In September, Toronto’s city council approved an increase to municipal land transfer tax rates for homes valued at $3-million and above.Fred Lum/The Globe and Mail
A number of properties in the affluent Toronto enclaves of Rosedale, Forest Hill and the Bridle Path have found buyers in recent weeks.
The city’s “luxury tax,” set to come into effect in 2024, may have something to do with the flurry of sales.
In September, Toronto’s city council approved an increase to municipal land transfer tax rates for homes valued at $3-million and above.
The new graduated rate will be applied at closing starting Jan. 1.
Some of the houses found buyers quickly while others had languished for weeks or months. What they have in common is a relatively quick closing before the end of the year.
In Rosedale, for example, a three-storey Georgian-style house at 48 Rosedale Rd. with an asking price of $12.75-million sold in November after 10 days on the market, for $11.5-million. The closing date for the circa-1922 home is Dec. 20.
A Forest Hill home in the French regency style was also listed with an asking price of $12.75-million. The property at 390 Russell Hill Rd. sold in October after five days on the market for $11.5-million, with a closing date of Dec. 14.
A couple of blocks south, at 354 Russell Hill Rd., a house with 10,000 square feet of living space and a “Mykonos blue” pool was listed with an asking price of $18-million and sold for $17.1-million in October. The closing date is Dec. 6.
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At 181 Crescent Rd. in Rosedale, a seven-bedroom house with terraced water gardens was listed with an asking price of $10.7-million and sold for $10.2-million in October after 84 days on market. The new owners will take possession on Dec. 20.
“A lot of these deals that are $10-million plus are, all of a sudden, having quick closings,” says Andre Kutyan, broker with Harvey Kalles Real Estate Ltd.
Mr. Kutyan says it’s unusual to see houses closing in December because the holidays tend to be a busy time for families. In other cases, people are travelling or don’t want to risk moving during a blizzard in the winter months.
In a typical year, a house sold in October will more likely close in February or March, he says. At the higher end, closings six months after the sales agreement is signed are not uncommon.
Between Sept. 1 and Nov. 7, six properties in Toronto changed hands above the $10-million mark on the public Multiple Listing System, says Mr. Kutyan. All six have closing dates before the end of December.
In the same period last year, zero properties traded above the $10-million mark.
In the segment between $5-million and $10-million, 88 per cent of the deals are closing before the end of the year, which is not typical, he says.
Mr. Kutyan is still receiving calls from potential sellers who are wondering if they should list now, he adds.
In many years in November and December, homeowners who have listed but not yet found a buyer will take the “for sale” sign down until the spring market.
This year Mr. Kutyan is advising sellers that buyers with deep pockets will have an added incentive in the final weeks of the year.
“At this point, I would leave them up until Dec. 31.”
Starting in January, Mr. Kutyan says, sellers will have to brace for buyers who want to factor the tax into their purchase price.
“I think the buyers in general are in the driver’s seat. If I’m buying at $5-million plus, I’m going to use that as a negotiating tool.”
For example, currently the combined municipal and provincial land transfer tax payable for a $10-million property in Toronto is $472,950, according to the city’s online calculator. As of Jan. 1, the amount will increase by $180,000 to $652,950, according to Harvey Kalles.
Gillian Oxley, a real estate agent with Royal LePage Real Estate Services, says the shift to a slower market has not had a large impact on the segment for super luxury sales, which remain strong.
The challenging listings to sell are in the $3-million to $5-million range, she says.
Buyers in the upper echelons often do not rely on financing and are therefore not as hindered by interest rates.
Ms. Oxley has seen a rush, however, on higher-end homes with closings before Jan. 1.
“I think buyers want to avoid the tax and sellers are worried the tax will impact their value,” says Ms. Oxley.
Looking at the broader market, Sal Guatieri, senior economist and director of economics at Bank of Montreal, cautions that Canadian housing sales are in for a chilly winter.
Lowest fixed and variable mortgage rates in Canada
Rising mortgage rates and recession fears are cooling the market, says Mr. Guatieri.
“If not for healthy job growth and a booming population, the market would be even colder, given the worst affordability in more than three decades.”
Mr. Guatieri expects demand to remain depressed until the Bank of Canada cuts rates – possibly next summer.
Even without a tax change looming, Mr. Kutyan says some homeowners with properties sitting on the market are often reluctant to cut their asking price. But holding out can be the wrong strategy, in his opinion, because a lowered price will attract new buyers who do not search above a certain level on the MLS.
Some homeowners fear they will appear desperate with a reduction, he says.
“The sellers would rather negotiate as opposed to cutting the price. They think they’re sending the wrong message to their potential buyer.”