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Big Step Towards Elimination Toronto Land Transfer Tax

The City’s Executive Committee, chaired by the Mayor, recently debated options for phasing out the Land Transfer Tax. At this meeting, The Executive Committee decided to take the next step towards a phase-out by formally asking the City’s Budget Committee to consider phase-out options as part of the City’s upcoming budget setting process for the next year. This is a critical step in the right direction.

The Toronto Real Estate Board made a presentation to the Committee, at this meeting, and spoke strongly in support of a phase-out of this tax.

Mortgage Market Share



Mortgage Book

Market Share*

12 Mo Chg



$198.2 billion





$187.4 billion




TD Bank

$175.9 billion





$146.6 billion





$86.6 billion





$82.6 billion




First National

$50.6 billion




National Bank

$34.7 billion





$18.5 billion




Home Trust

$15.9 billion



Above is a summary of the Top 10 lenders in the Canadian mortgage market.  As you can see, it is dominated by the Big 5 Banks.

Why Is Toronto Real Estate So High?

Anybody watching the Toronto real estate market this spring has noticed how fickle house hunters can be, but what really has some economists baffled is the fact that buyers have nudged resale house prices up for three consecutive months.

Sal Guatieri, senior economist with Bank of Montreal, was expecting house prices to continue the gentle decline that started last summer.

“We are surprised that they’ve actually picked up,” says Mr. Guatieri. “They’ve now popped back to record highs.”

The average selling price in the Greater Toronto Area in the first two weeks of May hit $543,838, according to the Toronto Real Estate Board. That compares with $516,089 in May of 2012. Sales in the first two weeks of May dropped 9.7 per cent compared with the same period last year.

Tighter Mortgage Rules Leading To Increasing Rents

Young adults have to live somewhere. And when they outgrow their parents’ house and join the workforce, the choices are typically to rent or buy.

But for many first-time buyers, the choices narrowed last July. That’s when Ottawa reduced the maximum allowable amortization and gross debt service ratio on insured mortgages. This immediately made it harder for younger buyers to qualify.

Because 80% of first-timers need mortgage insurance (and therefore have to play by insurer’s rules), that put many home ownership dreams on the back burner. In fact, the Canadian Association of Mortgage Professionals (CAAMP) estimated last fall that almost 17% of high-ratio borrowers would no longer qualify due to the last few rounds of rule changes.

As a result, tens of thousands of would-be purchasers have been (or will be) forced to rent, or stay renting. And with that jump in rental demand has come an expected byproduct: higher rents.

Nowhere has this been more evident than in Canada’s biggest rental market, Toronto. Condo vacancies there have now dropped to a skimpy 1%, according to CIBC.

Demand from shut-out buyers has, in part, rocketed Toronto condo rents 10% higher in just 24 months. That’s according to data from Urbanation, which pegs Toronto’s average rent at a record $1,856, or $170 per month higher than at this time in 2011.

“Demand for renting condos has heated up with less first-time buyers,” said Urbanation SVP Shaun Hildebrand in a news release. “Rental transactions have exceeded resale volumes in the condo market since mid-2012, when the latest round of mortgage rule changes came into effect.”

“For the first time in a while, rents are rising faster than prices,” he added.

Regardless of one’s position on the Finance Department’s policy-induced housing slowdown, the rental market side effects are clear. Until the market rebalances (i.e., rental supply increases, home prices drop, and/or incomes rise, etc.), renters in big markets will feel some pain. That pain will come from rules intended for home buyers.


Kevin Somnauth, CFA