Real estate industry not concerned about long-term effects following provincial budget surprise
Buying a home in Alberta is about to get more expensive.
Beginning July 1, Albertans will be required to spend as much as $1,000 extra to purchase a home in the province as a result of increased real-estate-related fees in the new provincial budget.
Counted among the changes are increases to the transfer/title creation flat fee, which will go from $50 to $75 and the variable fee transfer fee will jump from $1 to $6 for every $5,000 in the home’s value.
For homebuyers purchasing a $500,000 home carrying a $400,000 mortgage, the new fees would increase the costs from $280 ($150 Land Title Registration and $130 Mortgage Registration) to $1,230 ($675 Land Title Registration and $555 Mortgage Registration).
The fee increases come as Calgary’s real estate market comes off its fourth consecutive month of sales declines.
While the possibility fee increases could further slow the city’s real estate market is not lost on CREB® President Corinne Lyall, she doesn’t believe they will be a sticking point for prospective buyers.
“I think what’ll happen is, for first-time buyers especially, there might be a little sticker shock at closing to have a little bit more than they expected to have out of pocket,” she said. “I think what that means is people will have to take a little longer to save for this one-time cost, so it won’t impact their day-to-day living or monthly expenses.”
The new fees amount to an increase of 400 per cent for Alberta homebuyers.
Alberta Real Estate Association (AREA) CEO Ian Burns said the fee increases were done with little consultation – a sentiment echoed by other real estate organizations in the province.
“AREA – the provincial, professional association for Alberta’s 10,000 REALTORS® — was not one of the real estate association stakeholders consulted on these increases,” he said.
“AREA appreciates the fiscal challenges faced by government and recognizes that, after this increase, fees related to real estate transfers remain lower in Alberta than other provinces. We have asked Service Alberta to confirm what sources they are quoting when expressing that real estate associations were among the stakeholders who identified that there was ‘room for these fees to grow.’”
The “room to grow” comment refers to the provincial government’s statements that real estate fees in Alberta ranked below those seen in other provinces. With Calgary’s real estate market often drawing comparisons to other major markets, a quick search of similar transfer fees shows purchasing the same $500,000 home in Vancouver would require an additional $8,000 in fees and $12,200 in Toronto.
“In our talks with our stakeholders, we talked about the variable fee being the lowest in the country and that there may be room to grow, but what we did hear from many stakeholders was to not introduce a land transfer tax like there is in Ontario,” said Service Alberta spokesman Yonathan Sumamo.
“So with the new fees, including all the taxes for the new fees, Alberta’s total transaction costs for land title and mortgage title are still less than about half the national average, so you still are paying less tax when you buy a house in this province.”
Canadian Home Builders’ Association – Calgary Region president Wayne Copeland said while his organization will be impacted by the changes, the brunt of the increases will be felt in the resale sector.
“To be at the table for so many other things and to not be consulted on this – initially I felt offside about it,” he said. “But after I thought about it a little bit further, I was fine with it. We know that the fees are going to have to be raised and it doesn’t affect new homes as much as it does the MLS® market.”