Fee hikes will ding home buyers
Fee hikes in Thursday’s provincial budget will add more than $1,000 to the cost of buying an average home in Alberta at a time when real estate sales are plummeting.
And while one government minister suggested real estate associations were OK with higher fees for land title changes and mortgage documents, organizations contacted Friday said they weren’t asked about the increases.
“This comes as a surprise to us,” Wayne Copeland, president of the Canadian Home Builders’ Association-Calgary region said of the fee hikes.
“In a time when people are being hit with other budget fees, increases in costs associated with daily living, layoffs and salary adjustments, it will be another burden for many.”
The province said several real estate-related fees will increase effective July 1. Among the announced changes, the transfer/ title creation flat fee rises from $50 to $75, while the variable fee will jump from $1-$6 for each $5,000 in home value. Mortgage registration fees are to increase the same amount.
On a $450,000 mortgage, that would mean an increase from $140-$540 for each.
“Unfortunately, these fees are assessed at the end of the real estate transaction and so aren’t included in the purchase price of the house, nor can they be rolled into the mortgage, so homebuyers will need to come up with that extra cost,” Copeland said.
Corinne Lyall, president of the Calgary Real Estate Board, said the government has kept fees low for some time. This is the first time since 2011 that the flat fee for property and mortgage registrations has increased.
“Obviously, anything that directly impacts the consumer as far as home buying isn’t something that we’re super excited about,” said Lyall.
“In terms of how it directly impacts the homebuyer, I think first-time homebuyers might experience a bit of sticker shock. It’s all this little stuff that adds up for your closing costs.”
Calgary home sales have declined significantly in 2015 as the collapse in oil prices has cooled demand.
Through Thursday, sales this year are down 33 per cent from the same 2014 period, while new listings have increased 13 per cent. The median sale price has dipped 1.2 per cent to $420,000, while the average MLS sale price is off 2.5 per cent at $467,300.
Don Campbell, senior analyst with the Real Estate Investment Network, said the fee increases may “sting” homebuyers but won’t hurt the local housing market in any significant way.
“The majority of consumers do not even know the many and sundry fees they incur upon buying a property, until they receive their final state of adjustments from their lawyer,” said Campbell.
“The increase will definitely hurt the homebuyer, but because it is not on their radar at the beginning of the transaction will not stop many from buying or financing their property. ”
CREB chief executive Alan Tennant said the board wasn’t consulted on the specific fee increases. It’s informing realtors about the changes and will monitor feedback from clients, he said.
“CREB remains opposed to any fee hike that would be prohibitive to homebuyers entering the market as well as any tax that would negatively impact the real estate industry,” it said in a statement.
In an interview Thursday, Service Alberta Minister Stephen Khan said lawyers and real estate associations told him there was room to raise fees when compared with charges in other provinces. “We heard that independently from our stakeholders — boy you guys are really, really, really low when it comes to fees,” he told the Herald. “There’s a recognition that having the lowest fees is not a sustainable model.”
Ian Burns, chief executive of the Alberta Real Estate Association, which represents the province’s 10,000 realtors, said it has asked Service Alberta to confirm its sources when stating real estate associations were among stakeholders involved.
“(The association) 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,” he said.
In a statement Friday, Donna Babchishin, spokesperson for Service Alberta, said the ministry is in ongoing discussions with stakeholders.
“There was not a specific consultation on fee increases, considering the confidentiality of budget. However, as the minister said, the fees were proactively raised by our stakeholders several times during ongoing consultations on the modernization and delivery model for land titles,” she said.
“Over the last year of consultations and other discussions, the previous and current ministers and department staff were informed that Alberta’s fees were low compared to other jurisdictions that they were working in and that there was room for increases.