Toronto Condo and Real Estate Blog

First assessment since two-year freeze is based on real estate values that are already out of date in a weakening economy, critics say

By Karen Howlett, Globe and Mail

The last time John and Aggi McLaren were in the news was just over a year ago, when Ontario Progressive Conservative Leader John Tory held a news conference in the living room of their Oakville home.

The retired couple were struggling to pay property taxes on their modest, white stucco house, which was surrounded by palatial homes that had caused the assessed value of all properties in the neighbourhood to soar. Mr. Tory was at their home in an effort to make the controversy surrounding homeowners’ skyrocketing tax bills an issue during the campaign for the 2007 provincial election.

But the McGuinty government pushed the topic off the agenda by freezing property tax assessments until after the election. The two-year freeze ended last month and the agency that assesses residential property values is in the process of mailing new assessments to homeowners. Those in the City of Toronto will see their assessments increase an average of 5.4% next year, the Municipal Property Assessment Corp. announced yesterday.

The new assessments will be phased in over four years and reflect the fact that property values have jumped by about 22% in the city since 2005, MPAC said.

An assessment increase does not automatically mean that taxes will also go up - unless a property’s assessed value rises by a greater percentage than the average across the municipality. Those who own farmland in Brampton, west of Toronto, will see their assessments climb an average of 13.8% next year. Property owners in Muskoka’s cottage country will see their assessments jump 8% on average. And residents of Oakville will face a 5.95% hike. The government says the four-year phase-in adds predictability to the process. But critics said the assessments are based on real estate values that are already out of date in a weakening economy. In Toronto, for example, the average sale price of a home in September was $393,647 - 6% below the average price a year earlier, signalling the end of a decade-long run-up in prices, according to the Toronto Real Estate Board.

“If the market starts to decline, people will be stuck with those assessments for four years,” said Bob Topp, spokesman for the Coalition After Property Tax Reform, a group representing seniors and waterfront property owners.

Despite Premier Dalton McGuinty’s comments last week that now would be the wrong time to impose new costs on families and businesses, others say a tax hike is all but inevitable. New Democrat MPP Michael Prue said cash-strapped municipalities rely on property owners to pay for social programs downloaded by the province in the 1990s.

“The sad reality is that many municipalities, including Toronto, have aging infrastructure that needs to be replaced,” Mr. Prue said yesterday. “The municipalities have no choice but to go to the only revenue source they have, which is property taxes.”

Toronto Mayor David Miller said residents of his city could face a tax increase of between 2 and 4% next year. Pat Vanini, executive director of the Association of Municipalities of Ontario, said most cities are still in the early stages of preparing their budgets for next year.

As for the McLarens, they sold their home in June and moved into a townhouse last week. But the builder who bought their home has not yet paid them because he is doing less business as the economy slows. He intends to demolish the McLarens’ old home and replace it with a much larger one. “He’s caught in a down slide,” Mrs. McLaren said yesterday. “People are not buying those big houses. So we are really in a pickle.”

The price of living in Ontario

The Municipal Property Assessment Corp. is mailing new assessments to Ontario property owners.

The new assessments will be phased in over four years and reflect the fact that property values have soared in many regions of the province since the last update in 2005.

There are wide variations within municipalities. In Toronto, for instance, the average increase is 5.4% for 2009, but when measured by ward the increases range from a low of 1.2% to 8.4%.

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

The average price in September was $393,647, down 6% from a year ago

By Jennifer Lewington - Globe and Mail

A cooling house market, confirmed in sales figures released yesterday by the Toronto Real Estate Board, means the pendulum has swung in favour of buyers.

In September, home sales in Toronto dropped 11% to 2,546, compared with the same month in 2007 - a record sales year.

They were down 5% from 2006, a more typical year.

The September sales drop follows a modest 1% decline in August, which was the first time since 1996 that prices fell from the same month of the previous year.

Also in September, the average house price dropped 6% to $393,647, compared with September, 2007, but was still 6% higher in value than September, 2006.

As symptoms of a slowdown - but not a collapse - Toronto real estate agents report fewer multiple bids, houses on the market longer than usual and less speculation after a long run-up in prices since the end of the last downturn in 1996.

