Ottawa and Toronto – Opposite Ends of the Property Tax Rate Range

Imagine you’ve found your dream home. The property, with its four bedrooms, two-car garage and fully-fitted kitchen, is within your carefully-calculated budget. You’re delighted with the neighborhood, especially the local schools and parks, and can see yourself and your family living there for many years. But then you find out about the residential property tax and that it’s going to cost you ten thousand dollars a year.

You’re not alone – one of the essential tasks of any home buyer is to check the ongoing cost of owning a property. But many people often overlook this task and forget to factor in annual tax. Different cities and municipalities within Canada have widely different residential property tax rates. But don’t assume that you can’t afford to look for homes in a highly-desired city in Ontario. While Ottawa does have one of the highest property tax rates in the province, Toronto, conversely, has the lowest rates.

How is property tax calculated?

Property tax is an annual fee imposed on all properties – residential and commercial – in a city or municipality to generate revenue to support the council’s operating budgets. The operating budgets support the maintenance, renewal and creation of the infrastructure needed to provide services to the people. The infrastructure includes emergency response services, public transportation and the public library system. 

Property taxes vary from city to city as each city council sets its own rate and chooses which taxes to include. In Ontario, the residential property tax rate includes both a base property tax rate as well as an education tax. Every year, the Municipal Property Assessment Corporation assesses the values of all the homes in the region. Each assessed home value is then multiplied by the residential property tax rate to calculate the total property tax due for the year for that home [1].

The Effective Property Tax rates in Ontario

The assessed value typically is very far from the real market price of the property. This makes it very hard for potential buyers to know what the actual property tax of a specific property is. Even if you know the official property tax rate, you might not be able to accurately estimate your annual property tax. That’s where the effective property tax rate comes in – with it, you can calculate property taxes based on publicly available market prices rather than assessed valuations.

Knowing all these issues, Wowa decided to find the relationship between the actual prices of properties and their municipal taxes. Using the listing prices of 16,000 residential properties in 54 Ontario cities along with the property taxes paid on these homes, WOWA has calculated the effective residential property tax rates. These real-life numbers differ from other published rates which use the home’s assessed value [2], but more importantly this difference reflects a better representation of the financial reality in the real estate market of Ontario.

The effective property tax rates in Ontario calculated by Wowa range from 0.38% to 0.86%.

The lowest effective property tax rates in Ontario:

  • Toronto 0.40%
  • Milton 0.43%
  • Oakville  0.46%
  • Markham  0.47%
  • Vaughan  0.47%
  • Richmond Hill 0.47%

The highest effective property tax rates in Ontario:

  • Ottawa 0.78% 
  • Woodstock 0.79%
  • Belleville  0.83%
  • Greater Sudbury  0.86%
  • Owen Sound  0.86%

The full list of the effective property tax rates for 54 Ontario cities is available here.

What’s behind Toronto’s low property tax rate?

It may not be surprising that Ottawa, as the nation’s capital city, is near the top with a property tax rate of 0.78%. In contrast, Toronto, Canada’s largest city, is at the bottom of the pack with not only the lowest effective residential property tax rate in the GTA but for all cities in Ontario. To understand this discrepancy, we have to examine why Toronto, in contrast to Ottawa, can afford to provide services to its citizens at such a low property tax. Maybe living in the big city isn’t as expensive as most people think?

Firstly, politics makes Toronto a special case. Recent mayors have worked to keep all increases in taxes to or below the level of inflation. The 2019 city budget continued this controlled increase to the residential property tax [3].

Secondly, Toronto has the same advantage that all cities with highly-valued real estate and density, especially if home prices continue to rise. Any city council can afford to set a low property tax rate if many home owners with high-valued properties will be paying the property tax. In contrast, in cities with lower-property values or a smaller population, the property tax rate will have to be higher to raise enough funds for the operating budgets. So, while it may seem counter-intuitive, you will often find that the higher the value of residential property in a city, the lower the residential property tax rate [3]. 

In addition, a significant portion of Toronto’s funding comes from the land transfer tax,  calculated as a percentage of the property value.

Are you getting value for your property tax dollars?

All home owners should know what services their property taxes are funding. In Toronto, for example, approximately 23% of the residential property tax goes towards police services and 17% goes to to the Toronto Transit Commission [4].

