Ontario’s real estate association has launched an ad campaign to explain why they believe land transfer taxes hurt the economy. But in a hot housing market, could the tax be used to cool particular regions? There are still a wide range of things that could be done, including raising minimum down payments.
A number of provinces and cities in Canada already have land transfer taxes, which are paid by real estate buyers. The land transfer tax is progressive in that it varies with the value of the property (0.5 per cent on the first $55,000, 1 per cent from $55,000 to $400,000 and 2 per cent over that). The Ontario Real Estate Association says that it amounts to about $4,000 for an average home.
The C.D. Howe Institute found that the land transfer tax slowed down the lower-priced portion of the market more than the higher end (presumably because people at the lower end of the market are more sensitive to the added cost of the tax) and it notes that “over the longer term, there are concerns that a land transfer tax would reduce mobility of people, which would have a negative unintended consequence on job markets and economic growth.”