Tuesday’s headlines

12 comments

1. • ‘No one voice, no one opinion’ [ Toronto Star ]

2. That National Post C.D. Howe opinion piece on the Land Transfer Tax notes that “we can isolate the impact of the LTT by comparing changes in sales and prices on both sides of the City of Toronto border,” but their analysis doesn’t appear to actually do this. It would actually be interesting to see whether there has been a significant difference when comparing the decline in sales or house price increases (decreases) on comparable properties immediately north vs. south of Steeles, or east vs. west of the Etobicoke Creek.

3. I was confused by this also. They do quote numbers for the overall decline separate from the decline they claim is caused by LTT, so maybe the article was just poorly worded. I would like to see the study to see exactly how this one side-of-the-street-vs-the-other really played out. What exactly was their definition of comparable properties/areas?

   New York has had ridiculous transfer and mortgage and “mansion” taxes far in excess of Toronto for many years without, and they didn’t seem to hurt sky-high prices any.

   Claiming that anyone pays attention to LTT when buying a house requires a lot of back up before I’ll believe it.

4. It is poorly worded. The methodology of the study is sound. From a behavioural perspective it is interesting how buyers can account for an upfront LTT but are seemingly oblivious to the lower yearly tax.

   http://www.cdhowe.org/pdf/commentary_277.pdf

5. Metrolinx taking over the airport link is welcome news. Hopefully they’ll be able to move away from GO’s heavy-rail, express run for the suits concept.

   ============================ (railroad tracks)

   Oh and re: the LTT. Do homebuyers take into consideration the extra travel costs involved when they buy in the vast, burban diaspora? Never even mind about environmental costs.

6. I’m amused that Torontoist’s editor answers the criticism that it is downtown-centric by noting that his bailiwick is the 416… and maybe someone else will bring out Scarboroughist. Did Scarborough leave the 416 and not tell us?

7. RE, Glen’s comment on City’s Land Transfer Tax: “From a behavioural perspective it is interesting how buyers can account for an upfront LTT but are seemingly oblivious to the lower yearly tax.” Why is this so strange? When buyers are faced with an added new tax of a few thousand dollars that is an upfront cost that CANNOT be mortgaged, only those who know very little about consumer behaviour can pretend that it will not factor into buying decisions. Any savings (if any) in property taxes that this new tax makes possible are realized over a number of years — and hence, less noticeable (or not noticeable at all given that few people seem to believe that they are getting a good deal on their property taxes). I’m not saying that the city’s land transfer tax makes buying in TO a bad deal (if in fact this is where you work and live). But to say that a high upfront cost that can’t be mortgaged is not a disincentive for many buyers and sellers (and this is Toronto Council’s official position) is ridiculous.
   -have noticed somebody else signing themselves as “sam” so am signing myself as “samg”

8. samg,

   If an LTT of 1.1% has an incidence on capital of > than 1.1% it is in effect less than zero. So while it is true that it is an upfront cost that cannot be mortgaged, it is equally true that it an upfront savings that does not need to be.

   That is what what the report shows. Because of the LTT, house prices dropped more than the cost of the LTT itself. Add to that the already lower property tax and it makes Toronto more of a bargain.

9. Glen,
   I’m not talking about whether it makes a real estate purchase a good deal or not. I’m talking about the impact on consumer behaviour. And there most definitely is an impact. If prices have fallen further in the 416 area than they have relative to the surrounding 905, it’s because the tax has discouraged a good number of buyers from not focusing on Toronto. Some will see this as a good thing. Unfortunately, one of the key effects of this tax is its negative impact on TO’s “green” record …for example, when you take into account that some of those discouraged should be living in TO because of their work OR that some of those who are discouraged from selling because of the tax should be moving to a smaller abode.

10. samg,

    Reconcile this,

    Sales drop because of the added expense of the LTT

    Prices drop more than the added expense of the LTT.

    Homes purchased post LTT are cheaper, inclusive of the LTT, than those purchased before.

    Sales volume has dropped because of the LTT.

    …………….

    The effects of increased affordability should have increased sales, but the opposite occurred. Consumers were transfixed by itemization as opposed to net cost. They also ignored the perpetually lower residential tax rates in Toronto.

11. Glen,
    The fact that LTT cannot be mortgaged but is an upfront cost (unlike an increase in the price of the home) skews the effect. For many buyers, affordability isn’t increased if the buyer now has to pay a sizeable chunk upfront that they previously didn’t have to. And for another group of buyers, even if the situation DOES lower affordability, the fact of the added upfront cost represents a new hurdle.

    Regarding TO’s “perpetually lower residential rates”, most people just do not believe that Toronto has a lower residential tax rate that surrounding municipalities. PERIOD. Oh sure, a 300k house in Toronto may have lower realty taxes than in a 300k house in Pickering. But in terms of livings space and lot size, the Pickering home is way bigger. Now if you were to take a home in Toronto that has relatively the same amount of living space and lot size as the Pickering home, well, then the realty taxes would be much higher for the Toronto home. Rightly or wrongly, when looking at tax rates, many people tend to compare homes of similar lot size, living space, design rather than monetary value.

12. samg,

    If someone had a 50k deposit and approval for a 200k mortgage they could;

    Pre LTT, purchase a 250k home.

    Post LTT, the home would be 246,250. They can utilize the full 200k mortgage pay the balance of 46,250 with the original deposit and they have 3,750 remaining to pay the 2,750 LTT.

    (using the averages contained in the report of 1.1% LTT and 1.5% reduction in home values)

    Re the difference in tax rate;

    The house/lot size issue is a red herring. If cost were directly related to such, then you would have a point. Take a look at Toronto’s budget. The per household cost for police, fire, ambulance and social services alone, which do not scale with density, amount to far more than the average property tax (residential) revenue. Peel, York, etc. spend on average the same amount for per household for police, fire and ambulance as Toronto does. Density is no panacea.

    To ascertain the relative burden of taxation one must also consider the other half of the equation. Which is spending per household. In this context lets compare Toronto to Mississauga/Peel. Using 2006 data from the Municipal Performance Measurement Program it shows that Toronto spent $8,422 per household in 2006. On the other hand Mississauga and the region of Peel combined, spent $3,848.29 per household.

    So the average household in Mississauga pays more than $500 per year in property tax ($2800 avg.) than the average household in Toronto ($2279 avg.) and gets $ 4,573.71 less in services.