Late in 2007 the city of Toronto announced that it would introduce its own land transfer tax in 2008 for buyers who purchased property within city limits. This is in addition to the provincial land transfer tax buyers currently have to pay effectively doubling the taxes levied onto home buyers. This decision sent waves of nervousness through the real estate community who wondered how this would affect the Toronto real estate market. Would this cause buyers to move to neighbouring cities in order to avoid the new tax? Would people looking to sell their homes and living at the edge of city limits decide it is time to move to the suburbs? The answer so far has been no. Helped by a still strong Canadian economy the Toronto real estate market is very healthy and despite a modest decrease of 2% in overall sales reported to the Toronto Real Estate Board in January prices still increased by about 6% over the same period in 2007. The president of the Toronto Real Estate Board, "There is clearly still a place for the first-time buyer in today's resale market." The ability of first-time home buyers to enter the market is an important measure of the future health of the real estate market. The upward trend in Toronto real estate prices is expected to continue in 2008 as inventory levels have fallen causing demand to outpace supply. A second factor may have also helped to negate the effects of the new land transfer tax, this coming from the mortgage lender themselves. Shortly before the new tax was about to take effect many banks started to announce that they would cover the costs of the all or most of the tax. The city of Toronto also announced that a rebate program would be put in place for first-time home buyers. Both very important steps in ensure that the tax has as little affect as possible on the Toronto real estate market. This is especially important within the condo real estate segment of the market which most first-time home buyers look into when entering the market. For them small fluctuations or increases in interest rates and closing costs can not only effect how much they can afford to buy but also whether or not they can afford to buy a new home at all. Keeping real estate affordable for this kind of buyer is an essential part of having and sustaining a healthy real estate market as it helps in keeping the demand for all types of homes high. For now at least, the Toronto real estate market looks to have a strong run for 2008 and it seems that neither the Canadian dollar hitting parity nor the new land transfer tax are going to slow the Toronto real estate market. In fact most experts, included RE/MAX are predicting that the market sales levels will match those of 2007 and that consistent demand for housing will keep upward pressure on housing prices. Baring some unforeseen disaster Toronto looks to still be a good investment for your real estate dollar.
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