What are you going to do?
Much has been made about a study conducted by the right wing think tank, the C.D. Howe Institute, declaring house sales decreased by 16% due to the new Toronto Land Transfer Tax. The report published on the Toronto Real Estate Board (TREB) web site says
"The analysis of the Toronto Land Transfer Tax was conducted by respected economists from the C.D. Howe Institute and the University of Toronto. It determined that this tax is directly responsible for reducing sales in the City of Toronto by 16 per cent. According to the study, this means approximately 3,500 lost transactions of freehold homes in Toronto in the first year of the tax. Including condominiums, TREB estimates that the total impact could be approximately 5,000 lost transactions as a result of the Toronto Land Transfer Tax."
As far as I know, there has been no follow up to determine if this tax will continue to have an impact or if this adjustment is a one time occurrence. There was also no reference to what has been described as "the dramatic increase in sales that occurred prior to the implementation of this tax".
It's been my contention that the market will react to this tax as it reacts to interest rate hikes. That is average house prices come down to accommodate the increase costs of purchasing as house. Simple economics.
There's also the possibility that the quality of life will improve in a city that is better financed and this may have a positive effect on house values down the road.
I'm concerned that the Toronto Real Estate Board, of which I am a paid up member (and it ain't cheap folks), will invest time and money fighting this tax in 2009. It's a lost cause unless they can come up with a better way for the city to replace the money that would be lost if the tax was rescinded.
