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Land Transfer Tax
I am a first-time homebuyer
New Brunswick is a province in Atlantic Canada with a total area of only 72,908 square kilometers. It covers 0.7% of the total area of Canada (source: Statistics Canada). As per population statistics, New Brunswick’s population in 2021 was 775,610. According to the income-based GDP estimates of Statistics Canada, New Brunswick’s GDP at market prices in 2021 was over $42B, representing about 1.7% of Canada’s GDP. In 2020, the median after-tax income in New Brunswick was $56,900, $9,900 below the national median for the year.
The average house price in New Brunswick for the month of November 2022 was $265,250. Average house prices in the major markets of the province in the same period were as follows –
The housing markets in New Brunswick are much more affordable compared to the bigger housing markets in the country such as the Greater Toronto housing market and the Greater Vancouver housing market which had average house prices of $1,079,395 and $1,198,827 in November 2022 respectively. The average house prices in New Brunswick are also significantly lower than the average Canadian house price which was $632,802 in November 2022.
In November 2022, the number of sales dropped by 31.2% compared to a year ago, reflecting the nationwide trend following the Bank of Canada rate hikes and the resultant increase in mortgage rates. Most of the average houses in New Brunswick qualify for CMHC mortgage insurance and require only 5% down payment as they are priced under $500,000.
If you are looking for a home to purchase, budgeting for home closing costs is very important to prevent yourself from overspending. The most significant closing cost is the land transfer tax, which is calculated at 1% of the property’s purchase price in New Brunswick. Other common closing costs for which you would normally spend over $100 are – property appraisal, lawyer & legal fees, home inspection, property survey and title insurance.
First enacted in 1983, New Brunswick’s land transfer tax is taxed at a flat rate of 1% of the real property value. The real property value is the greater of the assessed value of the property or the purchase price of the property. The tax rate prior to March 31, 2016 was 0.5% and that for properties registered before June 1, 2012 was 0.25%.
For example, if you buy a house worth $300,000 in New Brunswick, the land transfer tax will be –
$300,000 x 1% = $3,000
The government of New Brunswick offers the Home Ownership Program for low and modest income households, for them to be able to buy a house. To be able to qualify for the program, an individual or a family must have a household income of less than $40,000, and must have resided in New Brunswick for at least a year. The applicants must either be qualifying first-time home buyers or be living in a substandard housing unit. The applicants should also meet all lending requirements.
The qualifying individuals and families receive assistance in the form of a repayable loan of 40% of the home purchase price for purchasing existing units. If building a house, they can receive a loan of up to 50% of the building cost, up to a maximum of $75,000. The loans are interest free for households with an income of less than $30,000. For every $1,000 of adjusted income above $30,000, the interest rate increases by 0.5% till it is equal to the provincial borrowing rate. The amortization period is up to 25 years with terms of one year.
Similar to other Atlantic provinces, the cost of living in New Brunswick is fairly low. The monthly cost of living for a family of three in the province is $2,918, which is notably low compared to the $4,589 and $4,557 in Ontario and B.C. respectively. This cost included a 2-bedroom apartment rent, transport cost, food and preschool cost. The cost of living in Moncton for a family of three is $3,654, which is almost 30% less than that in the major Canadian cities of Toronto and Vancouver.
New Brunswick was one of the six provinces where the inflation rate increased in November 2022. Despite the inflation rate in Canada having reduced by 0.1% from October 2022 to November 2022, the inflation rate in New Brunswick increased to 7.8% compared to the 6.9% in the previous month (source: Statistics Canada’s Consumer Price Index data). The consumers in Atlantic Canada had to pay more for fuel oil, which is more commonly used in the region for heating homes.
Every year, homeowners are required to pay property taxes to the city. Municipal services such as public transit, police, garbage collections, fire department and schools are paid for using these taxes. The tax rates are determined based on the annual budget requirements of the city and are subject to change every year. Homeowners in New Brunswick who do not reside in the province are required to pay a provincial tax on top of the municipal tax. The property tax rates for some of the major municipalities in New Brunswick are listed below.
|Municipality||Municipal Property Tax Rate||Provincial Property Tax Rate|