Land Transfer Tax Rebate changes in effect for first-time home buyers in Ontario.
Ontario has increased the rebate on land transfer taxes for first-time homebuyers by 200%, with the new amount being $4,000. This is done in an attempt to assist new buyers to enter the housing market. However, the land transfer tax levied on homes worth more than $2 million was raised.
Charles Sousa, the Minister of Finance for Ontario announced that first-time buyers who also are Permanent Residents of Ontario will be exempt from paying land transfer tax on the initial $368,000 of the purchase price from January 2017 onwards. He termed the $4,000 rebates as an ‘incentive’ for first-time homebuyers. According to Sousa, this is not going to change home buyers’ ability to afford the purchase. It will merely serve as an added boost at the beginning of the purchase.
Ontario would refrain from following the example of British Columbia, which imposed a 15% tax on foreign nationals purchasing real estate in the Vancouver area, last year in August. However, the provincial government will keep people who aren’t Canadian citizens from receiving this increased rebate if they buy a property.
Also, on transactions involving homes worth over $2 million, the land transfer tax will be increased by 0.5%, but this will likely affect a smaller percentage of the population. The yearly land transfer tax for Ontario is more than a couple of billion dollars. All additional revenues produced by the increase in the tax on luxury homes will contribute towards the increased rebates for people buying their first homes.
The government showed concerns about the complexity first-time buyers encounter while they enter the housing market, particularly in the Greater Toronto Area. The average home price increased by 21% to over $750,000. Meanwhile, prices in Hamilton reached an average of $535,000, which means an increase of 20%. The corresponding increase in Barrie is 24%, with the average home costing around $475,000. Our mortgage calculator will help especially the first time buyers in this decision.
The Ontario Real Estate Association stated that more young people will be encouraged to consider buying their first homes as a result of the increased rebate on offer. OREA president Ray Ferris concludes that the relaxation in land transfer tax will help with some of the expenses associated with closing the purchase. Buyers can use the money they receive as rebate towards their down payment.
The new rebate combined with some of the best mortgage rates in Ontario should be a great incentive for first-time homebuyers to enter the market. However, according to a senior economist, Benjamin Reitzes, there will be little help for buyers from this tax. A vocal financial critic, Vic Fideli, says that the government has made this move to gain popularity without actually focusing on the benefit of homebuyers.
While the government reviews how the tax burden influences the rental market affordability, Sousa announced a freeze in the property tax on apartment buildings. The average municipal property tax load on apartment buildings is more than double or even triple for condominiums. According to Sousa, the government is concerned for lower-income residents who dwell in apartment buildings and face a much higher tax burden as compared to condo owners.
The land transfer tax in Ontario is now calculated with 0.5% applied on the initial $55,000, 1.0% from $55,000 to $250,000, 2.0% from $250,000 to $400,000 and 2.5% for $400,000 and over. Here is a link to our handy Land Transfer Tax Calculator to help you estimate some numbers.