The Effects of the Land Transfer Tax on Real Estate Sales in Toronto

You’ve probably seen the news lately: real estate sales down by 50% compared to this time last year! Although there are many things to take into consideration like the changing economy and hesitation on behalf of Canadians while watching the real estate market in the states, there are still more sides of the story…

Take, for example, the effects of the Land Transfer Tax, a levy of up to 2% in addition to the province’s taxes, which took effect Feb. 1, 2008.

The C.D. Howe study, “Sand in the Gears”, reported a drop in the number of houses sold in Toronto from February, when the tax was implemented, until August, when the real estate market began to falter. Comparing Toronto sales with those in the suburbs, there has been a 16% decrease in sales and a 1.5% reduction in house prices.

City Councillor Shelley Carroll, the mayor's budget chief, is predicting that the effects felt by the land transfer tax should stabilize in a year or so, but added that the market was artificially inflated when some buyers hurried to purchase their property before it took effect.

None of us has a crystal ball to look into the future, but it will be interesting to see what the real estate numbers in February 2009 will look like. A little less askew?