High-end home tax will force out Toronto talent, warns real estate CEO

Jan. 15, 2020
Thestar.com
Tess Kalinowski

The luxury and vacant home taxes recently proposed by Toronto city councillors wouldn’t crush the local real estate market the way similar taxes did in Vancouver, but piling on more fees would erode the city’s ability to attract talent from other places, says the head of Sotheby’s International Realty Canada.

“I don’t think taxing is the right way to go. We’re already paying more tax than people pay in other countries,” said CEO Don Kottick. “If you keep taxing we’re going to become anti-competitive.”

Toronto Coun. Ana Bailao (Ward 9 Davenport), the city’s point person on housing, supports a vacant homes tax similar to Vancouver’s that raised about $40 million there last year. She also favours a luxury home tax. Some Toronto councillors have proposed a 3 per cent tax on homes selling for $3 million or more.

Toronto is also the only municipality in Ontario that also levies its own land transfer tax in addition to the provincial one.

“At some point people are going to say, ‘Enough is enough,’” said Kottick.

Instead of taxing real estate, governments should be expediting planning and building approvals to boost the housing supply at all price points, he said.

With nine bathrooms and five bedrooms, the Geary house also includes a panelled library.

Sotheby’s “Top-Tier Year End Real Estate Report,” published Wednesday, shows that sales of higher-priced residential real estate recovered from a lacklustre 2018 and gained momentum as 2019 progressed. Sales of Greater Toronto Area homes, including condos, priced between $2 million and $4 million, increased 12 per cent year over year. Houses and condos selling for $1 million to $2 million were up 25 per cent last year, compared to 2018.

“If we had more supply there probably would have been a lot more sales too,” said Kottick.

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The relatively small superluxury segment of the Greater Toronto Area market -- properties selling for $4 million or more -- declined 3 per cent last year with 228 sales.

But Sotheby’s says that number probably reflects a migration to exclusive listings of high-end properties by sellers who want to avoid having sales prices published through the real estate industry’s Multiple Listings Service.

Kottick said the fall season eclipsed the traditionally busier spring last year in Toronto, Vancouver and Montreal. But in Vancouver the sales of $4-million-plus properties remained 12 per cent below 2018 levels in the last half of the year because of taxes on vacant homes, homes worth $3 million or more and foreign buyers.

Sales of homes priced between $1 million and $2 million in the City of Toronto increased 23 per cent year over year in 2019. Inside the city boundaries, there were 5 per cent more sales of homes over $4 million.

 “Major metropolitan markets countrywide saw a noticeable increase in affluent real estate consumers … as an alternative to investing in stocks and equities in order to diversity portfolios, hedge against inflation and buffer against financial market volatility and risk,” said the report.

Broker Barry Cohen, Re/Max Realtron Barry Cohen Homes Inc., reported last week that there were 125 homes valued at $5 million or more sold in the GTA in the last six months of 2019 -- a 14 per cent increase over the same period in 2018.

Last year was the second best year in the last five for sales of $5-million-plus homes, he said. There were 194 homes in that price category sold in 2017. Lawrence Park South, Rosedale-Moore Park and the Bridle Path experienced year over year sales growth of 250 per cent, 200 per cent and 100 per cent respectively in the number of $5-million-plus home sales, said Cohen.