While Canadian homebuyers often fixate over sale prices as the barometre of a market’s affordability, one group has studied the hidden costs of land-transfer taxation and found that these additional fees are highest in Canada’s hottest markets and lowest in the relatively lukewarm markets of Calgary and Edmonton.
Zoocasa, the Toronto-based real estate web company, compared land-transfer taxes, the often-overlooked fees that home buyers must pay when buying homes, in 25 different cities across Canada.
The study found that someone purchasing a home for the average price in Toronto and Vancouver would face between 1.8 per cent to 2.1 per cent in land-transfer taxes on top of the bloated purchase price, which would add as much as $20,000 to the overall price in fees that are not eligible to be part of a mortgage.
On the flip side, in Alberta’s two largest cities – which see average home prices at between 50 per cent to 60 per cent less than in Toronto and Vancouver – land-transfer taxes are also roughly 10 per cent what they are in those cities.
“The average home price is already lower [in Calgary and Edmonton] and the market in comparison is a lot more depressed,” says Penelope Graham, managing editor at Zoocasa. “You’ve got some negative sales growth and negative price growth, so it doesn’t make sense to put a tax on prospective home buyers.”
And the reason the taxes are so high in markets such as Toronto and Vancouver “is it’s a money maker,” Ms. Graham adds, noting that in Toronto, land-transfer fees were created as a way to generate revenue for the city to fund infrastructure improvements.
In a recent report on land transfer taxes, Toronto officials noted the revenue tool raised $156-million in the first quarter of 2018.