Market Insight for December 5

Mayor Olivia Chow wants Torontonians who can afford homes over $3 million to pay more in land transfer taxes in 2026. The proposal could raise an additional $14 million next year for city finances

Changes proposed by Chow Tuesday would see the so-called luxury home tax rate increase on homes purchased from $3 million to more than $20 million, with the change in rate growing as homes get more expensive. The luxury homes tax is a higher land transfer tax for multimillion dollar properties approved in 2023.

In Ontario, the buyer is responsible for paying the one-time Land Transfer Tax (LTT) when purchasing real estate, a provincial tax based on the property’s value, collected by the lawyer on closing, with Toronto buyers also paying a municipal LTT, though first-time buyers may get rebates. This tax is a significant closing cost, applied to homes, condos, and land, and is separate from annual property taxes.

As the city shifts full on into budget deliberation mode, the mayor made the announcement before she brings the proposal to the executive committee next week.

The increases would bring the total amount generated by the land transfer tax on “luxury” homes to $152 million next year, an increase of nearly $14 million compared to 2024.

The mayor is pitching this proposal as a way to protect other city-funded affordability measures.

“I’m proposing that the wealthiest two per cent of property buyers, just half of one per cent of Toronto residents, contribute a bit more,” Chow said outside her office at city hall. “So, we can invest in services families rely on.”

The mayor says the funds will help cover things like school nutrition programs and a recently announced third annual freeze on TTC fares.

In 2024, the proposed tax increase would have impacted 1,164 home sales, according to the mayor.

Here’s a breakdown of how the tax rate will change for different property values.

• Homes valued between $3 million and $4 million would see a 0.9 per cent change in rate, to a total 4.40 per cent.
• Homes valued between $4 million and $5 million would see a 0.95 per cent change in rate, to a total 5.45 per cent.
• Homes valued between $5 million and $10 million would see a one per cent change in rate, to a total of 6.5 per cent.
• Homes valued between $10 million and $20 million would see a 1.05 per cent change in rate, to a total 7.55 per cent.
• Homes valued above $20 million would see a 1.10 per cent change in rate, to a total 8.6 per cent.

In addition to the above rate changes, anyone buying in Toronto must pay both the provincial and municipal LTT, effectively doubling the cost.

The Toronto Regional Real Estate Board (TRREB) has never liked the municipal land transfer tax and doesn’t support hiking it, said Jason Mercer, TRREB’s chief information officer.

He says the tax can have negative impacts even when it’s applied to wealthier homebuyers.

“Even at the higher end of the housing market, if a larger upfront tax prevents people from buying in that space, they’re essentially not moving out of, say, more mid-range houses that could be available for people with other housing needs,” Mercer said in an interview with CBC Toronto.

In a news release, TREBB called on the city to increase a land transfer tax rebate for first-time homebuyers instead.