July 2018

Real estate website Zoocasa recently revealed the unequal land transfer tax paid by homebuyers across Canada. Their research found that on top of already paying the highest housing costs in the country, Vancouver and Toronto residents also have to pay the two highest land transfer tax rates on housing purchases.

For instance, in Toronto, a repeat homebuyer would have to pay 3.1% tax, while first time buyers qualify for rebate so their tax comes to 2.1%. On an averaged priced property this comes up to CA$25,162 and CA$16,687 respectively. Either way the amount is significantly higher than in other areas of the country. What could cost more than CA$20,000 in these cities can cost as low as CA$239 in Alberta where the residents of the province do not pay a land transfer tax but instead a ‘title transfer fee’ of $0.1%, which can be as low as CA$239 for an average priced home. Despite not all governments calling it a tax, all of the provinces charge it when a real estate deal occurs.

Evidently, in the priciest cities residents are paying a fortune in taxes, “and that's a cost that can't be mortgaged, it has to be paid in cash,” observes Penelope Graham, Zoocasa’s managing director. For some this can mean years of saving up, during which the house prices will increase even further. For many, this large tax may push housing affordability out of reach.

Graham argues this is a large source of income for the government. Since its introduction in 2008, Toronto’s municipal land transfer tax has brought in over CA$800 million. This large amount is due to the soaring house prices over the last several years. This can be problematic for more than just hopeful homebuyers, as Graham feels Toronto is "too dependent on the municipal land transfer tax” which leaves the city vulnerable if housing prices were to crash.

Housing Affordability
The high land transfer tax is also seen as problematic to the Canadian Taxpayers Foundation as it can affect housing affordability in Canada. Kris Sims, the British Columbia director, argues the high land transfer taxes “jack up the price of a house”, which demonstrates the Canadian government is taking the wrong approach to solving the housing crisis, reports the Huffington Post.

In addition to the land transfer tax, as part of a new policy introduced by the British Columbia and Ontario governments, foreign buyers also have to pay additional tax. Although this has been successful in reducing foreign buyer interest, it has not resulted in an improvement in affordability. As a matter of fact, the Huffington Post reported the Royal Bank of Canada found that at the start of 2018, housing affordability had moved to the worst level in decades. Sims further argued this reduced interest from foreign investors may negatively affect housing affordability, as the taxes will increase the cost for legitimate investors and developers who will in turn transfer this cost to future buyers.