NEW TORONTO LAND TRANSFER TAX
THE NEW CITY LAND TRANSFER TAX
Key points of this tax:
It will double what buyers pay in tax in the city of Toronto - Ontario also has a Land Transfer Tax, about the same amount as every other province, except Alberta and Saskatchewan which have none!
Is there any good news? Thanks to the lobby efforts of the Toronto Real Estate Board, first time buyers are exempted up to $400,000. As well, all Agreements of Purchase and Sale are exempted if they are entered into before December 31st of 2007. That means people who bought into new condo projects over the past couple of years, but will not take title to their unit for another year or two are exempted. The actual tax kicks in February 1st of 2008, so in theory you could buy after December 31 2007, and as long as the closing date is on or before January 31st 2008, then you also would not pay the Tax.
First Time Buyer Incentive Package for 2009 Only! :
First Time Buyer Incentive Package for 2009 Only!
As a First Time Buyer you can get a Non-Refundable Income Tax Credit of $5,000 to offset all Closing Costs. In Addition you will Pay NO Land Transfer Tax up to $2,000 in Ontario tax and $3725 in the new City Tax with both New and Resale purchases. Finally each person can withdraw up to $25,000 from RRSP for a down Payment. :
Specifically it works this way:
The New Toronto Land Transfer tax
0.5% to $55,000 of purchase price
1% from $55,000 to $400,000
2% on the balance.
The Ontario Land Transfer Tax is a little more expensive
$55,000 to $250,000 multiply by .01 and then subtract $275
Over $250,000 multiply by .015 and then subtract $1,525
Over $400,000 multiply by .02 and then subtract $3,525
$250,000 = $2225 $400,000 = $4475 $600,000 = $8475
Property Value New Tax
Besides the illogic of this tax grab, how will the market deal with it?
In the short term - expect the market to be much busier than usual.Prices will probably increase in the period to negate any tax savings.
Starting February 1st expect the market to slow down more than normal. In fact, there will probably be better opportunities for buyers at that time.
And yes, the market will adjust to this tax over several months. For those who can remember the introduction of the GST, retail sales slowed for a few months and then everything went back to normal.
The challenge to this new tax is how will buyers adjust to having to come up with more money at the time of purchase?
Younger people will simply take out a bigger mortgage and lenders will be happy to accommodate. We will simply have more 5% or 0% down payment mortgages. And now that 40 year amortization mortgages are prevalent, can 100 year be that far behind? After all, people in Spain already have 100 year amortization mortgages. So the real cost to buyers from this tax is that you will be paying more interest costs for a longer period of time!