{"id":212014,"date":"2025-04-29T03:46:54","date_gmt":"2025-04-29T03:46:54","guid":{"rendered":"https:\/\/peraltafinancing.com\/business\/real-estate\/what-would-help-buyers-more-eliminating-gst-or-land-transfer-tax\/"},"modified":"2025-04-29T03:46:54","modified_gmt":"2025-04-29T03:46:54","slug":"what-would-help-buyers-more-eliminating-gst-or-land-transfer-tax","status":"publish","type":"post","link":"https:\/\/fivemor.com\/?p=212014","title":{"rendered":"What Would Help Buyers More: Eliminating GST Or Land Transfer Tax?"},"content":{"rendered":"


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I really don\u2019t want to talk about it.<\/p>\n

Or think about it.<\/p>\n

I can\u2019t get into it.\u00a0 I think I\u2019ll be sick.\u00a0 It makes me want to cry.\u00a0 It makes me want to remove the maple leaf tattoo on my back.<\/p>\n

I just ask one thing: once the election is over, can those of you who support you-know-who just try not to do\u00a0too\u00a0<\/em>big a victory lap?<\/p>\n

Good lord, how did we get here\u2026<\/p>\n

In any event, many of us have spent the last several weeks sifting through all the campaign promises (lies?), looking at what the various parties and candidates are offering us (bribing us with?) in exchange for our votes, and every one of us has our\u00a0one<\/em> area of focus or issue that\u2019s at the top of our list.<\/p>\n

Personally, I took one of those \u201cWho Should You Vote For\u201d surveys, and the fact that I was even being asked<\/em> some of those questions was enough to rattle me and show me where society has gone.<\/p>\n

In any event, I\u2019ve heard a lot about this notion of\u00a0eliminating HST<\/em> on new construction, and while it\u2019s ironic that I\u2019ve been championing this for many years and now am going to question the effectiveness of it, I think it\u2019s a conversation that needs to be had.<\/p>\n

Not only that, I think it might lead into a question about how\u00a0otherwise<\/em> to help with \u201caffordability\u201d if we were to determine that reducing or eliminating HST won\u2019t have the intended (or promised?) effect, and since you\u2019ve already read today\u2019s blog title, you know where I\u2019m going to take this\u2026<\/p>\n

So first and foremost, consider this:<\/p>\n

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Buried in the price of every\u00a0new\u00a0<\/em>house or condo offered for sale is a ridiculous amount of HST.<\/p>\n<\/blockquote>\n

We live in a world with among the highest sales tax anywhere on the planet.<\/p>\n

13% is a lot, on a relative basis, especially considering our rates of income tax and the thousand other taxes that exist in this country, including many sneaky ones (like when you buy a TV and the government assumes you\u2019re\u00a0disposing<\/em> of another TV, so you\u2019re charged a fee for doing so), but I digress.<\/p>\n

13% is a lot when you purchase a chocolate bar for $2.00.\u00a0 It\u2019s only 26 cents, but on a relative basis, that\u2019s a lot.<\/p>\n

13% is a lot when you purchase a\u00a0car<\/em>.<\/p>\n

And if you purchase a particular car, don\u2019t forget, you have to pay a\u00a0luxury tax<\/em>, since our government wants to punish you for being successful, and the have-nots<\/em> are angry that you\u00a0have<\/em>, but I digress\u2026<\/p>\n

All this is to suggest that, as crazy as it is to think about the\u00a0absolute<\/em> amount of tax paid on a high-dollar purchase like a\u00a0car<\/em>, compared to the\u00a0relative<\/em> amount of tax purchased on something like a chocolate bar, nothing compares to the idea of paying the relative\u00a0and<\/em> absolute numbers associated with a new home.<\/p>\n

It\u2019s insane.<\/p>\n

I\u2019ll save the calculations because they\u2019re anything but straightforward, but a $1,000,000 new-build in Markham might cost you $895,000 if the government wasn\u2019t <\/em>charging HST to the developer.<\/p>\n

I often wonder what would happen if HST was\u00a0added on<\/em> instead.<\/p>\n

Imagine a sticker price of $899,000 for a new detached home in Innisfil, and then imagine 13% being added\u00a0on top<\/em> of that.<\/p>\n

Would buyers revolt?<\/p>\n

I assume this is why developers began including the HST in the price to begin with, but either way, it\u2019s an absurd amount of money.<\/p>\n

Call it \u201cfair\u201d or call it \u201cnecessary,\u201d but don\u2019t disagree with one simple fact:<\/p>\n

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HST applying to new homes does\u00a0not<\/em> help with affordability in a country that struggles with affordability.<\/p>\n<\/blockquote>\n

I have written about the HST many times on Toronto Realty Blog so I\u2019m not going to bore you with links to past articles.<\/p>\n

