Photo: Rod Brazier/Flickr
Prominent economists are weighing in on Ontario Finance Minister Charles Sousa’s announcement today that the province plans to rise the maximum land transfer tax rebate for first-time homebuyers to $4,000, up from its current $2,000 level.
“I think it is, in terms of affordability, a step in the right direction for first-time buyers,” says Robert Hogue, a senior economist at the Royal Bank of Canada.
“Mind you, it’s being financed by a raise of the land transfer tax rate for homes above $2 million so it’s just a redistribution of that transfer tax,” he tells BuzzBuzzNews.
Sousa announced the more-generous cap — which will be countered by hiking the land-transfer tax from 2 per cent to 2.5 per cent on homes over $2 million and take effect January 1st — today as he presented the 2016 Ontario Economic Outlook and Fiscal Review at Queen’s Park.
“For many, this will mean no land transfer tax on the purchase of their first home,” Sousa said in a statement.
First-time home buyers won’t pay any land transfer tax on the first $386,000 of their purchase, the Toronto Star reports.
The average price of a Toronto home, including high-rise condo units, was $762,975 in November, according to the Toronto Real Estate Board.
RBC’s Hogue says it’s too early to know to what extent the measure will have an effect on the market.
“At the margin it will have a positive impact, but the magnitude of it? It’s hard to tell,” he says.
Benjamin Reitzes, a senior economist at Bank of Montreal, takes another stance.
“Given the runaway home price gains in Toronto and the surrounding regions, this hardly makes a dent in worsening affordability and, if anything, just adds more fuel to the housing fire,” he says in a report.
The provincial government, in a statement, says the move is going to “help more people purchase their first home.” Sal Guatieri, another BMO senior economist, suggests otherwise.
“I don’t think it will have a material impact in boosting home sales,” the BMO economist tells BuzzBuzzNews, though he notes first-time buyers will benefit nevertheless.
“It will help first-time buyers save some money buying a home in Ontario.”