Homebuyers will continue to be attracted to Markham, Richmond Hill and York Region homes for sale rather than those Toronto after the Ontario government recently backed down from its plan to allow municipal land transfer taxes (MLTT) outside of Toronto.
Every home sold in the province is subject to a provincial land transfer tax, but only Toronto has a municipal land transfer tax . Whether it’s charged by the province or a city, the tax is charged on all real estate sales in the area it governs. The tax must be paid by home buyers and the final tax rate depends on the price of the home.
Toronto’s MLTT is calculated according to the following rates:
- .5% on the first $55,000 of the cost of a home
- 1% on the next $345,000 cost of a home
- 2% On the cost of a home over $400,000
The MLTT adds $9,725 to the cost of a $700,000 Toronto home; an amount that buyers don’t have to pay for a similarly-priced home in Markham.
The added cost of the MLTT gets many buyers to look outside of Toronto for their next home. With a very attractive and diversified housing market, combined with being right next door to Toronto, Markham home prices have benefited more than most by not having a MLTT.
Homeowners who want to sell their home benefit from having more buyers looking for properties and home buyers benefit from not having to pay the MLTT when they purchase a property.
“I think (the government scrapping extending the municipal tax outside Toronto) will just keep helping you guys (Markham and York Region residents) sell homes because some people tried to avoid it, so they go outside Toronto proper so they don’t have to pay the tax,” said Patricia Verge, President of the Ontario Real Estate Association, as reported on YorkRegion.com.
“It already has helped your area. We’ve proven with our studies that Toronto has been seriously hurt by this tax and even though they have a wonderful market and all is well, it could be that much better. We certainly know people who are looking outside Toronto proper so they don’t have to pay the tax.”
The recent push to give all Ontario municipalities the power to charge a MLTT came during a regular 5-year review of the province’s Municipal Act. Many of Ontario’s municipalities were in favour of adding the tax because they have so few ways to generate income. Toronto’s right to charge the tax was granted by the province in 2006.
Fortunately for buyers and sellers in Markham, Municipal Affairs and Housing Minister Ted McMeekin realized that the one benefit was far outweighed by the many disadvantages of the MLTT, not the least of which is that it would make it even more difficult for many first-time buyers to ever realize their dream of owning a home. Imagine having the additional cost of the MLTT on top of securing a down payment, applying for a mortgage, insurance costs, taxes and all the other costs that first-time buyers face.
It’s not likely that we’ll have to worry about a MLTT in Markham again very soon. In addition to the widespread and vocal opposition to the tax (about the only ones in favour of it were the province’s municipal governments), the Municipal Act is not due to be reviewed again for another five years. So we can all continue to enjoy a healthy real estate market in Markham.