Toronto: match land transfer tax rebate or lose to the suburbs
The City of Toronto should match the province's land transfer tax rebate to first-time homebuyers or it faces losing more of its tax base to the suburbs, says Toronto real estate lawyer Blair Drummie.
While the province plans to double the maximum tax rebate offered to first-time homebuyers, it may not mean much to the market unless Toronto makes a similar slash to its land transfer tax, Drummie, a sole practitioner, tells AdvocateDaily.com.
"This will make the suburbs more competitive," he says. Toronto is the only municipality in Ontario where homebuyers pay both a provincial land transfer tax and a municipal land transfer tax, almost doubling the tax for homebuyers. Outside Toronto, homebuyers pay only the provincial tax.
The provincial Liberal government plans to double the land transfer tax rebate for first-time homebuyers to $4,000, up from $2,000, in a bid to make real estate more affordable in a red-hot market like the GTA, reports the Toronto Star.
Drummie says it may not make much of a difference among first-time buyers as the October average selling price of a home in Toronto
is was $762,975, a 21.1 per cent increase from October 2015.
"Is it going to make a difference? Probably not, because housing is out of reach for most young people," he says. "It might make a difference in the condo market."
Where the tax rebate may help is in parts of the province where real estate prices are nowhere near the stratosphere and sales are slower, or in communities surrounding Toronto.
"At the time of closing, everybody has their hands in your pocket, and every little bit helps," Drummie says. "It's giving the first-time buyer a break that they need."
He says the city has to follow suit if the intention is to keep first-timers in the Toronto market.
"They probably should," says Drummie, who was never been supportive of the city's levy. "They got away with a 100 per cent increase in tax and nobody complained at the time . When it settled in and people began paying it, there was a bit of an uproar."
Now, it could become an important incentive for first-time buyers to purchase their home in communities surrounding Toronto.
The city's land transfer tax has always been slightly less than the provincial transfer tax, he says. That will change for first-time homebuyers, with the city's tax costing more than the province's, "substantially more," Drummie says.
But without Toronto offering its own tax rebate for first-time buyers, it "again, makes the suburbs more competitive," he says. "There are many things driving purchasers to the suburbs and this will be one more thing sending them outside the city.”
By introducing the rebate, Ontario indicates it's shying away from the Vancouver model of cooling its market with a 15 per cent tax on foreign buyers. It worked, at least temporarily, according to the Globe and Mail.
"Will an extra $2,000 make a difference on house prices in Toronto for a first-time buyer? No," Drummie says. "They can't get near a house in Toronto, but now the incentive to locate outside Toronto is even greater.”