Toronto’s City Council has floated the idea of increasing the municipal land transfer tax homeowners pay on their real estate transactions – but doing so would hurt affordability for buyers and sellers, argue various municipal and provincial real estate bodies.
“Yesterday, City Council formally asked the City’s budget Committee to consider changes in LTT policy that could see home buyers of average-priced properties pay another $750 to City Hall, on top of the $11,000 in LTT that they already pay City Hall as an upfront closing cost, a seven percent increase,” stated the Toronto Real Estate Board in a release. “This is in addition to another upfront $12,000 in LTT they pay to the Province. The proposed changes would also see first-time home buyers either paying up to $475 more, or, at best, being no better off than they are now, even though the Province recently doubled their rebate in recognition of the needs of first- time buyers.”
Larry Cerqua, president of the Toronto Real Estate Board, alongside Tim Hudak, CEO of the Ontario Real Estate Association, are adamant that any increase to the LTT would have dire consequences for anyone purchasing a new home. In particular, first-time buyers will suffer, they say, in what is already one of the world’s most expensive cities to buy property.
“The proposed changes to the City of Toronto’s Land Transfer Tax are a cash grab, and would make all Toronto home buyers pay more Toronto Land Transfer Tax, which means that the City is proposing to make home ownership in Toronto even more expensive,” argued Cerqua in a Toronto Real Estate Board statement in November.
Hudak, the former leader of the Progressive Conservatives in Ontario, was similarly scathing of any prospective hike.
“The Land Transfer Tax is already very punishing in the City of Toronto. This will put the dream of homeownership in Toronto further out of reach,” he told Metro Morning last week.
Proposal to Harmonize Municipal and Provincial LTT
Their reaction comes after a report to the Toronto Executive Committee by the city manager last month proposing various ways to balance next year’s budget. Provoking the ire of many in the real estate industry was a suggestion to harmonize the municipal and provincial Land Transfer Tax rates.
Presently, Ontario has a 1.5% rate on property that is valued between $250,000 and $400,000. The city manager’s report posed the idea of raising Toronto’s rate so it is in line with the province’s – conceivably raising an extra $77 million in 2017. In a city with such long-standing budgetary struggles, extra funds will not be discounted out of hand, but it remains to be seen how council reacts to the proposals. As escalating Toronto real estate prices have become such a hot-button issue, the thought of increasing the financial burden on potential buyers will prove politically sensitive.
Another factor to consider is that Toronto is the only city in Ontario that applies both a municipal and provincial Land Transfer Tax.
Higher Taxes Won’t Dissuade Buyers
While both the Toronto Real Estate Board and the Ontario Real Estate Association have been pretty adamant on the negative implications of a hike, it’s not so much a major issue for home buyers in the opinion of Zoocasa agent Chantel Crisp.
“Right now I don’t see the Land Transfer Tax holding buyers back,” she says. “When I sit down with a client for a consultation, people are usually shocked that it’s (LLT) about double in Toronto, but it doesn’t usually hold them back. The price of the homes overall is what they think of most.”
If this year is any indication, then buyers across the GTA will still be there next year, increased LTT or not, believes Crisp. It’s a seller’s market clearly, and no matter what decisions are taken at City Hall or indeed in Ottawa, that is unlikely to change anytime soon.
“In terms of sellers, in this market that we are experiencing, I don’t find the Land Transfer Tax is hindering them,” says Crisp. “With such low inventory, any seller that’s on the market right now has minimal competition. Buyers are essentially fighting over the same homes.”