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Impending tax drives home sales

Toronto housing purchases up 21% in what is usually a slow period - slowdown expected after tax takes effect in February

Buyers racing to beat Toronto's incoming land transfer tax created an uncharacteristic spike in home sales over the holiday season, but a slowdown is on the horizon after the tax comes into effect. "The fourth quarter of any calendar year tends to be very slow for the real estate market, but this was anything but slow," said Phil Soper, president and chief executive of Royal LePage Real Estate Services. "It is painfully obvious that the new tax that's being imposed on people in Toronto's 416 area drove activity."

As of February 1, Toronto home buyers will pay a new fee to the city in addition to the existing provincial land transfer tax. It will nearly double the tax bill for home buyers, raising the tab on a $375,000 home to $7,575 from $4,100.

"The rate of activity in areas where the tax will not impact people was much lower than in neighbouring areas where the tax comes into effect," Mr. Soper said.

Housing unit sales were up approximately 21 per cent in the GTA in the fourth quarter, compared with 7 per cent in surrounding areas, according to data from the Toronto Real Estate Board.

The strong fourth quarter helped the Toronto market shatter previous sales records in 2007, according to data released by Royal LePage. The average price of a two-storey detached home in the city hit $506,900, up 8 per cent from last year. The price of a detached bungalow rose 8.9 per cent to $413,375, and that of a condo unit rose 10.4 per cent to $280,505.

Two years ago a two-storey home in the city averaged $461,282, while a bungalow went for $362,611 and a condo unit $242,202.

After the current wave of buyers subsides, both price gains and sales should start to decline. "We do expect activity in Toronto this year to fall by about 4 to 5 per cent versus 2007," Mr. Soper said. "We don't expect to see a year like 2007 in terms of raw activity for a few years to come."

January 9, 2008 in Toronto Real Estate Update | Permalink


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