At a time when many homeowners are bracing for mortgage renewals at much higher rates, Toronto city staff have presented a budget with a 10.5-per-cent property-tax increase.
The increase, if approved, could easily add $500 to $1,000 or more to the annual cost of property taxes in Toronto. For specifics, try a calculator on the mortgage website Wowa that shows the amount of taxes residents pay based on either assessed value or fair market value.
It’s easy to say Toronto residents can afford the increase, which could end up even higher if the city does not secure funding from the federal government to support refugees. After all, the average home price in the city in 2023 was $1.1-million. Even if you have a big mortgage on a Toronto home, aren’t you well off in terms of household wealth?
For “on-paper” calculations like net worth, the answer is yes if you have a lot of equity in your home. But in day-to-day living, housing wealth is not very helpful. A home that has risen in value does not help you pay your mortgage, or home ownership costs such as property tax, insurance, utilities or maintenance. Mortgages are a particular concern right now because a wave of renewals will happen this year at much higher rates.
You can tap into the equity in your home, but it’s expensive and thus not something to rely on for paying monthly household costs. A home equity line of credit can cost a few hundred dollars to set up, and the interest rate is high these days at around 7.7 per cent. Seniors have the additional option of a reverse mortgage, with rates at comparable levels.
There was a brisk discussion about whether Toronto homeowners can afford a 10.5-per-cent property-tax hike on the social media platform X last week. The view that Toronto homeowners are wealthy by virtue of owning a home in the city faced off protests that there’s a limit to how much homeowners can bear.
The reality here is that you can be rich on paper if you own a home in Toronto, but that won’t help you pay an increase of $500 or more per year in property taxes.
One final note on property taxes is that they’ve been rising in cities around the country. It turns out neither the federal nor provincial governments are to be feared nearly as much as cities for increasing the tax burden on households managing the impact of two years of inflation and high interest rates.
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Rob’s personal finance reading list
How to have a no-spend weekend
Advice on how to have a weekend where you don’t spend any money. The trick, it seems, is to plan ahead without spending a lot of money doing so.
Does your adviser really know you?
This article aimed at investment advisers talks about how important the personal touch is in keeping clients happy. It made me wonder, how many people feel their adviser knows them as people – their personal situation and preferences? If you feel invisible as a client, better advice is out there.
Getting to know DINKS and HENRYs
A look at two popular personal finance acronyms of the moment – DINKS, which stands for double income, no kids; and HENRY, which stands for high earner, not rich yet.
Dirty money
All about the Bank of Canada’s legit money-laundering activities – cleaning dirty or mangled bank notes. Most of this work is done for the public, but also banks and police. The author of this piece is Dean Beeby, a freedom-of-information specialist who long ago was my editor in the business department at The Canadian Press. One of the smartest editors I’ve worked for.
Ask Rob
Q: I’ve been getting periodic e-mails from my credit card provider offering me an increase to my credit limit. I pay my balance in full monthly and I don’t really need the increase but I’m wondering if it’s something that should be accepted just in case the need arises. Your thoughts?
A: You sound like you have your finances nailed down, which suggests you have resources beyond a credit card in case of a financial emergency. Can’t see a reason to raise your limit if you don’t need the extra spending room.
Do you have a question for me? Send it my way. Sorry I can't answer every one personally. Questions and answers are edited for length and clarity.
Tools, explainers, guides and charts
How to choose between the family and individual option for registered education savings plans, or RESPs. We had a family plan for our two boys and it worked well.
The Money-Free Zone
I just caught up with the 2023 song Nobody by Black Belt Eagle Scout, a.k.a. Katherine Paul, an Indigenous alt-rock singer. Dreamy vocals and power guitar really come together here.
Watch this
A news report on houses in Carleton Place, Ont., that are being sold for $400,000 less than they were listed at a few years ago, at the peak of the market. Carleton Place is a short drive west of Ottawa.
On social media
An Instagram slideshow on where home prices in Canada have dropped the most recently.
What I’ve been working on
- The Two-Minute Portfolio: Dividends plus index-beating results over the long term
- Wealthsimple is starting to look like Canada’s next big bank
- People keep making this costly TFSA mistake – and paying penalties averaging almost $1,500
More Rob Carrick and money coverage
Subscribe to Stress Test on Apple podcasts or Spotify. For more money stories, follow me on Instagram and Twitter, and join the discussion on my Facebook page. Millennial readers, join our Gen Y Money Facebook group.
Even more coverage from Rob Carrick:
- 🎧 Catch up on Stress Test: Why millennials and Gen Z are Alberta-bound for a more affordable life • Rising interest rates brought pain for new homeowners - and opportunity for house hunters • Why more Canadians are choosing to be childfree or delay parenthood • Love in the time of inflation: How to manage rising costs when dating • You're not bad at money - you're suffering from money shame • Retirement might look different for Gen Z and millennials. Here's how to plan for it • Recession-beating tips for the job market, housing, investing and the cost of life • Is the middle class dead for millennials and Gen Z?
- ✔️ The housing file: A house isn't special. Get your head straight about the reality of home ownership • The good, the sad and the unaffordable: Saving for a home downpayment in Canada's big cities • Property taxes are popping in some cities - how worried should you be about other tax hikes? • Our other real-estate problem - people have too much wealth tied up in houses • Borrowers and savers, here's how to time the eventual rollback of interest rates
- 📈 Investing: Canada's top digital broker is TD Direct Investing, with an assist from the TD Easy Trade app • 2023 Globe and Mail ETF buyer's guide part one: Canadian equity ETFs • For the ultimate in cheap investing, check out the Freedom .08 ETF Portfolio • Yes, there is risk in Canadian bank deposits for the unwary and complacent • CDIC covers bank deposits, but who protects your investments if your broker goes bust? • Answers to your questions about the low-risk ETF paying almost 5% • Happy fifth birthday to one of the all-time best investing products for everyday people • An investing strategy that wins cleanly over the long term by outperforming in bad years like 2022
- 💰 Your money: Mortgage holders, savers and GIC investors, it’s time to change your thinking on interest rates • How much debt is each generation of Canadians carrying, and how do you compare? • For the sake of their financial futures, young people should leave Toronto and Vancouver • This practical new spin on a savings account might just peel you away from your big bank • Rental fraud grows amid rise in fake, falsified tenant applications • Are Canadians worse off financially now than in the 1980s? • From groceries to auto loans, here’s how much more it costs to live right now • When saving for retirement, should you change your asset mix over the course of your career? • Do retirement income needs always rise alongside inflation? Not necessarily • When the bank suggests you lock in your variable rate mortgage, it has an angle
