Toronto’s Mansion Tax Looms Over Luxury Market

Toronto’s luxury brokers are bracing for fallout as the city’s expanded mansion tax takes effect April 1. Many warn the higher levy will slow already-anemic sales, nudge buyers out of the city and generate less revenue than City Hall expects.

The new measures build on levies introduced in early 2024, raising Toronto’s municipal land transfer tax across five price tiers starting at C$3 million ($2.2 million USD) and topping out above C$20 million ($14 million USD). Mansion Global reported that the tax applies to all residential buyers in the city and sits on top of Ontario’s separate provincial land transfer tax, which is not increasing.

Agents told the outlet that the biggest hit will land just above the entry point to luxury, where buyers tend to be the most price-sensitive. Andy Taylor of Sotheby’s International Realty Canada said that the lower a buyer’s price point is, the more cost sensitive they will be.

With Toronto home sales at a 25-year low, according to the Toronto Regional Real Estate Board, brokers said timing matters. Buyers hoping to beat the April deadline are being urged to move quickly, and sellers weighing a sale may find an advantage in listing sooner rather than later.

While a modest increase may not stop buyers facing a life change, Taylor told the outlet that it could freeze upward mobility. Condo owners eyeing detached homes, or buyers stretching from C$2 million to C$4 million ($1.4-2.8 million USD), are likely to pause, pushing demand back into the C$2 million-to-C$3 million ($1.4-$2.2 million USD) range and tightening supply there.

According to city documents, those rate tiers will range from 4.4 percent at the C$3-4 million ($2.2-2.8 million USD) price range and gradually increase to 8.6 percent at the C$20 million ($14 million USD) and up range, an increase of around 1 percent in each tier. A nonresident foreign buyers speculation tax of 10 percent also took effect Jan. 1 in the city.

That dynamic could ripple outward. As sellers opt to renovate instead of trading up, inventory shrinks further in lower luxury tiers, while higher-end listings linger. Meanwhile, nearby markets stand to gain. Agents report buyers sidestepping the tax by looking to Oakville, Caledon and King City, or leaving Canada altogether.

“Even C$20 million ($14 million USD) buyers are considering Mississauga and Oakville,” said Saul Sanchez of Chestnut Park Real Estate/Christie’s International Real Estate. “Luxury buyers are smart. They care about costs.”

Not everyone sees the tax as fatal. Giuseppe Flammia of Engel & Völkers Toronto Central said buyers committed to a specific home or downtown living are factoring the tax into negotiations rather than walking away. On a C$3 million ($2.2 million USD) home, the difference is roughly C$30,000 ($22,000 USD), he said.

City officials argued the tax targets ultrawealthy buyers to make life more affordable for families, but critics said that framing misses Toronto’s reality.

“C$3 million ($2.2 million USD) in Toronto is not ultraluxury,” said Cailey Heaps of Heaps Estrin. She pointed to Los Angeles’ Measure ULA as a cautionary tale, where higher transfer taxes coincided with lower transaction volume and weaker-than-expected revenue.

— Eric Weilbacher