Absence of land transfer tax makes homes more affordable in two provinces

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Alberta and Saskatchewan do not impose land transfer tax on the sale or purchase of a home, saving buyers thousands of dollars.

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Alberta and Saskatchewan’s housing markets are among the most affordable in the country, and that’s not just because average prices are lower than in larger markets like Ontario and British Columbia. British.

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On the contrary, these two prairie provinces offer homebuyers another advantage: no land transfer tax.

“That’s a huge benefit,” says Brad Mitchell, executive director of the Alberta Real Estate Association. “It’s because a land transfer tax really takes money away from a down payment.

Mitchell explains that tax in other provinces must be paid by buyers before they put down their down payment on their home.

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“So if the land transfer tax is $10,000, your down payment has effectively become $10,000 more,” he says. “In return, people are forced to save a lot more to enter the market.”

While not a factor in the Alberta and Saskatchewan markets, land transfer taxes are potentially a big headwind for buyers in other provinces, says James Laird, co-founder of RateHub.ca, who offers a land transfer tax calculator on its website.

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“The average price of a home across the country is just over $700,000, and when you use that price to compare land transfer tax rates in different markets, you can really see its negative impact on affordability,” he says.

In Montreal, for example, the cost of transfer duties would be close to $10,000, while the tax would be around $12,000 in Vancouver. Toronto is significantly higher, he adds, with the transfer tax bill on a $700,000 home — well below the average condo price in that market — coming in at around $21,000.

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“So not having a tax transfer represents significant savings,” he explains.

Additional closing costs like land titles and mortgage registration – about a few hundred dollars each – and legal fees – about $1,500 to $2,000 – are relatively similar across the country and do not have not much impact on buyers, says Mitchell.

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Land transfer taxes are likely to have a very big impact on first-time buyers in markets like Vancouver and Toronto, potentially driving them away from those markets on top of soaring home prices, he adds. Additionally, tax dollars spent have a broader impact on local economies.

“When people move into new homes, on average they spend about $40,000 more” on renovations and furniture, Mitchell says. With buyers paying thousands of dollars in taxes on the purchase of a home, they inevitably have less to spend on these items.

This drain on economic activity and buyers is significant.

“It’s billions of dollars of revenue in BC or Ontario,” he says.

Since some buyers are in the market due to unfortunate turns in life, such as losing a job, Mitchell says a land transfer tax is essentially a penalty for misfortune.

“Through no fault of their own, they’re paying a land transfer tax that’s straight out of their jeans,” he says, adding that the tax can’t be paid from mortgage financing.

Of course, out-of-province buyers moving to Alberta and Saskatchewan will likely be pleasantly surprised not only that they get more home for their money here, but they also save thousands of dollars in not having to pay land transfer tax. , says Mitchell.

“So people really appreciate it.”

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