research for The Canadian Real Estate Association found that each resale housing transaction in Ontario generates about $33,500 in spin-off spending over and above the price of the house. This means that Toronto real estate transactions are pumping more than $2 billion per year into the local economy. The Toronto Real Estate Board warns that any move impacting the real estate industry would impact the city’s overall economy, and should be carefully considered.
Toronto’s Realtors are especially concerned about this proposed measure because it would be
unprecedented. Although land transfer taxes have been introduced in other municipalities, in no case was there also a provincial/state land transfer tax in place.
Ontario, however, already levies such a tax. In the average Toronto home sale, the province collects about $4,200 in land transfer taxes. If the City introduces its own land transfer tax, Toronto homebuyers would be left facing a “double whammy” of extra costs. The Toronto Real Estate Board letter emphasizes that as Toronto would be the only municipality imposing this heavy burden, homebuyers, instead of serving as cash cows, would be encouraged to buy new homes outside the city.
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