There are many hidden costs involved in purchasing a property. One of these is land-transfer taxes, which can be extremely high in hot real estate markets like Toronto and Vancouver. A recent nationwide comparison of 25 major Canadian real estate markets found that the Alberta cities of Calgary and Edmonton had the lowest land-transfer taxes from sea to sea.
Besides high-priced homes, those purchasing a home in Toronto or Vancouver can expect land-transfer taxes between 1.8 and 2.1 percent on top of their purchase price. These fees, which can bloat to nearly $20,000 in these hot markets, are not eligible to be part of a mortgage. Calgary and Edmonton, meanwhile, boasted land-transfer taxes that amounted to 10 percent of the cost in those cities.
Part of the reason for this is that Calgary and Edmonton are not in as high demand as other urban areas in Canada. Toronto and Vancouver’s land transfer taxes are in place primarily to fund infrastructure and improvements. In Alberta, the added cost would likely turn off prospective buyers in Alberta, which is a significantly cooler market than those elsewhere in the country. This made it less beneficial for lawmakers to add such high taxes to home prices.
Land-transfer taxes have certainly made a difference for regions with a hotter real estate market. Toronto, for example, raised $156 million in the first quarter of 2018 alone. While city planners may appreciate the added revenue, home buyers may find real estate in Alberta to be more affordable with lower home prices and taxes alike. Those who are purchasing a home in Alberta should speak to a lawyer to understand the laws associated with their purchase.