WHY THE CITY OF TORONTO LAND TRANSFER TAX IS A PROBLEM -PART II

In our previous Blog we pointed out that the City of Toronto Land Transfer Tax was really a pre-payment of property taxes. Residential taxes in Toronto are anywhere from 20 t0 40% lower than taxes in 905 for a similar priced property. You pay the Land Transfer Tax in Toronto but you save on property taxes over the years. But there is a real problem with this tax. While it is discriminatory against one type of property owner – those who are buying; the Toronto Real Estate Board claims that this second tax discourages people form buying in Toronto. They show that sales are growing faster in the 905 Region in comparison to the 416 Region. The stats are true but that is not the reason why sales have slowed in 416. The real reason is that there is a lack of listings for freehold (not condo) properties in Toronto! People who already own in Toronto do the math and with two Land Transfer Taxes, moving costs, commissions, and legal fees; it is cheaper to renovate than to move!! Just look at all the Reno work going on in any neighbourhood. Try and get a contractor? When freeholds do come on the market, there are multiple offers. The average annual price appreciation is running over 10%. That is where the price bubble is most likely to appear. Are you listening Mr. Flaherty? With the Toronto condo market, many of the sellers are investors who are not trying to move to another property in Toronto. This has led to an ample supply of condos for sale and prices that have been flat for the past six months. For those people living in condos today who need a bigger unit, their choice is either to buy a larger condo or move to the suburbs. Right now many of these people are moving to the suburbs because they cannot afford a freehold home in Toronto. All we hear from Toronto politicians is that they want families to live downtown and not just young singles. If that is what politicians truly want, then they better repeal the City of Toronto Land Transfer Tax sooner rather than later – or it will be too late!! And Toronto can pay for it by increasing the property tax rates of those who already live in Toronto to levels closer to those in the suburbs.

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