By Penelope Graham

Closing a real estate transaction generally ushers in feelings of excitement and relief. The funds have officially made their way into the seller’s account, and all parties can rest easy after a month or more in limbo. But not so fast! Before the keys are handed over, the buyer has to shell out for the most reviled of closing costs: land transfer tax (LTT).

Just how much, however, varies widely depending on the province or even the municipality. While every province charges LTT or some form of property transfer fee, depending on the tax structure, buyers may pay anywhere from a few hundred dollars to tens of thousands in addition to their home purchase.



It’s a disparity that’s exacerbated in Canada’s priciest markets. Vancouver and Toronto, well-known for their stratospheric average home prices, are taxed the most, with a sliding scale that charges more for the most expensive homes. Given the average dwelling is priced near the $1-million mark in both regions, more buyers are exposed to the upper echelons of that scale, making affordability an even tougher hurdle.

In fact, according to a recent study by Zoocasa that analyzed LTT in 25 major markets nationwide, buyers purchasing a home at the average price in Toronto and Vancouver can expect to pay $25,162 and $20,067 upon closing their transactions.

Toronto takes the top spot due to its infamous dual taxation strategy, in which buyers must pay full LTT at both the municipal and provincial levels. Even factoring in the generous combined rebates for first-time home buyers ($4,000 from the province for properties above $368,000 and $4,475 from the City of Toronto), the city still ranks second-most expensive in terms of LTT, with the average buyer paying $16,687.

The top five most expensive markets, according to the study, are rounded out by the British Columbia municipalities of Victoria, Abbotsford and Kelowna, where buyers will pay $713,485, $8,780 and $8,659 in LTT, respectively. And, because B.C. does not have a rebate, these costs are absorbed by move-up and first-time buyers alike.

Because LTT, or its equivalent, is a closing cost, it must be paid in cash and cannot be mortgaged. For this reason, it’s vital future buyers take this into account when saving up for their home down payments. As well, for savvy first-time buyers who can be flexible with location, dodging LTT can result in thousands of dollars saved and provide an affordable entry point into the market.

This is evident in the five least-taxed markets in Canada, which include two Ontario cities: Windsor-Essex and London. Both municipalities benefit from average home prices lower than the provincial minimum threshold for taxation of $368,000, meaning first-time buyers evade LTT altogether.

Move-up buyers in those markets will be taxed at the provincial rate of $3,023 and $3,966, respectively – still far below comparable markets within Ontario’s Greater Golden Horseshoe. Niagara Region also ranked well for its affordability. With an average price of $407,693, a qualifying first-time buyer would pay only $629 in provincial LTT.

The third and fourth least expensive markets in terms of LTT, go to Albertan markets, where a much less expensive title transfer fee is charged. The fee is made up of two parts: one based on the overall property value, and another based on the total mortgage value. The formula for both portions is a $50 base added to $1 for every $5,000 increment. As a result, Edmontonian and Calgarian home buyers pay just $239 and $269 on top of their home purchases, accounting for just 0.1 per cent of their home’s total value.

Check out the infographic below to see how LTT impacts housing affordability across Canada:

2 COMMENTS

  1. DOUBLE DIPPING ❗️❗️❗️… prople pay LTT … then they keep on paying property tax per year … and to top it off .. their property tax increases incrementaly though they are just using their house not selling it…

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