Ontario offers 1st-time homebuyers bigger tax break
The Ontario government is moving to double the maximum tax rebate offered to first-time homebuyers while boosting the land-transfer tax on house purchases above $2 million.
Finance Minister Charles Sousa made the announcements in his fall economic statement, delivered in the provincial legislature on Monday afternoon. The changes are to take effect on Jan.1, 2017.
"Purchasing your very first home is one of the most exciting decisions in a young person's life, but many are worried about how they will be able to afford their first condo or house," he told the Legislature Monday. "Improving housing affordability will help more Ontarians to participate [in the housing market]."
Sousa said first-time buyers won't pay any land transfer tax on the first $368,000 of a purchase price, and they will become eligible for a rebate of up to $4,000 in provincial land transfer tax, levied on the purchase of every house and condominium. Meanwhile, the land-transfer tax rate on the amount of a purchase above $2 million will rise to 2.5 per cent, from the current rate of 2 per cent.
Government officials say the tax increase on luxury homes will bring in about $105 million annually, and that will fund the increased rebate.
Addressing 1st-time buyers' difficulties
The government had promised some sort of action after expressing concerns about the difficulty first-time buyers face trying to enter the housing market, especially in the Greater Toronto Area where the average price for all types of properties last month jumped 21 per cent year-over-year to nearly $763,000.
Over the same time period, home prices in Hamilton grew nearly 20 per cent to an average of $535,000, while prices in Barrie soared 24 per cent to an average of $476,000.
The government revealed Monday how 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.
The province is now expecting to take in $2.36 billion in land-transfer tax this fiscal year, $314 million more than predicted. The economic update documents say this is "due to the continued strength of Ontario's housing market in 2016."
Economic statement 'a distraction,' critic says
New Democrat finance critic Catherine Fife called the fall economic statement "a distraction" from the top issue facing Ontarians — soaring electricity rates — and said Premier Kathleen Wynne had downplayed expectations of help for first-time homebuyers.
"Quite honestly, she was right to lower the expectations because what we see in this statement is neither new or profound or progressive," Fife told the legislature.
Sousa had promised last week that today's statement would include measures to address housing affordability. But Premier Kathleen Wynne moved quickly to dampen expectations, saying the measures would amount to "a small change" to help first-time homebuyers.
The Liberal government also announced it is freezing the property tax on apartment buildings while it reviews how it affects rental market affordability. It said the average municipal property tax burden on apartment buildings is more than double — and sometimes triple — that for condominiums.
Property taxes are generally reflected in rents, so the government is concerned that lower-income residents in apartment buildings are facing a much higher tax burden than people who own condos.
Sousa reaffirmed his forecast that the current 2016-17 deficit will be $4.3 billion, and repeated that he plans to bring in a balanced budget in 2017-18. If so, it will be the province's first time without a deficit in a decade.
Other new measures announced in the economic statement include:
- $140 million more spending in the hospital budget to "reduce wait times and improve services."
- $65.5 million more to be spent this school year to create 3,400 extra child care spaces.
- A new financial services regulatory authority that the government says will "improve protections" for consumers, investors and pension plan beneficiaries.