Instead of implementing grand-sweeping changes in the hot housing market, Ontario will commit to helping first-time homebuyers who are struggling voraciously to purchase homes in Toronto.
Ontario will double the maximum Land Transfer Tax Refund to $4,000 for eligible first-time homebuyers as of January 1, 2017. This means there would be no Land Transfer Tax on the first $368,000 paid for a first-time home. This will help people who were unable to purchase a home due to rising property costs and taxes.
Along with lowering the rates for first-time homebuyers, Ontario has decided to raise the rates of one- or two-bedroom single-family residences over $2 million to 2.5 per cent. This would mean that home buyers in the over $2 million market would pay an extra $5000 on average, which is affordable for the many buyers in the upper echelon. The funds raised from the rate increases would be used to fund the first-time homebuyer’s initiative. The refund was announced as a part of the 2016 Ontario Economic Outlook and Fiscal Review.
The Land Transfer Tax Refund has been met with mixed reviews, many citing it as a soft approach to a larger issue. The housing market in Toronto has been in the hot zone for several months and creating more opportunities for first-time buyers does little to cool the market in the larger metropolitan centre. Though Vancouver’s foreign buyer’s incentive was a bit high-handed, the Land Transfer Tax Refund is the complete opposite and accomplishes very little.
The Land Transfer Tax will benefit first-time homeowners outside of Toronto due to inflated prices within the city boundaries. The average price for first-time homes outside of Greater Vancouver and Toronto is $361,000. Alternatively in Toronto, prices were 19 per cent higher than last year’s.
Though the refund will do little to help the heated markets in Toronto, any little bit to aid first-time homebuyers to compete in Toronto’s housing market is welcome. Even if the homebuyer will spend more than $365,000 to purchase in the city, a rebate on the Land Transfer Tax will help homeowners to save money initially and use it to keep up with hefty mortgage payments thereafter.
Helping first-time homebuyers and increasing taxes for wealthier homeowners is a smart move, but broader strokes from Ontario may be the only way to cool the Toronto housing market. Providing affordable housing and hitting density targets is also an important step, like looking into zoning bylaws at a municipal level and allowing for laneway housing. Housing is one of the most difficult files in Ontario’s fiscal review and the housing sector awaits with bated breath what future options the ministry considers.