How Rising Tax Burdens Are Crushing Canadian Home Buyers: The Nova Scotia Reality

Canadian families now spend 42.3% of their income on taxes versus just 35.5% on housing, food, and clothing combined. This unprecedented tax burden is making homeownership increasingly unattainable, especially affecting first-time buyers and creating ripple effects throughout Canada's real estate markets, including Nova Scotia's rapidly appreciating housing market.

The Staggering Reality: Taxes Now Outweigh Basic Necessities

The Fraser Institute's 2025 Canadian Consumer Tax Index reveals a shocking reversal in Canadian household spending priorities. For the first time in modern history, the average Canadian family spends more on taxes than on their most basic necessities combined.

By the Numbers:

• 42.3% of income goes to taxes (all levels and types)
• 35.5% goes to housing, food, and clothing combined
• $48,306 average tax bill for families earning $114,289

Since 1961, taxes have grown by an astronomical 2,784%, far outpacing:

• Housing costs: 2,129% increase
• Food costs: 927% increase
• Clothing costs: 460% increase
• General inflation (CPI): 925% increase

Canada's Tax Burden: Among the World's Highest

The 42.3% total tax burden faced by Canadian families places Canada among the highest-taxed countries in the developed world, significantly exceeding what families pay in most other wealthy nations.

International Tax Burden Comparison (2024):

Country
Family Tax Burden (%)
Belgium
44.8%
Canada
42.3%
France
41.0%
Germany
40.9%
OECD Average
29.5%
United States
~25%
New Zealand
18.6%
Korea
18.3%
Switzerland
17.1%
Israel
15.6%
Chile
4.4%
Colombia
5.2%

Note: OECD figures represent "tax wedge" measures for typical two-earner families. The Canadian number tracks all taxes at all levels and is considerably broader, making direct comparison indicative but not exact.

Key Insights:

• Canada's tax burden is 12.8 percentage points higher than the OECD average
• Canadian families pay nearly 70% more in taxes relative to income than the typical OECD family
• Only Belgium exceeds Canada's total tax burden among major developed economies
• Countries like Switzerland, Korea, and New Zealand achieve high living standards with tax burdens less than half of Canada's

The Housing Market Squeeze: Multiple Pressures Converging

The international comparison makes Canada's housing affordability crisis even more stark. While Canadian families pay 42.3% of their income in taxes—among the highest in the developed world—they still face some of the most expensive housing markets globally. This creates a devastating double burden that doesn't exist in many peer countries.

1. Reduced Purchasing Power

When nearly half of a family's income disappears to taxes, the amount available for a down payment, monthly mortgage payments, and homeownership costs shrinks dramatically. This creates a situation where even with lower mortgage rates, affordability challenges continue to act as significant counterbalances to the stimulative effects of lower interest rates.

2. The Development Tax Crisis

The tax burden now accounts for 36% of the cost of a new home in Ontario, with the average tax burden on the final purchase price jumping from 31% just three years ago to almost 36%. For a typical Ontario home priced at $1,070,000, buyers now pay nearly $381,000 in various taxes and fees.

This massive tax load includes:

• Income taxes on earnings used for down payments
• Corporate taxes passed through to buyers
• Sales taxes (GST/HST)
• Land transfer taxes
• Development charges and municipal fees

3. Supply-Side Constraints

High fixed fees and development charges squeeze developers' profit margins and therefore their ability to invest in diverse housing projects. This reduces housing supply precisely when demand is increasing, creating upward pressure on prices.

Nova Scotia: A Microcosm of National Challenges

Record-Breaking Prices Amid Growing Unaffordability

Nova Scotia achieved record-breaking home prices in May 2025, with the average home price reaching $493,136—a 6.1% increase year-over-year. Halifax specifically hit $626,156, maintaining a 5% annual increase.

The Affordability Crisis Hits Home

Statistics Canada data shows 66% of Nova Scotians faced challenges with their housing in 2024, with 41% of people "very concerned" about their ability to afford housing because of rising housing costs or rising rent.

Even in Halifax, previously considered one of Canada's more affordable markets:

• Home prices are expected to increase by 5% in 2025
• Halifax's homeless population reached 3,295 individuals as of March 2025, an increase from the previous week
• Housing inventory sits at just 2.3 months, meaning if no new properties were listed, all available homes would sell within that timeframe

Tax Policy Responses—But Are They Enough?

Nova Scotia's government has responded with some relief measures:

• Plans to reduce provincial HST from 15% to 14% starting April 1, 2025
• Increases to basic personal amount, spousal amount, and eligible dependent amount for tax filers
• Doubling the non-resident Deed Transfer Tax from 5% to 10% effective April 1, 2025

However, Nova Scotia expects to run a larger $898-million deficit in fiscal year 2025-26, with the debt-to-GDP ratio expected to rise to 40.9% by 2028-29, potentially limiting future tax relief options.

Impact on Different Types of Home Buyers

First-Time Buyers: The Hardest Hit

First-time buyers face a perfect storm:

• Higher savings requirements: With taxes consuming 42.3% of income, accumulating a down payment takes longer
• Reduced mortgage qualification: Lower after-tax income means qualifying for smaller mortgages
• Development charge burden: For homes priced at $450,000—an amount which aligns with what many households could afford based on median pre-tax household incomes—the average tax burden rises sharply to 45.2%

Move-Up Buyers: Trapped by Transaction Costs

Existing homeowners looking to upgrade face:

• Land transfer taxes on new purchases
• Legal and transaction fees
• Capital gains considerations on investment properties
• Higher property taxes on more expensive homes

Investors: Policy Pushback

REITs, whose primary goal is to increase distributions to investors, now own over 200,000 residential rental units in Canada. Because rental income is factored into real estate property values, preferential capital gains taxation also increases the incentive for financialized landlords to increase rents.

