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ASK JO: Toronto's New Land Transfer Tax & the Real Estate Market

Hi Jo and Otto,
Gorgeous site. Just happened upon it for the first time. Love the colors and happy flowers!
On the topic of affordability getting tight, could the timing of Toronto's proposed 2% land transfer tax be any worse? How do you think this tax will affect Toronto's market?
Have a wonderful evening,

-- Melanie, Toronto 

 

Hi Melanie,

Thank you for visiting our site... we're glad you like the look and feel of it - and the happy flowers too of course!

On to topic of affordability, the new Toronto Land Transfer Tax is definltey not going to help with the affordability of condos in the city since it's pretty much doubling the largest portion of the closing cost in a transaction...  on the same token, closing costs are usually an afterthought for many purchasers anyway, so it might not make much of a difference.  I should note though that when you compare the cost of closing a resale property now (approx. 1.5% give or take) versus the cost of closing a property from a new builder where you have to pay sometimes large sums of money at closing for for levies (education, transportation, etc.), occupancy fees, utility hookups, developmental & other fees, then what really is the difference?  High closing costs hasn't affected the new condo market so it may not even make a dent in the market at all, but it's possible affect is still unknown, so we'll just have to see. 

Now on to the real estate market... the market is still very hot right now and very unpredictable to say the least.  We've had consistent growth year after year for the last decade and from the looks of things on the surface, nothign seems to be dampening that.  We traditionally follow the US market pretty closely, but right now it looks like we're heaven and they're hell in terms of real estate!  The dynamics in the US market are quite different though because it appars that it's they're sub-prime lending market that is the real source of their real estate woes.

Canada on a whole is much less aggressive than our US counterparts when it comes to money, debt and lending.  However, lately there have been many changes in the mortgage market such as longer amortizations, the lowering of the 25 to 20% downpayment requirement, interest only loans, lowering of mortgage premiums, etc.  These changes may have acted as artificial temporary inflators of the real estate market by allowing more people to get into home ownership, but again, that is still unknown.  I also recently commented on a blog posting about how the interest rates are affecting the demand for Toronto Real Estate and the net result was that it wasn't much for now.

Unfortunately we don't hold the crystal ball on Toronto Real Estate here and we can only work with the information we have at hand.  Everything is a speculation at best, but if we consider our city compared to any other major metropolitan city in the world, we're still relatively affordable.  On top of that, people can actually afford what they are purchasing for the most part as I haven't really been coming across too many power of sales at all - at least not in the downtown market. 

Alas, that's all I can say on the topic... I do have my opinions and I truly believe that if you do buy "value" and you're going to live in your home or you're investing and the numbers make sense, then you should be able to weather any storm.  *knock on wood*

Jo

Posted on Thursday, July 5, 2007 at 09:39PM by Registered CommenterElaine | CommentsPost a Comment

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