The Ontario government is budgeting on a housing resale market rebound this coming year, with its new fiscal plan counting on more homes changing hands and hundreds of millions of dollars more revenue from land transfer taxes.
The new budget, revealed on Thursday, projects that the province will bring in $3.785 billion in revenue from land transfer taxes in 2026-27, up from $3.444 billion last year. Officials warned, in the document, that this revenue source is an especially sensitive and risky one: every time housing resale amounts or resale prices changed by one percentage point, the budget pointed out it meant the difference of $34 million in revenue for the provincial government.
But right now, provincial officials are expecting sales activity to pick up, and much faster than prices, forecasting a 9.1 per cent increase in home resales this year across Ontario, as well as a 0.8 per cent increase in average resale prices. “Looking ahead, home resales are projected to rebound, supported by pent‐up demand and economic growth,” the budget predicts.
In response to questions from the Star, the province said its resale projection is rooted in a survey of “private-sector forecasts” as of Jan. 16. Specifically, five forecasts are used from TD, Desjardins, the Canadian Real Estate Association, Central 1 and RBC, it said.
Their optimism has been met with skepticism among some real estate players.
“I don’t see that happening. It’s not realistic,” John Pasalis, president of Toronto’s Realosophy Realty, said of the provincial forecast. “For most of this year, I don’t think we’re going to see a very big rebound. I think people, if anything, will start maybe returning at the beginning of next year.”
Pasalis cautioned that he hadn’t looked in depth at every region across the province, but said two key dampening factors are sentiment about the market — as opposed to the fear-of-missing-out fever during the housing boom, he said people are largely anxious about today’s market, choosing to “sit on the sidelines” — and uncertainty around interest rates.
“If we look at what’s going on with rates, obviously due to the oil shock, the surge in prices and risk of inflation, fixed rates are going up and now there’s concern the Bank of Canada might be raising rates. All of this is not stimulative for housing,” Pasalis said.
“Yes, we’re going to rebound. We’re not going to stick here forever. But I think the sentiment is still soft on the ground. People are still anxious. Buyers are still a little bit anxious that the prices might dip, and I don’t know if we’re going to get through this until next year.”
Shaun Hildebrand, president of market research firm Urbanation, agreed. While his team doesn’t track the real estate market at the provincial level, he told the Star in a text message on Friday that based on a look at “most” of Ontario, “these projections appear overly optimistic.”
“Given how weak activity has been in (the first quarter of 2026), the growth they are projecting would require a pretty strong turnaround for the rest of the year. Current trends and recent upward pressure on fixed mortgage rates suggest this is unlikely to occur,” Hildebrand said.
Ontario’s forecast of more land transfer tax revenues this coming year follows a similar prediction made by Toronto’s municipal government, which charges its own land transfer tax. The city budget earlier this year assumed revenue of $850 million from the tax; last year, it budgeted for $990 million from that stream, but as of the fall, was on pace to bring in closer to $805 million.
The city’s forecast was partially based on charging higher tax rates on homes that sell for $3 million or more — but it also expected to see more sales.
Still, Toronto realtor James Frodyma said the people he’s working and speaking with are skittish — with would-be buyers hesitating to make a major purchase in the face of an uncertain economic climate.
He raised the case of one of his clients: “We’ve been looking for a property and he’s finding deals, but he’s hesitating to make an offer on it, because he said making a purchase now feels like I’m trying to catch a falling knife.”
“There is a sentiment that perhaps the market is not at the bottom … so am I willing to purchase what could be a depreciating asset?”
Frodyma still believes the market could pick up this year. He’s seen more transactions lately, though he cautions some of that may be the annual spring surge in activity. Buyers looking long-term can act with more confidence, he said: someone looking for a “forever home” had less to worry about than someone looking to buy a condo and live there for a shorter period, he said.
But looking ahead to the coming year, he’s not expecting a sizable shift.
“I am not as bullish as perhaps the government is,” he said.
