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People who own multimillion-dollar properties in Vancouver will pay C $2468 in property tax, compared with C $6355 in Toronto and C $10684 in Ottawa.
Low property taxes may be part of the reason why Vancouver’s housing market is so attractive to foreign buyers and investors.
Sherry Cooper, chief economist of Dominion Lending Centers and former chief economist of the Bank of Montreal, points out that the annual cost of owning a house in Vancouver is about half that of Toronto, 1/3 of Seattle and 1/5 of San Francisco. Vancouver is a relatively cheap place to deposit money for foreign buyers.
This is an important incentive for speculative investment, especially in high-end housing, Cooper wrote in a client report on Friday. In turn, this may also be a historical factor in the rise in house prices over the past two decades.
One of the reasons the city has such low interest rates is that houses in many former middle-class neighborhoods are now worth more than C $2 million, and higher tax rates could destroy many retirees on a fixed income.
The British Columbia government and Vancouver City Council are working to slow house price growth. The city has imposed a school surtax on properties worth more than C $3 million, to the chagrin of high-end homeowners. Similarly, the province’s foreign buyer tax has increased to 20% from 15% this year.
All the policy changes seem to have had some impact. Home sales in Greater Vancouver fell to an 18-year low in July as buyers took a wait-and-see attitude to the market.
But the tax rate alone does not determine how much the homeowner pays. The assessed value of the house is used by tax officials to calculate the house price. Therefore, to get a more comprehensive picture of who pays the highest and lowest tax rates, we looked at the estimated cost of a typical (average or benchmark) house in each city.
When compared in this way, Vancouver is still relatively cheap, but not the cheapest.
Toronto and its surrounding cities have higher taxes and fees. Hamilton’s tax is C $6939.59 based on the average price of the house. This is the result of a sharp rise in house prices in southern Ontario over the past few years.
Usually, homeowners don’t pay that much. When prices soar, the city council lowers tax rates to mitigate the impact on homeowners. After the next round of real estate valuation, this could happen in Ontario. Toronto Mayor John Tory, for example, has vowed to limit property tax increases to inflation.
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