A Glimmer of Hope for First Time Home Buyers?
Wednesday Nov 30th, 2016Share
In a climate with soaring house prices, first time homebuyers are finding it harder to enter into the housing market. In Barrie, the price of homes jumped approximately 24% reaching an average price of $476,000 last month. While this era of drastic growth certainly boosts the tax revenue for the Ontario government, it hinders the ability of homebuyers to purchase their first home.
With this reality in mind, Ontario’s Finance Minister, Charles Sousa, made an announcement in his fall economic statement delivered to the provincial legislature on November 14th, 2016, that the tax rebate offered to first time homebuyers will be increased. Currently, first time homebuyers are eligible for a Land Transfer Tax Credit (LTTC) which is a refund of the cost of land transfer tax relative to the property being purchased. The rebate is available regardless of the purchase price but only to a maximum of $2,000. This rebate applies to both new and resale homes. For example, on a home with a purchase price of $200,000 the tax payable is $1,725 and would be completely refunded.
Under the proposed changes, which are scheduled to take effect on January 1, 2017, first time homebuyers will be eligible for a refund of up to $4,000 for the land transfer tax, thus doubling the current amount. This will effectively remove the land transfer tax from the first $368,000 of a home price. The eligibility criteria to receive this refund will also contain an important new restriction; only those first time homebuyers who are Canadian citizens and permanent residents will qualify.
In order to offset the cost of this increase, the land transfer tax on homes that are purchased for over $2 million will be increased from 2% to 2.5% which, according to Government officials, will bring in approximately $105 million annually, thus funding the new rebate for first time homebuyers.
Additionally, the land transfer tax payable on “commercial properties”, which includes commercial, industrial, multi-residential and agricultural properties, will be increased. For commercial properties that are over $400,000 the new tax rate will be 2%, which represents a 0.5% increase from the current rate of 1.5%.
With this information in mind, prospective purchasers of commercial properties, or homes that are over $2 million, may want to consider completing these purchases prior to January 1, 2017 in order to avoid the higher rates. First time homebuyers on the other hand may want to hold off for a couple of months in order to take advantage of the new land transfer tax refund that will become available.
For more information on the financial assistance programs that are available for first time homebuyers please download our First Time Homebuyers Guide by clicking here.
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