What I\u00a0will\u00a0<\/em>bore you with, however, is the following:<\/p>\n

\u201cThe Increasing Tax Burden On New Ontario Homes\u201d<\/a><\/p>\n

That\u2019s a blog post that I wrote in December of 2024 in which I outlined that a whopping\u00a035.6%<\/strong> of the cost of a new home is made up of taxes,\u00a0including<\/em> HST, as well as many others.<\/p>\n

I want to explore those \u201cmany others\u201d in a moment, but first, let\u2019s stick to HST.<\/p>\n

Amidst all the election promises, party leaders are offering \u201chousing affordability\u201d by eliminating the\u00a0federal<\/em> portion of HST that applies to new homes, which amounts to five percent.<\/p>\n

Two weeks ago, this article ran in the CBC:<\/p>\n

\u201cWhat Election Promises On Housing Would Mean For Toronto And The GTA\u201d<\/a>
CBC News
April 11, 2025<\/p>\n

The section that really concerns us today is that which discusses HST.<\/p>\n

From the article:<\/p>\n

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Both Liberal Leader Mark Carney and Conservative Leader Pierre Poilievre have promised to eliminate the five per cent federal goods and services tax off the purchase of some new homes, but the promises differ.<\/p>\n

The Liberal proposal is limited to new homes under $1 million, for first-time home buyers only. The Conservative proposal would cover a wider range of purchases: all new homes priced under $1.3 million, regardless of the buyer.<\/p>\n

There are questions about how far either proposal would go toward making\u00a0the Toronto housing market more affordable.<\/p>\n

GST is not charged on resale home purchases, and resale accounts\u00a0for roughly three-quarters of the residential real estate market in Toronto, based on\u00a0resale data<\/a>\u00a0from TRREB and\u00a0new home sales data<\/a>\u00a0from Altus Group and BILD\u00a0over the past decade.<\/p>\n

Steve Pomeroy, a\u00a0professor at the Canadian Housing Evidence Collaborative at McMaster University, says the GST cuts will help stimulate some new home construction, but says the\u00a0Liberal\u00a0and Conservative claims\u00a0that the move\u00a0would save new home buyers up to $50,000 or $65,000 off their purchases are not entirely accurate.<\/p>\n

\u201cIt\u2019s a good 10-second political sound bite,\u201d said Pomeroy\u00a0in an interview. \u201cThe reality is it\u2019s not going to have that big an effect.\u201d<\/p>\n

He says that\u2019s because developers build the sales tax into the market price of a new home.<\/p>\n

\u201cYou negotiate with the builder for a price and let\u2019s say you agree to $700,000, which would be a relatively modest condo\u00a0in Toronto,\u201d said Pomeroy. \u201cYou don\u2019t actually then add the tax on top of that. It\u2019s already absorbed in the price, because that\u2019s the price you\u2019ve negotiated.\u201d<\/p>\n

John Pasalis, president of Realosophy, a real estate brokerage in Toronto, questions the effectiveness of extending a GST cut to all purchasers of a new home.<\/p>\n

\u201cHow do we make it more affordable for the next generation to own?\u201d Pasalis said in an interview. \u201cI tend to think a policy that gives a tax benefit to first-time buyers, younger families, rather than people who are using homes as an investment is a way to get down that road.\u201d<\/p>\n<\/blockquote>\n

We can\u2019t debate the accuracy of the above facts and opinions, can we?<\/p>\n

I might boldy suggest that the opinions offered by Mr. Pomeroy and Mr. Pasalis\u00a0are<\/em> facts.<\/p>\n

For many years, I have argued that eliminating HST or one of PST and GST on new home sales woudl be a step in the right direction for housing affordability, but like Mr. Pasalis and Mr. Pomeroy, I\u2019m not suggesting that it\u2019s a magic wand.<\/p>\n

As the CBC article notes above, only one quarter of all home sales are\u00a0new<\/em> home sales, thus the elimination of some\/all of the HST wouldn\u2019t have a sweeping effect across the country.<\/p>\n

Not only that, and perhaps most importantly, new home construction has slowed to a crawl this year.\u00a0 Elimination of HST sounds fantastic, but if sales of pre-construction condos are down 90%, then what the heck are we talking about here?<\/p>\n

I think we all want to believe \u2013 or\u00a0picture<\/em>, since politicans love to tell stories about \u201ca family I ran into recently at a local church bake sale,\u201d that the buyer of a new home is a lovely family of five who desperately wants to climb onto the property ladder, and that eliminating HST will help them do exactly that.<\/p>\n

But in reality, we\u00a0know<\/em> that investors have dominated the pre-sale real estate space for the last decade.<\/p>\n

So does eliminating HST really help make real estate more affordable for those who, apparently, \u201cneed\u201d it most?<\/p>\n

Mr. Pasalis suggests in the article that we focus on \u201cthe next generation,\u201d and if we were really going to do that, then we\u2019d need to take a step back and look at the way real estate is taxed.\u00a0 Yet again.<\/p>\n

