December of 2007 was unlike any previous December. The explanation was the introduction of the new City of Toronto Land Transfer Tax. The new taxation was announced as coming into effect on February 1st, 2008, with an exemption for any transaction written prior to the end of 2007. The amount of the new municipal land transfer tax is not inconsequential. Effectively it will have the effect of doubling the existing provincial land transfer tax. Currently the land transfer tax on a property sold for $750,000 would total approximately $11,500.00. The new tax will add to the burden of buyers by requiring buyers to pay approximately $22,500.00 for a similarly priced property.

It was this new tax that stimulated both buyers and sellers in December. For buyers it was an opportunity to save a considerable amount in taxes, and sellers to make their properties more attractive to buyers by selling before the end of 2007. The impact of this looming tax is clearly reflected in December's market statistics, particularly in the City's central districts (see below).

Overall sales in December 2007 exceeded last year's sales by 4 percent. In 2006 the Toronto Real Estate Board reported 4,447 properties sold. In 2007 properties sold increased to 4,646. Reacting to the new land transfer tax new listings for the month also increased. In 2006, December saw 4,874 new listings come to market. This year that number increased to 5,137, 5 percent more than the year before. Unfortunately for buyers, available inventory remains low, with only 13,452 properties available for sale, an amazing 13 percent less than at December 31, 2006. It is safe to predict with only 13,452 properties available for sale at the beginning of 2008 that sought-after properties will continue to be the subject of multiple offers.

Activity in the Central districts very dramatically illustrates the impact of the new municipal tax. The Central districts, primarily because they represent some of the most expensive real estate in Toronto, will be most affected by the new taxation. For example, in 2006 there were only 736 new listings in December for all Central districts. This December that number increased to 1,103, an increase of 49 percent. There was also a corresponding increase in sales. Last year only 779 property sales were reported sold in the Central districts for December. This December that number increased by 36 percent to 1,057. It is not surprising that this activity also drove up prices. The average sale price for all Central districts for December was $531,366, a startling 30 percent increase compared to the average sale price of $408,599 achieved in 2006.

The pressure created by the new land transfer tax also kept overall all prices high in December. Historically, due to fewer sales, particularly of higher priced properties, average sale prices decline in December. Not this December. The overall average sale price came in at $394,931, higher than the average price achieved in September ($380,132), October ($394,646) and November ($393,747). The average sale price for December of 2006 was only $336,217. On an annualized basis the average sale price for 2007 was $376,326, up over 7 percent compared to the $351, 941 achieved in 2006. Total sales for 2007 came in at 93,193, 12 percent more than the 83,084 achieved in 2006, and substantially higher than the various predictions for 2007, which had estimated that between 80,000 to 82,000 properties would be reported sold by the Toronto Real Estate Board. The Toronto market managed to ignore the real estate fears and concerns that are being experienced south of the border in the United States.

Looking forward the fundamentals remain in place for another strong year. Most predictions, including that of Canada Mortgage and Housing Corporation, see annual sales between 90,000 to 92,000. If these numbers are achieved, and there is a no reason why they should not be realized, they would represent the second best year in statistics keeping for the Toronto market place. Due to the numbers achieved in December, anticipate a slow start in January. A large number of buyers and sellers that would have been entering the market at the beginning of 2008 have already completed their real estate purchases and sales. The new land transfer tax and its impact largely remains an unquantifiable factor at this time.