Purchasing a home in Canada is expensive enough as it is: with the average home price reaching almost half-a-million dollars, according to the most recent data by the Canadian Real Estate Association, a property is already out of reach for many Canadians. Add closing costs to that figure — a home inspection, PST on CMHC insurance, legal feels and land transfer tax, for example, and buying a home gets even more daunting.
But all is not created equal. While most other closing costs are relatively the same across the board, land transfer tax (LTT) is set by each municipality and can vary wildly. In some places, LTT can add as much as $25,000 to your final bill, while in others it can be as little as $240.
To find out how this levy impacts affordability in municipalities across the nation, Zoocasa calculated the average land transfer tax in 25 cities across Canada. The study took into account the average home price as well as any applicable first-time home buyer rebates to find the best and worst cities in Canada for this duty.
Even though homes on the Vancouver MLS average out to be the most expensive in Canada at more than $1.1 million dollars, residents don’t pay the most tax. LTT equals out to be 1.8 per cent of the average total purchase price, so the levy on such a property works out to be about $20,000.
Instead, Toronto wins that award. Although the average home price is cheaper at just over $800,000, Torontonians are taxed at both the municipal level as well as the provincial, equaling roughly 3.1 per cent of the total purchase price. That means Torontonians end up paying their government about $5,000 more, or a $25,000 based on the average home price. That’s a 10-per-cent down payment in most parts of Canada!
But all hope is not lost. While many Canadians simply cannot afford to live in either of those major cities because the property prices and tax burdens are so high, there’s no need to move to a rural area. Canada has several smaller cities with good-to-excellent job prospects, affordable housing and low LTT. So those uncomfortable or unable to spend that much on a property plus taxes should look to smaller cities like Calgary or Ottawa.
It’s clear from looking at Ottawa real estate that not only are houses way cheaper at $425,000, but so is the tax. Home buyers need only pay at the provincial level, equaling just 1.2 per cent, meaning the average prospective buyer will only pay about $5,000 on top of their home purchase price.
Those who are looking for an even lower tax bill should head out of Ontario and drive west. Average Calgary homes for sale are just $470,000, less than half the price of Vancouver homes. As well, in Alberta, the transfer of property is not taxed, rather, a nominal fee the equivalent of a paltry .01 per cent is charged. That’s just $280 to close a purchase transaction. No, there’s no zero missing from that number.
Check out our infographic to find more cities with low land transfer tax:
Zoocasa.com is a leading real estate company that combines online search tools and a full-service brokerage to empower Canadians to buy or sell their homes faster, easier and more successfully. Home buyers can browse real estate listings on the website or the free iOS app.
You may also be interested in: One year later: did the Ontario Fair Housing Plan work?
Writer: Danielle Kubes
Disclaimer: All investing can potentially be risky. Investing or borrowing can lead into financial losses. All content on Bay Street Blog are solely for educational purposes. All other information are obtained from credible and authoritative references. Bay Street Blog is not responsible for any financial losses from the information provided. When investing or borrowing, always consult with an industry professional.