Ever since a new report came out about how there’s room to increase Toronto’s residential property taxes, I’ve seen a lot of different opinions surface. Here’s what I think...
I already knew Torontonians paid lower property taxes compared to our neighbours in the Greater Toronto and Hamilton Area, and to me, it kind of makes sense...and it kind of doesn’t. Let me explain.
According to the Centre for Urban Research and Land Development, Toronto’s property taxes could increase approximately 20% and still be in the median-range compared to the other 28 municipalities in the GTHA. The point of the increase would be to fund new infrastructure and maintain existing infrastructure to accommodate the growing population.
Newmarket was marked as the median with owners paying an average property tax of $4,484. The average property tax paid in Toronto was $4,027.
When considering tax hikes, I like to look at how it impacts household income. The average property tax burden in Toronto was 2.74% (percent of household income), which is 22% less than the median. Only Milton had a lower property tax burden.
The report also found that home values in Toronto averaged about 9% higher compared to the GTHA as a whole, but Toronto owners paid 10% less in property taxes. When looking at just these numbers, it seems like there’s definitely room to increase Toronto’s property taxes.
But what about cost of living and land transfer taxes?
It costs more to own a condo downtown Toronto than in the 905 area. The Toronto Real Estate Board resale figures just came out for February 2019; the average price of a condo in Toronto was $612,488, while the average in the 905 area was $448,711. Toronto condo owners may be paying less property tax, but the mortgage payments are likely much higher.
And have we forgotten that Toronto is the only municipality paying land transfer tax on top of the provincial land transfer tax? The average price of a home in the 905 last month was $744,672. If you buy this home in Oakville, you’ll pay $11,368 in LTT. The average price of a home in Toronto was $840,211, which equals $26,558 in LTT! That’s a lot of money upfront. Even if you took the average priced 905 home and put it in Toronto, you’d pay $22,737 in LTT, double what you’d pay in Oakville!
Before the City of Toronto does something drastic like hike the property tax rate by 20%, I think the higher home values and significant amount of LTT need to be taken into consideration. LTT is supposed to go towards infrastructure development, too. If Toronto homeowners have to pay more in property taxes, I think the municipal LTT should be eliminated.
When looking at just property taxes, it looks like Toronto should be paying more. But when you factor in larger mortgages and staggeringly high LTT, the low property tax rate makes sense to me.