However, policy responses are targeting investors:

• Higher non-resident buyer taxes
• Speculation taxes in some provinces
• Reduced tax advantages for certain investment structures

Market Dynamics and Regional Variations

National Context

MLS® sales are expected to increase in 2025, with previous strength in income and population growth, and less burdensome mortgage rates helping to offset poor affordability conditions.

However, the recovery is uneven:

• The housing markets in Ontario and British Columbia are particularly unaffordable, with sales expected to remain below their 10-year averages
• Ontario and British Columbia's benchmark prices remained in negative territory annually, while all other provinces saw year-over-year growth

Atlantic Canada's Unique Position

Home prices in Nova Scotia were still 65% above their pre-pandemic level—one of the largest gaps in Canada, yet the province remains relatively affordable compared to major urban centers.

Key advantages:

• Lower absolute prices than Toronto/Vancouver
• Nova Scotia sits in balanced market territory with a 53% sales-to-new-listings ratio
• Growing economy and population

Key challenges:

• Lacklustre supplies have fuelled the upward trajectory for Nova Scotia real estate prices
• Increasing out-of-province buyer competition
• Infrastructure strain from rapid growth

Long-Term Implications for Canadian Real Estate

1. Generational Homeownership Decline

High tax burdens combined with housing costs are pushing homeownership out of reach for many young Canadians. Research shows that affordable houses require more focus on the supply side of the market to reduce the shortage, which conflicts with government's goal of generating more tax revenue since property tax is linked directly to real estate market prices.

2. Regional Migration Patterns

Many new buyers want prices to decrease to better afford a home, while sellers want them to stay higher for obvious equity reasons. This creates migration pressure from expensive markets like Toronto and Vancouver to more affordable regions like Atlantic Canada.

3. Rental Market Pressure

Unable to buy, more Canadians are forced into rental markets, driving up rents and reducing vacancy rates. Halifax's rental market is entering 2025 with strong momentum, with average rent increasing by 4.8% in December 2024 compared to the previous year.

Policy Solutions and Recommendations

Tax Reform Priorities

Canada's position as one of the world's highest-taxed countries while simultaneously facing a housing affordability crisis demands urgent reform:

1. Reduce Development Charges: High development charges squeeze developers' profit margins and reduce housing supply
2. Streamline Tax Complexity: Simplify the multiple layers of taxation on housing transactions
3. Income Tax Relief: Expand basic personal exemptions to leave more income available for housing costs
4. International Best Practices: Study lower-tax OECD countries like Switzerland and Korea that maintain high living standards with tax burdens less than half of Canada's

Supply-Side Solutions

1. Infrastructure Investment: Federal and provincial governments must get more involved in funding public infrastructure at local levels to support growth and ease the tax burden
2. Zoning Reform: Allow higher-density development to spread infrastructure costs over more units
3. Streamlined Approvals: Reduce time and cost of development approval processes

Market Stabilization Measures

1. First-Time Buyer Support: Enhanced down payment assistance programs
2. Speculation Controls: Targeted measures for non-resident and speculative buyers
3. Purpose-Built Rental Incentives: Tax advantages for purpose-built rental construction

Looking Ahead: 2025 and Beyond

Short-Term Outlook (2025-2026)

• MLS® sales are expected to increase, but growth will be limited by fewer investors and affordability challenges faced by first-time homebuyers
• Housing starts will slow down from 2025 to 2027 mainly due to fewer condominium apartments being built
• Interest rate decreases may provide some relief, but won't solve underlying affordability issues

Medium-Term Challenges (2026-2028)

• Canada needs to build around 430,000 to 480,000 new homes annually by 2035 to restore affordability
• Growing government debt may limit future tax relief options
• Climate change adaptation costs will add to housing expenses

Long-Term Solutions

The path forward requires coordinated action:

• Federal: Income tax reform and infrastructure investment
• Provincial: Streamlined approvals and reduced regulatory burden
• Municipal: Development charge reform and zoning modernization
• Private Sector: Innovation in construction methods and financing

Conclusion: A Call for Comprehensive Reform

The Fraser Institute's findings reveal a fundamental shift in Canadian household economics that puts Canada among the world's most heavily taxed countries. When taxes consume 42.3% of family income—12.8 percentage points higher than the OECD average—the dream of homeownership becomes increasingly elusive for average Canadians.

This places Canadian families in an uniquely challenging position globally: they face both among the world's highest tax burdens AND some of the most expensive housing markets. Countries like Switzerland and Korea demonstrate that high living standards are achievable with tax burdens less than half of Canada's.

Nova Scotia, despite remaining more affordable than major Canadian cities, exemplifies the national challenge. With housing prices expected to increase 5% in 2025 and 66% of residents facing housing challenges, even traditionally affordable markets are feeling the squeeze.

The solution requires recognizing that housing affordability isn't just about interest rates or supply shortages—it's fundamentally about how much income families have left after meeting their tax obligations. Until policymakers address the 2,784% growth in tax burden relative to basic necessities, Canadian real estate markets will continue to price out the very families they're meant to serve.

For prospective homebuyers in Nova Scotia and across Canada, the message is clear: factor tax planning into your homebuying strategy as much as mortgage rates and down payment savings. The Canadian dream of homeownership now requires navigating not just real estate markets, but the complex web of taxation that increasingly defines our economic reality.

Looking to buy or sell in Nova Scotia's evolving market? Understanding these tax implications and market dynamics is crucial for making informed real estate decisions in 2025 and beyond.