Highlights:
- The new tax is 0.5 per cent of the first $55,000 of a home's value, 1 per cent on the next $345,000 and 2 per cent on any portion over $400,000. But first-time buyers pay nothing on the first $400,000.
- You have until Dec. 31, 2007 to buy, and Feb. 1, 2008 to close
- The tax affects only the purchase (not the seller) of real estate in Metro Toronto, not Mississauga
- Maybe it's time you thought about moving to Mississauga!
Some scramble to close deals in 'bit of panic' over new tax; others wonder if prices will fall
Oct 24, 2007 04:30 AM Joanna Smith Staff Reporter Toronto Star
Suren Mahadevan felt forced into a snap decision.
As confused as any first-time buyer, Mahadevan was thinking carefully about whether to buy one big house where his retired parents could live with him or two condos, one for them and one for him.
But when his real estate broker told him the city of Toronto's land transfer tax was probably on its way, he made his move.
"It just made me jump on it a little bit sooner," said the 33-year-old real-estate appraiser who spent $170,000 on one condo on Monday, even before he knew whether there would be rebates for first-time buyers. "... you just pull the trigger and get one as quickly as possible."
Under the new tax approved by Toronto city council Monday night, potential homeowners have until Dec. 31 to buy, and Feb. 1, 2008 to close on their new home, to avoid paying up to 2 per cent in taxes.
The new levy will add thousands of dollars to the price of most houses in the city. If enough buyers feel the pressure, then sellers will continue to rule the market until the end of the year. Some realtors predict the market will slow down once the tax comes into effect.
"I think there will be (an increase in sales) in the next couple of months but after that it will slow down more than it would have normally," said real estate broker Darshan Sivanandarajah, who advised Mahadevan, who is now looking for a second condo, to buy now.
"I told them, `If you're going to buy for sure, you might as well do it before the land transfer tax," said Sivanandarajah, who works for Re/Max Crossroads Realty Inc., noting one young couple decided to buy their first home several months ahead of their wedding.
Another realtor, Sandra Rinomato, said that there might be "a bit of a panic" among buyers rushing to close the deal before the deadline.
"I don't know how that will necessarily affect the market compared to what it would have been and that's something that nobody will know," said Rinomato, who is also the host of the reality-television show Property Virgins. "Unless sales skyrocket, we won't ever be able to measure it effectively."
Like many other realtors, Rinomato said she is more concerned with any effects the new tax will have on sellers. She said a homeowner wanting to sell for $415,000, for example, "will have a very hard time getting over $399,999, because that's the cap for the land-transfer tax rebate for first-time buyers."
The new tax is 0.5 per cent of the first $55,000 of a home's value, 1 per cent on the next $345,000 and 2 per cent on any portion over $400,000. But first-time buyers pay nothing on the first $400,000.
Real estate broker Rachel O'Hearn said the market might see "a little flurry effect" because buyers were waiting on the new tax.
"I think now that the decision has been made, it's going to throw people into action to get it done before the end of the year," said O'Hearn, who works for Leslie Benczik Team-Re/Max All-Stars Realty Inc. in the downtown area. "And then we'll see what kind of effect it has on the market after that."
Scott Kavanagh was planning to wait until spring to buy a home in Toronto. "I'll definitely start looking more aggressively now," said Kavanagh, a 28-year-old events producer who owns a house in Stouffville. "I think it's significant enough to push me to move before the end of the year."
Some realtors are concerned sellers on the outer edges of Toronto will be adversely affected, because buyers may opt to buy elsewhere in the GTA, where there's no new tax.
Kavanagh said it has crossed his mind that if the market does slow down he might actually get a better deal in 2008 – especially if there's a spike in sales now.
"I think that's a question that will be on everyone's shoulders," he said. "There are so many variables that come into play now."
Read more about the new Toronto Land Transfer Tax
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