As of January 1, 2017, Ontario is doubling the rebate on the land transfer tax for first-time homebuyers to $4,000, levied on the purchase of every house and condominium. The land transfer tax on homes that sell for more than $2 million, however, is increasing from two per cent to to two-and-a-half per cent.
The government says half of first-time buyers won't pay any land transfer tax to the province, while the half-percentage point increase on homes over $2 million will affect less than one per cent of the population. Government officials say the tax increase on luxury homes will bring in about $105 million annually, and that will fund the increased rebate.
With the new mortgage stress tests underway, first-time home buyers have been warned that they will bear the brunt of Ottawa's most recent crackdown on mortgage qualification requirements, and some fear that they are being eliminated from expensive housing markets altoghether. Premier Kathleen Wynne had said the government was worried about the difficulty faced by first-time buyers trying to get into the housing market, especially in the Greater Toronto Area, where the average price is $762,975.
Ontario finance minister Charles Sousa announced the changes to the land transfer tax as part of the Ontario government's fall economic statement, which states that home ownership has become a key factor in many people's long term financial security. The Ontario Real Estate Association had asked the government to expand the land transfer tax rebate program for first-time buyers as one way to help more of them get into the housing market. Ontario's land transfer tax rises from half-a-per cent on the first $55,000 of a purchase price to two per cent for everything above $400,000. The city of Toronto has its own land transfer tax, which is one per cent on the first $55,000 and two per cent on the rest, and which offers rebates of up to $3,725 for first time buyers.
The province takes in over $2.1 billion a year in the land transfer tax, and the government says any increase in revenues from the increase on luxury homes will help pay for the doubled rebates for first-time buyers. The government also announced that it is freezing the property tax on apartment buildings while it reviews how it affects rental market affordability.
The Ontario government claimed that the rising cost of housing is significantly boosting its tax revenue. Its land transfer tax revenue is up 15 per cent from its forecast in the budget delivered in February, and the province is now expecting to take in $2.36 billion in land-transfer tax this fiscal year, $314 million more than predicted.
Ontario residents had been keeping an eye on the announcement for any news on how the province would address housing affordability, although premier Kathleen Wynne admitted that any measures taken would be a fairly small step to helping first-time home-buyers.
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