February 2008 will bring the city’s increase in land transfer tax, which stands to cost the average homebuyer up to an additional $4,000 out of the gate.
I know how you feel. It’s like you blinked and 2007 just blew by. People say that when years start flying by, you’re getting old, but I prefer to think that you’re just not counting days. Normally at this time of year, real estate slows considerably. The December/January market can aptly be labelled the “Dreary Months” in most years, but this year is a little different. The reason it’s different is because of the city’s increased land transfer tax, set to take effect, essentially, February 1st.
It’s already official that 2007 has been the most active real estate year on record. We had beaten the previous high, set in 2005, when there were still six weeks remaining in 2007. The new LTT factor could see us set a record that is likely to remain unbeaten for many, many years to come.
A quick recap will tell you that the new LTT stands to cost the average homebuyer an additional $3,500 to $4,000 out of the gate. Taking into account how this expense may deplete the down payment on one’s mortgage, the new LTT could mean a hit of $10,000 to $15,000 or more. It’s easy to see, therefore, why so many buyers are scrambling to purchase before the new LTT kicks in. While I’m aware there remains much confusion on the details of the new LTT, the focus of this particular article is different.
I’m happy, however, to answer your questions via e-mail.
In most years, buyers and sellers during this time of year fell into one of two categories — those who had no choice and those who were simply testing the market. This year, the third and most populated category has to do with the LTT. It includes those looking to avoid the new tax and those looking to take advantage of it. Make no mistake, there are a few sellers out there who have priced their home at slightly above a December 2007 price, knowing full well that come February 2008 the actual price tag of their home will necessarily go up, even more.
Heather is looking for a new home in the 416 area and come February she will fall subject to the new LTT. My advice to Heather is simple — do everything in your power to find a home within your comfort zone, and close before the new tax takes effect. This isn’t the same advice as “be desperate and walk around waving your bills in the air for whoever snatches them up first.” This is simply understanding the reality of your situation and taking steps to put yourself in the best scenario possible.
Josh, on the other hand, is looking to sell his home, located in the 416 area. If Josh is hoping to squeeze out a few extra dollars, hoping to cash-in on the realities of the new LTT, I would tell Josh that unless his home is an absolute gem, there will be enough competition out there that will likely prevent him from succeeding. What’s more is come spring/summer, the fact that his home was listed in the winter time may negatively impact his eventual sale price. Not necessarily, but it would remain a small possibility.
Now if Josh anticipates possibly being in a time crunch to sell in early 2008, I would recommend that he put the home up for sale immediately as there is likely to be a slight lull in the first two to three months of 2008 — nobody wants to be the first patient to a new virus.
One other important factor to understand is that, chances are, Josh isn’t going to sell his home unless he successfully finds one to buy, within the same LTT free timeframe.
This means that while February 2008 may seem two months away, the window to avoid the new tax affectively shuts in about one. The other important thing to consider is that for those living outside the 416 area, if at all possible, waiting until the new tax hits should be your number one option.
Finally, it’s important for all of us to realize that while the new LTT is sure to carry with it a down spell, that down spell will be limited. Any new virus is only as potent as the science of the people it hits allows it to be. Suffice it to say that Toronto’s economy, while not immune yet, will be soon enough, and continue to surge ahead.
For any questions/comments on this article or anything in general please feel free to e-mail Amit at
amitp@rogers.com
. Amit is a Realtor/Developer with Re/Max.
