TORONTO — Ontario is doubling the rebate on the land transfer tax for first-time homebuyers to $4,000 in an effort to help them enter the housing market, but it is raising the same tax on homes that sell for over $2 million.
Finance Minister Charles Sousa said first-time buyers won’t pay any land transfer tax on the first $368,000 of a purchase price once the changes take effect Jan. 1.
There will be a half-percentage point increase in the tax on homes that fetch more than $2 million, a measure expected to affect less than one per cent of the population, added Sousa.
“Purchasing your very first home is one of the most exciting decisions in a young person’s life, but many are worried about how they will be able to afford their first condo or house,” he told the legislature Monday. “Improving housing affordability will help more Ontarians to participate (in the housing market).”
The province takes in over $2.1 billion a year in the land transfer tax. Any additional revenue generated by the increase in the land transfer tax on luxury homes will help pay for the doubled rebates for first-time buyers, Sousa said.
The government had promised some sort of action after expressing concerns about the difficulty first-time buyers face trying to enter the housing market, especially in the Greater Toronto Area where the average price for all types of properties last month jumped 21 per cent year-over-year to nearly $763,000.
Over the same time period, home prices in Hamilton grew nearly 20 per cent to an average of $535,000, while prices in Barrie soared 24 per cent to an average of $476,000.
The changes to the land transfer tax were outlined in the Ontario government’s fall economic statement, which said that home ownership has become a key factor in many people’s long-term financial security.
The Ontario Real Estate Association said the increased rebate of the land transfer tax will help more young families achieve their dreams of home ownership.
“This tax break will reduce a first-time buyer’s closing costs and help them save more for their down payment,” said OREA president Ray Ferris.
The city of Toronto has its own land transfer tax, which offers rebates of up to $3,725 for first-time buyers.
Ontario’s land transfer tax rises from 0.5 per cent on the first $55,000 of a purchase price to two per cent for everything above $400,000. Toronto’s land transfer tax is one per cent on the first $55,000 and two per cent on the rest.
New Democrat finance critic Catherine Fife called the fall economic statement “a distraction” from the top issue facing Ontarians – soaring electricity rates – and said Premier Kathleen Wynne had downplayed expectations of help for first-time homebuyers.
“Quite honestly, she was right to lower the expectations because what we see in this statement is neither new or profound or progressive,” Fife told the legislature.
The Liberal government also announced it is freezing the property tax on apartment buildings while it reviews how it affects rental market affordability. It said the average municipal property tax burden on apartment buildings is more than double – and sometimes triple – that for condominiums.
Property taxes are generally reflected in rents, so the government is concerned that lower-income residents in apartment buildings are facing a much higher tax burden than people who own condos.