Dominique Anglade suggested yesterday to abolish the welcome tax on the purchase of a first property. Cheer! What this tax has become with rising property values just doesn’t make sense anymore. Unless you are an elected municipal official who wants to see your income increase.
In a world where access to property is proving increasingly perilous for the rising generation, the Liberal Party is right to raise this issue. Adding several thousand dollars to the bill for new buyers constitutes an additional brake on the purchase of a home, which is poorly justified.
The Liberal Party could have gone even further. The welcome tax is justifiable only for people who gamble in real estate, make flips or purchase-resale. For all ordinary buyers who acquire a property for the simple purpose of living there, the rates are prohibitive. Even for those who are not first time buyers.
The third rate level, which reaches 1.5% of the value of the transaction, is reached from $266,000. There was a time when homes reaching this kind of value were considered prestige properties. But in 2022, this calculation table is completely disconnected.
Very ordinary bungalows, if they are located around an urban center, will easily exceed this threshold. Middle-class families will pay a rate that was intended to bleed the wealthy in the process. The entire table of rates based on house values must be reviewed taking into account reality.
Since the calculation table is disconnected from reality, the amounts paid no longer correspond to the initial objectives which were covered by the transfer duties. The initial idea, in the 1970s, was to recognize that the transfer of property represented a cost for a municipality. Change in the registers, change of recipient of the tax account, etc.
However, in 2022, the operation of registering a change of ownership has been simplified thanks to computer technology, while the amounts paid have exploded. In Greater Montreal, decent but not at all luxurious properties now sell for $500,000. Welcome tax: $6,000!
Does anyone seriously believe that it costs a city so much to change the contact details of the owner of the pretty bungalow located at 100, rue des Beaux Pommiers? In reality, it has only become a very juicy source of revenue for the municipalities. Which no longer has any connection with said “mutation”.
On this account, it may be time for Quebec and its municipalities to review the fiscal pact. And to do so without placing an unreasonable burden on homebuyers.
Quebecers are still today, in 2022, a people of tenants, compared to other Canadians. It is said that the rising generation is particularly keen on access to property. That’s excellent news. Let’s help them!