We have no shortage of real estate related taxes in this city, province and country.<\/p>\n

Let me again refer you to a blog I wrote in 2024:<\/p>\n

\u201cHow Can An Increase In Taxes Mean An Increase In Affordability?\u201d<\/a><\/p>\n

In this blog post, we discussed the following:<\/p>\n

-Ontario Land Transfer Tax
-Toronto Land Transfer Tax
-Municipal Development Charges
-Toronto Vacancy Tax
-Underused Housing Tax
-Federal \u201cAnti-Flipping\u201d Tax
-Municipal Non-Resident Speculation Tax
-Ontario Non-Resident Speculation Tax
-Property Tax
-Capital Gains Tax
-HST On New Homes<\/p>\n

That\u2019s a\u00a0lot<\/em>.\u00a0 But we live in Canada.\u00a0 And there\u2019s an election on Monday.\u00a0 But I digress\u2026<\/p>\n

My point is this:<\/p>\n

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If we\u00a0really\u00a0<\/em>wanted to make housing more affordable for future generations and if we\u00a0really\u00a0<\/em>wanted to give first-time buyers a leg up, we would eliminate ALL land transfer tax for those buyers.<\/p>\n<\/blockquote>\n

Just consider the buyer of a $1,200,000 property in Toronto.<\/p>\n

They would, conceivably, be making a $240,000 down payment, or 20%.<\/p>\n

But they would also<\/em> be writing a cheque to the province and the city for $40,950, minus the silly \u201crebate\u201d which amounts to $8,475.<\/p>\n

That rebate, by the way, is an\u00a0absolute<\/em> number, not a relative one.<\/p>\n

So when the number was fixed many years ago, it represented greater importance ocmpared to today as prices have risen substantially since then.<\/p>\n

Not only that, the land transfer tax upon its inception at the provincial level in 1974 was never intended to have the dastardly effect then as it does on housing now.\u00a0 After all, the first \u201cbracket\u201d in the sliding scale of taxation was from\u00a0$0 \u2013 $55,000<\/strong>, so that has to tell you what prices were like and the negligible effect that the tax was intended to have.<\/p>\n

We also never intended to have a\u00a0municipal<\/em> tax essentially DOUBLE the amount of land transfer tax that buyers have to pay, as was the case when David Miller brought the tax into effect in 2008.<\/p>\n

We never thought (or at least I didn\u2019t\u2026) that the muncipal tax would be increased six or seven times, as it has been since 2008.<\/p>\n

And last but not least, we never assumed that the City of Toronto would become so desperately reliant on the tax (often over $1 Billion in revenue per year) that increasing the\u00a0rate<\/em> of tax would be \u201cnecessary\u201d to offset the decline in transactions.<\/p>\n

All this is to say: I think first-time home buyers should be exempt from 100% of the municipal and provincial land transfer taxes.<\/p>\n

Now, what if a young man buyers his first condo at 26-years-old and then marries and purcahses a home with his wife at 29-years-old in order to start a family?<\/p>\n

Well, now he\u2019s out of luck.\u00a0 He won\u2019t be exempt because he\u2019s already owned a condo, and here\u2019s where things get murky.<\/p>\n

But is it any\u00a0less<\/em> murky than the idea of eliminating 5% of the HST on new homes and how that is supposed to help with affordablity?<\/p>\n

Connect the dots:<\/p>\n

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-New homes are primarly purcashed by investors, not end-users, not families
-New homes account for (in a good year) only one-quarter of sales
-The federal portion of the 13% HST (in Ontario) is only 5%<\/p>\n<\/blockquote>\n

It doesn\u2019t seem like the changes that the federal political candidates are promising is\u00a0acutally\u00a0<\/em>going to do what they\u2019re saying it is.<\/p>\n

But we already knew that, right?<\/p>\n

Because\u00a0nothing<\/em> they promise has the effect that they say it will, and I\u2019m convinced that nothing they do will have an effect.<\/p>\n

Mucking around with five percent on\u00a0new homes<\/em> isn\u2019t the answer.<\/p>\n

Attack land transfer tax.<\/p>\n

Attack development fees.<\/p>\n

And while both <\/em>happen to fall under municipal and provincial jurisdictions, I refuse to accept that as a reason why the federal government can only consider HST as their \u201cbrilliant idea\u201d to increase housing affordabilty.<\/p>\n

Poltician after politican acts like\u00a0Austin Powers<\/em> and talks about building \u201cOne Billion Homes\u201d but that\u2019s fantasy.<\/p>\n

If they really want to have an impact, give a financial break to first-time buyers, young buyers, families, or whoever else they want to glorify and salivate over in their campaign promise speeches.<\/p>\n

Is there a hockey game on TV on Monday night?<\/p>\n

I sure don\u2019t want to watch election coverage.<\/p>\n

Nobody enjoys watching their own home slowly burn to the ground\u2026<\/p>\n