It’s equally important for home owners to ask what services are not being funded and for which they may be charged a separate fee. Does the property tax include garbage pickup or is this a separate fee? Are they billed monthly for utilities such as water or are utilities included annually as part of their property tax? Is the infrastructure of the city serving their needs with frequent and accessible public transport, rapid paramedic emergency response times, an efficient and reliable sewer system and enough funds to upgrade and scale anything as the population increases? Maybe a higher property tax rate goes towards providing more responsive services [5].

The bottom line

Remember that the residential property tax rate is just one part of your property tax calculation; the value of your property is the other element. While the roughly 0.46% difference in the property tax rate between Toronto and Owen Sound may not sound like a lot, it could mean a difference of several thousand dollars a year. Location is, once again, a key factor in your home-buying budget calculations.


Effective property tax rates by city

CityNumber of Data PointsAverage Effective Property Tax Rate (%)
Ajax3450.6713
Aurora2990.5248
Barrie6240.7581
Belleville100.8251
Brampton13670.5872
Brant460.6180
Brantford380.7628
Brock860.6766
Burlington4090.4871
Caledon2650.5075
Cambridge1110.7290
Clarington4180.6822
East Gwillimbury1780.5263
Georgina3350.6218
Greater Sudbury40.8562
Guelph1570.7174
Halton Hills1970.5137
Hamilton7350.6824
Kawartha Lakes4320.6548
King1640.5483
Kingston210.7439
Kitchener1210.6815
London1120.7244
Markham9340.4658
Milton3360.4256
Mississauga12330.4939
Newmarket4060.5498
Niagara Falls1220.7476
Oakville6840.4595
Orillia540.7067
Oshawa5710.7506
Ottawa170.7777
Owen Sound20.8618
Peterborough590.7469
Pickering3100.6783
Port Colborne180.7357
Prince Edward County280.5898
Quinte West120.7093
Richmond Hill8220.4691
Sarnia110.7297
Scugog1370.6253
Stratford50.6422
Thorold270.7332
Toronto12070.3955
Uxbridge1110.6509
Vaughan8510.4665
Waterloo1100.7500
Welland430.7696
Whitby3780.7038
Whitchurch-Stouffville2330.5033
Windsor230.7717
Woodstock230.7864
Grand Total158150.6448

You can find another in-depth comparison of Ontario’s property tax rates by Jacob Lorinc on The Star at https://www.thestar.com/news/gta/2019/08/02/toronto-has-the-lowest-property-tax-rate-among-35-major-ontario-cities-a-new-study-says.html

Sources

  1. Graham, Penelope. “Ontario cities with the lowest and highest property tax rates.” zoocasa.  August 1, 2019. https://www.zoocasa.com/blog/ontario-property-tax-rates-2019/
  2. Ottawa Business Journal. “How do Ottawa’s property tax rates stack up?” August 3, 2018. https://obj.ca/article/how-do-ottawas-property-tax-rates-stack
  3. Rider, David. “Ryerson study concludes Torontonians could pay far more in property taxes.” The Star.  February 28, 2019. https://www.thestar.com/news/gta/2019/08/02/toronto-has-the-lowest-property-tax-rate-among-35-major-ontario-cities-a-new-study-says.html
  4. Pelley, Lauren. “Here’s how much more you’ll be paying in property taxes in 2019 – and where that money’s going.” CBC News. March 07, 2019. https://www.cbc.ca/news/canada/toronto/property-tax-toronto-budget-2019-1.5042301
  5. Lorinc, Jacob. “Toronto has the lowest property tax rate among 35 major Ontario cities, a new study says.” The Star. Aug 2, 2019. https://www.thestar.com/news/gta/2019/08/02/toronto-has-the-lowest-property-tax-rate-among-35-major-ontario-cities-a-new-study-says.html
  6. Lorinc, Jacob. “Ryerson study concludes Torontonians could pay far more in property taxes.” The Star. Feb 28, 2019. https://www.thestar.com/news/city_hall/2019/02/28/ryerson-study-concludes-torontonians-could-pay-far-more-in-property-taxes.html
Share trusted real estate news and advice

You may also like...

1 Response

  1. Rico Varela says:

    whoah this blog is excellent i love reading your articles. Keep up the great work! You know, lots of people are searching around for this information, you could aid them greatly.

Leave a Reply

Your email address will not be published. Required fields are marked *

Bitnami