Toronto's New Property Tax Hike: What It Means for the Market

Toronto's 2024 city budget is out, and alongside many rising costs, the jump in property tax caught a lot of attention. The city announced a 9 percent increase this year, plus a 1.5 percent levy for city building, which means homeowners pay about 1.5 percent more in property tax overall. I am Moe Asgarian, a senior real estate broker in Toronto, and I want to explain what is behind this and how it could affect the Toronto housing market.

Why the city needs the money

Some context first. Since the start of 2020 and the pandemic, businesses in Toronto closed, many people were laid off, and after a downturn everything kept getting more expensive. The cost of food and daily life climbed, and running the city got more expensive too. I do not want to get into the political or economic details, but the situation over the last few years has left the city facing a 1.8 billion dollar budget shortfall, and it has to find ways to raise revenue. The new mayor, Olivia Chow, ran on the idea of raising taxes, so it is no surprise this came up in her first months. Everyone who voted for her knew this was coming.

What the hike means for homeowners

One note in passing: as the graph shows, property tax in Toronto and Vancouver is far lower than in other Canadian cities. So what does this increase mean for homeowners? The city says it means the average homeowner pays, on a monthly basis, about 26 dollars more in 2024, which is roughly 321 dollars more per year. They also warned that if the federal government does not send a 250 million dollar contribution for refugee housing sooner, they may have to raise residential property tax by another 6 percent, bringing it to 16.5 percent. These numbers matter, and it is worth knowing exactly what conditions we are living and investing in.

Six ways it can affect the market

Quickly, here are six effects. First, it raises the overall cost of owning a home, which can mean fewer people can buy, especially first time buyers on tighter budgets. Second, it can affect prices: home prices depend on many factors, with demand the biggest, but higher tax may soften demand, make selling harder, and bring prices down a little. Third, the rental market, because some landlords raise rents to cover the new cost, which makes renting more expensive. Fourth, it can push other parts of the market, possibly changing lending rules or the broader economy. Fifth, it can affect investor appetite: Toronto is one of the most attractive markets for investment, but higher property tax may dent enthusiasm. Sixth, to a degree these taxes can improve the upkeep of the city and the quality of life in different neighbourhoods, if the revenue is spent well.

My honest take

Many housing experts say immigration and mortgage rates matter far more to the market than property tax. If you want my honest opinion, this move does not have much effect on the Toronto housing market. Some buyers may feel discouraged at first and say the cost of living is too high, but as history has shown, Toronto has its own appeal and investors keep coming. For example, they once announced they would add to the land transfer tax, and today Toronto charges double the land transfer tax of other cities. Yet Toronto still has the most transactions, plenty of condos trade, and people have adjusted. My guess is this affects the market for a short time and then it returns to normal. If you need analysis and numbers to guide you in this market, whether you are a first time buyer or an investor looking for a good spot, my team and I can help. I hope this year is a good one for everyone in Toronto. Stay well and take care.