For many first-time buyers in Ontario, saving for a down payment is among the biggest obstacles to home ownership. The provincial land transfer tax (LTT) and other closing costs reduce the size of a buyer’s down payment, making it more difficult to enter the market.
Currently, first-time buyers are eligible for a maximum LTT rebate of up to $2,000. However, as home prices have increased, the rebate’s effectiveness has eroded over time.
In 1996, when the LTT rebate was introduced, Ontario’s first-time buyers paid $0 on the average priced home. The rationale behind the LTT rebate was to exempt first-time buyers in order to help them enter the market. Today, first-time buyers are paying nearly $4,000 in LTTs on an average priced home, after applying the rebate.
To improve the affordability of home ownership, the government should modernize the LTT rebate for first-time buyers. OREA is currently researching this important issue and will be making recommendations to the government in the very near future.