I just read the news that Toronto mayoral candidate Brad Bradford is proposing that, if elected, he will scrap the municipal portion of the Land Transfer Tax on the first $1.1 million of a principal residence.
For someone buying a $1.1 million home, that would represent a savings of more than $18,000. That is a huge amount of money for buyers.
Toronto home buyers currently face a double Land Transfer Tax when they purchase in the city — one provincial and one municipal — so any relief from that cost would make a real difference.
As a real estate agent who hosts first-time buyer sessions, I know how exciting an announcement like this can be for buyers trying to get into the market. In fact, this fall we held two home buyer sessions with more than 40 attendees. The interest from first-time buyers is definitely there, and anything that makes it easier for them to purchase their first home deserves attention.
Ever since Toronto introduced its own Land Transfer Tax, it has been a significant additional cost for buyers.
For a home priced at $1.1 million, the combined provincial and municipal Land Transfer Tax is $36,950. For an eligible first-time buyer, rebates bring that amount down to $28,475.
So you can see why eliminating more than $18,000 of that cost would be meaningful.
And here’s the important part: Land Transfer Tax isn’t rolled into your mortgage. It has to be paid at closing, out of pocket. That’s real money buyers need to have available on top of their down payment, legal fees and other closing costs.
On a $1.1 million purchase, the minimum down payment alone is approximately $85,000. Add almost $30,000 in Land Transfer Tax for a first-time buyer and you can quickly see how difficult it can be to get into the Toronto market.
Bradford’s proposal would apply to principal residences, not investment properties, and he has said it would be retroactive to purchases made beginning September 29.
Of course, there is another side to this proposal.
The plan is estimated to reduce City of Toronto revenue by approximately $300 million per year. That’s a significant amount of money, and the obvious question becomes: how does the City make up that difference? Bradford has proposed a combination of changes to capital spending, borrowing and other measures to offset the lost revenue.
Whether the numbers ultimately work is something that will undoubtedly be debated during the election campaign.
But from the perspective of someone who regularly sits across the table from first-time buyers trying to figure out how to come up with their down payment and closing costs, there’s no question that $18,000 is a meaningful amount of money.
Toronto’s first-time home buyers could certainly use some help getting into the market.
Now we’ll have to see whether this proposal ever becomes reality.
And don’t forget if you know of someone who needs to buy or sell, please make sure they call Davelle.
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