By Lindsay Smith/Columnist
One of the biggest cost components when buying a home is Land Transfer Tax (LTT). Essentially, this is sales tax on property. There are several costs involved when closing on a home that has been purchased: Lawyer fees, LTT, disbursements and HST. The lawyer fee covers the transfer of ownership and common disbursements include title insurance, registering mortgages, property tax adjustments, etc. However, the big, really big, costly item is the LTT.
How does this relate to Toronto? Well, in 2008, the City of Toronto added a surtax to the Provincial Tax effectively doubling the tax paid by homeowners. A quote from an article in 2019 stated, “Toronto has by far the highest LTT in all of Canada… while average prices (Toronto) have increased 1,325% since 1974, LTT has increased 3,528%. Not only that Toronto city council is voting on, again, increasing the tax.”
Here is how it looks, in Oshawa and Toronto, based on the average detached home prices in town at $832,000.
LTT for Oshawa: $13,115 LTT for Toronto: $26,230
I am thinking $13K will pay for concierge moving from downtown TO all the way to Oshawa plus some. Or it will help to furnish a home, add central air conditioning or help with other creature comforts. Or if a buyer purchased a home based on the average ($832,000) and put 20 per cent down, the LTT savings would pay for your first four-and-a-half months of mortgage payments. The more expensive the city of Toronto is for buyers the more we see in Oshawa.
This is a big deal. This is purely a tax. I am not opposed to taxation, but when a buyer sits down at their kitchen table, in their 600 sq. ft. condo downtown and they start doing the math they quickly come to the conclusion moving to Oshawa makes financial sense. I feel we all understand that taxation is part of life. If you take an average home and look at the total tax bill a buyer pays, doubling the LTT is a bit like peeling a tomato with a hammer (one tax most buyers neglect to notice is HST on the insuring fee when buying with less than 20 per cent down. On an average home the HST can be as high as $3,200 which needs to be paid in cash at the time of closing.)
This taxation issue is just one of the reasons people are leaving Toronto. Over the past few months, I have written about how the migration of buyers from the west is adding to multiple bids on homes and the prices being driven up, however, the market may be calming down. In the past week we have seen more inventory hit the market than we have in about a year. We currently have 139 detached homes for sale in Oshawa, up from 69 last month. As the inventory builds the bidding wars will slow down and it will become much easier for a buyer to find a home to move into.
Really, what I am noticing is that the spring market has started in late January. This is highly unusual. Typically, the market starts to pick up about this time, after our inventory has built over the previous two months and buyers start their spring surge in March. This is a trend worth watching, even with the increases in homes for sale, 94 per cent of all home sales last week sold for full price or for more than asking. This means the market has yet to react to more inventory.
I am one of Oshawa’s biggest “cheerleaders” and I feel we have an amazing town to live in. As I have mentioned in the past, we have the location and buyers who want to live here. What we need is more product to sell.
With Oshawa becoming a magnet for buyers, what we need now is for the municipal and provincial governments to ease the roadblocks allowing developers, small and large, to provide more family homes and rental accommodation. We desperately need more of both. Recently a client shared that a family member has been in multiple offers, not on a home purchase but a rental they were looking to rent.
Supply and demand – we have the demand we just need more homes and rental units to house the people eager to live in our town.
Thank you, Toronto, for the gift of the thousands of families you are sending our way. We just need a few more homes for them to move into.
If you have any questions with the above information, or if you can see a real estate emergency on the horizon, I can be reached at firstname.lastname@example.org.