Tax advantages driving exodus from Canada's priciest housing markets

  2/6/2024 |   SHARE
Posted in Canada Living by Terra Realty| Back to Main Blog Page

Young Family Moving In a New Home

More owners are willing to move to lower-tax provinces to buy a home

Housing affordability remains one of Canada’s biggest financial and social issues and it’s prompting more people to move to provinces where their money will go further.

A new report published today (Feb. 6) by RE/MAX Canada reveals that the burden on buyers from provincial governments’ billions of dollars in levies and development fees on new construction, and rising land transfer and property taxes, is sparking an exodus from the priciest markets.

Looking at the key markets of Vancouver, Calgary, Winnipeg, Toronto, Montreal and Halifax, the report found that interprovincial migration in 2023 saw close to 60,000 Canadians move to Alberta and, to a lesser extent, Nova Scotia, New Brunswick, and Prince Edward Island, while all other provinces saw more people leave than arrive.

Official data from Statistics Canada's Quarterly Demographic Estimates, Provinces and Territories Interactive Map reveals how interprovincial migration has escalated in recent years. The number of Canadians moving to Alberta in the first three quarters of 2023 doubled year-over-year to 45,194 (from 22,278 in the same period of 2022).

Most of these people came from Ontario (6,262), BC (5,269), Saskatchewan (1,579) and Manitoba (1,316).

"Given today's housing market realities, it comes as no surprise that buyers are willing to travel across the country to achieve home ownership," says RE/MAX Canada President Christopher Alexander. "In addition to affordable housing values and extensive job opportunities, Alberta is well known for its position on taxation, with no provincial sales tax and zero land transfer tax on residential real estate.”

For cash-rich buyers from provinces such as Ontario and British Columbia, selling-up and moving to a lower-cost area makes sense, while those trying to get on the property ladder can do so faster by moving to a more affordable market.

Regressive taxation

The report notes that regressive tax policies have exacerbated the affordability issues in Canada’s most expensive housing markets.

It gives the example of Toronto, which has the highest land transfer taxes in the country, and where a new luxury tax on homes selling for more than $3 million means additional costs of between 3.5% and 7.5% depending on the selling price. On an average-priced home in the city, buyers can expect to pay close to $40,000 in taxes.

"When you think about what a $40,000 tax bill payable upon closing could do if it was applied to a down payment, it's clearly time to incentivize the first domino," says Alexander. "The first order of business should be revisiting the first-time buyer rebate/exemption in Toronto and Vancouver, because at $400,000 and $500,000-$525,000 respectively, they're woefully inadequate given the average or benchmark price of properties in those cities."

There is also the uncertainty around property tax reassessments which could mean a spike in the amounts paid by homeowners in several markets including Toronto, Montreal, and Halifax.

"The goal should be to make home ownership more accessible, not less," says Alexander. "Taxation is contributing to the demise of the Canadian dream, with home ownership across the country falling from peak levels reported in 2011, and it will continue to decline unless there is some intervention. A greater supply of affordable housing in major centres will have a sizeable impact on keeping the dream alive. However, if we don't heed the call, we risk continued out-migration of our youth."

Source: Wealth Professional

First Time Home Buyers, Home Buyers, Housing Affordability, Land Transfer Tax, Moving, Property Taxes, Tax Implications

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