There is a shift in strategy, with sellers less likely to under-price their homes in hopes of a bidding war and more likely to set a realistic price that ensures a sale within 1 or 2% of the asking price.

It’s a lot different than a year ago, with buyers apprehensive about wild stock-market gyrations on both sides of the border and concerns of a slower economy.

Most buyers have become more selective, with less speculative action in buying and selling of homes. There’s been a bit of an adjustment in price.

Despite the drop in sales and average prices, business analysts see no sign of a dramatic tumble of a scale witnessed in recent months in the United States.

Citing the latest Toronto Real Estate Board statistics, University of Toronto professor of real estate and urban economics William Strange says, “There is not an optimistic interpretation of these numbers, nor does it mean we are talking about doom and gloom like Florida and California.”

In a press release, Toronto Real Estate Board president Maureen O’Neill blamed the city of Toronto’s land transfer tax, imposed earlier this year, for some of the drop in sales. The 11% decline in Toronto is steeper than the 6% drop last month for the Greater Toronto Area as a whole. “We remain concerned about the land transfer,” she said in the statement.

On an average house price, the city’s land transfer tax is about $3,700 - on top of a similar amount collected by the province - with an exemption for first-time buyers.

The tax remains an annoyance to some, but Mr. Veinot says “people have gotten over the land transfer tax,” with economic worries looming larger in their decision to buy or sell.

City budget chief Shelley Carroll (Ward 33, Don Valley East) says the city tax “is one of many factors” in a home purchase, noting the sharp run-up in sales prior to its Feb. 1 implementation.

AVERAGE HOUSE PRICE IN THE CITY OF TORONTO
Sept. 2006: $371,682
Sept. 2007: $420,182
Sept. 2008: $393,647

VOLUME OF SALES
Sept. 2006: 2,680
Sept. 2007: 2,854
Sept. 2008: 2,546

SOURCE: TORONTO REAL ESTATE BOARD

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

GTA Resale Housing Remains Stable in August

The Greater Toronto Area real estate market remained stable throughout the first half of this month, Toronto Real Estate Board President Maureen O’Neill announced today.

“We’re continuing to see consistent levels with respect to sales volumes and prices,” said Ms. O’Neill. “While the numbers are more conservative than those in recent years, the stability we’re experiencing should help sustain consumer confidence as we move into the fall real estate market.”

With 3,019 transactions in the Greater Toronto Area during the first half of the month, sales were down 13% compared to the 3,480 sales recorded at mid-August last year, and off eight per cent compared to the 3,290 sales recorded during the same period in 2006.

In the City of Toronto, 1,192 transactions were recorded, down 15% from the 1,411 sales that took place in the first half of August 2007, and off six per cent compared to the 1,269 sales that occurred in the same timeframe two years ago.

“While 2007 was a record year, it is still worthwhile to note that sales in the City of Toronto increased 11% between mid-August 2006 and mid-August 2007, before the Toronto Land Transfer Tax went into effect,” said Ms. O’Neill.

In the 905 Region there were 1,827 sales to mid-month, down 12% from the 2,069 transactions that took place in the same period a year ago, and off 10% from the 2,021 sales recorded in the first two weeks of August 2006.

Prices meanwhile, increased compared to the same timeframe last year. The current average price in the GTA is $373,844, up five per cent from the mid-August 2007 figure of $354,088.

In the City of Toronto the average price is currently $394,563, up seven per cent from the $370,037 figure recorded a year ago.

In the 905 Region the average price is $360,325, up five per cent from the $343,210 recorded at mid-August 2007.

There are currently 26,128 active listings, up 28% from the 20,365 properties available for sale a year ago. This has resulted in homes remaining on the market for a slightly longer period of 35 days compared to 32 days last August.

Several GTA neighbourhoods however, experienced brisk sales throughout the first half of this month.

In Whitby (E15) transactions increased 12% compared to the same period a year ago as a result of strong detached home sales.

Detached home sales also led Aurora (N06) to a 21% increase in transactions.

Streetsville (W19) saw eight per cent more transactions driven by a significant increase in the sale of attached row houses.

In Downtown Toronto (C01) transactions increased six per cent compared to mid-August 2007 as a result of strong sales in all housing types.

“It’s encouraging to see strong activity levels in pockets throughout all four corners of the GTA.” Said Ms. O’Neill.

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