What a lot of people don’t understand about Toronto Real Estate and rising prices is the effect city taxes have on pricing.
The taxes in the city of Toronto are, insane. For those who really have no idea what I am talking about, when you build a new construction building there is several taxes the builder has to pay to the city. Development charges are fees collected from developers at the time a building permit to help pay for the cost of infrastructure required to provide municipal services to new development, such as roads, transit, water and sewer infrastructure, community centres and fire and police facilities. They also collect education and park levies to help pay for new schools and parks.
Development charges in the City of Toronto increased from $41,251 from May 1, 2018 to $60,739 on Nov. 1, 2018 for a single family home. That number will increase to $71,432 on Nov. 1, 2019 and then to $80,227 on Nov. 1, 2020, adding $38,976 to the cost of a new home in just three years.
Development charges have increased exponentially and it has shifted the burden of paying for critical infrastructure onto the newest residents and businesses moving into a neighbourhood. All government fees, taxes and charges amounted for 22% of the cost of a new home.
Since 2004, development charges have increased between 236 and 878% across the GTA. Once the City of Toronto finishes the phase-in of its latest round of increases in 2020, the increase over 2004 levels will be a whopping 1,700%. To provide a comparison over that same time frame, the Consumer Price Index (CPI – Inflation) rose by 22% and the average new house price in Toronto increased by 143%.
Development Charges are increasing 10 to 40 times faster than inflation over the same period. Existing City of Toronto home owners faced a property tax increase of 30% per household during that same period.
To put all of these percentages into perspective the approx. development charges are as followed:
1 Bedroom- $60,0000
2 Bedroom- $80,000 +
Taxes and charges are one of the biggest contributing factors to increased pricing in the city, especially in preconstruction. Everyone wants to look at developers or realtors to blame high pricing on but I think anyone with a reasonable understanding of pricing and taxes would find these numbers shocking.
What is even more mind blowing is- where is the money going?
How many new parks has the city built in the last 10 years? Schools? Infrastructure (HAHAHA)? Right. Food for thought.