The Ontario government's move to increase a land-transfer tax rebate is "not going to be the thing" that allows many first-time homebuyers to finally purchase real estate, says one financial planner who has found herself priced out of the market.
Shannon Lee Simmons, a certified financial planner with New School Finance, said Tuesday that the provincial land-transfer tax, particularly for would-be buyers in Toronto and the GTA, can add tens of thousands of dollars to the cost of purchasing a home.
Toronto buyers also have to pay a city land-transfer tax, she notes.
She recognizes that such rebates are "supposed to help with the blow" that comes with extra costs at the back end of a home purchase, such as taxes and closing costs. While every little bit helps, a rebate of $4,000 may not be enough for many would-be buyers, she said.
"Do I think that this is going to be the floodgate of first-time homebuyer relief that we finally have all been waiting for? No," Simmons told CBC's Metro Morning. "When we're talking about hundreds of thousands of dollars being saved up that are necessary for down payments, what's an extra $2,000 or an extra $4,000 in the grand scheme? So I don't think it will help a lot of us get to that first-time homebuyer entry level."
While Simmons has been looking for some time to purchase her first home, she calls the idea of owning a home a "daydream" and doesn't expect to be putting in any offers anytime soon.
'We want a stable and affordable housing market'
Simmons was reacting to Monday's announcement by the Ontario government of new measures aimed at making it easier for first-time homebuyers to get into the hot housing market.
In his fall economic statement, Finance Minister Charles Sousa announced that first-time homebuyers will not pay any provincial land-transfer tax on the first $368,000 of a purchase price. Those same buyers will become eligible for a rebate of up to $4,000 on the tax, which is levied on the purchase of every house and condominium.
The move does not affect Toronto's land-transfer tax.
On Tuesday, Sousa defended the changes, saying they will help young families just starting out to build some equity and begin "establishing themselves."
"We want a stable and affordable housing market, it's critical to Ontario's economy," Sousa told Metro Morning.
"More we felt needed to be done especially to enable young families and those starting off an opportunity to get into the real estate market, build a bit of equity so they can start establishing themselves. Of course, the decision is theirs and what we're suggesting and what we're offering is the ability for them to have a little bit more support."
Sousa said the province arrived at the figure of $368,000 because the average price of a home for first-time buyers in the province is $375,000. This means that under the new rules, some Ontario first-time buyers won't pay any provincial land-transfer tax at all.
"We're trying to make a decision that affects not just the city of Toronto, but this affects all of Ontario," Sousa said.
Along that same line, Metro Morning host Matt Galloway asked why Ontario doesn't consider a foreign buyers tax on real estate to help cool the market, such as what British Columbia brought in over the summer.
Sousa expressed concern about making a move that could cause the market to crash, which would affect the equity homeowners have built up, some over decades.
"We're also concerned about people's retirement and the valuations of their real estate. These are major assets for a number of individuals," Sousa said.
"The decisions we make that would reflect Toronto specifically would then have impacts on Niagara and Hamilton, for example, so we have to be cognizant of that."
He noted that the land-transfer tax refund will now only be available to permanent residents. Previously, it was open to everyone, including foreign buyers.
Sousa also would not commit to bringing in policies such as a rent freeze to help renters who are finding themselves priced out of the real estate market and are now feeling the pinch of a hot rental market.
"Who is going to be able to save when the rent for a two-bedroom downtown is over $2,000?" said Simmons. "So some sort of rent control would also help first-time homebuyers because it would keep the rent manageable while they try to save but are also having a life."