Unintended consequences of removing Toronto’s land transfer tax

 

“We believe the mayor when he says he will get rid of the land transfer tax. He’s committed to doing that in his first term, and we fully support that,” Von Palmer told CRE Online. “But I think the mayor’s office has to be careful because once they start rolling out timelines, it can potentially affect people’s behaviour.”

Palmer said he’s seen indications that the removal of the tax could be part of the 2012 budget.

Real Estate Investment Network President Don Campbell agreed that city hall should be cautious when making this announcement, adding that if it’s made too early, it could cause some buyers to hold off from making a home purchase until the tax is completely phased out.

Those who’ve signed contracts for new homes still under construction would likely stall the closing process until the tax is eliminated, he added. 

But the removal of the levy wouldn’t greatly affect the behaviour of international buyers who already view Toronto as an affordable market despite the land transfer tax, he said.

Campbell suggested the city make the removal of the tax retroactive to the day the announcement is made to prevent it from disturbing the market.

Regardless of how the tax is eliminated, Campbell said its removal won’t significantly affect the market.

“It will not create an extra boom in the market,” he told CRE Online. “We may witness a bit of a shift of demand in the initial months after removal, but as we saw with the creation of this tax, it didn’t have a real impact on the market long term.”

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