Both the federal and provincial governments have introduced several new legislative changes that will impact the real estate market for homeowners, homebuyers and investors.
Most of these new measures have been put in place to temper the Canadian real estate market that has been growing at unprecedented rates for more than 20 years and has caused major home affordability issues for most Canadians.
Here’s what’s new:
Foreign buyers are now banned from buying Canadian residential properties for two years
The foreign buyer ban came into effect Jan. 1 and carries a large penalty of $10,000 for anyone found breaking the rules or even assisting with breaking the rules.
One of the ongoing narratives behind the rapid appreciation in Canadian home prices is that Canadian real estate attracted foreign buyers and investors. When foreign investors purchase properties, it creates more competition for Canadian residents and citizens (and Canadian investors) so after trying, and failing, multiple times to levy additional taxes to discourage foreign buyers, there is now a total ban on foreign buyers for a two-year period.
Now, only Canadian permanent residents and citizens can purchase residential properties. However, there has been a growing list of exemptions to exclude foreign workers, some students, and even certain property types from the ban.
New anti-flipping tax
Reality TV series have been showing us for years how you can buy a property, fix it up and sell it for a profit within a short period of time. But in Canada, the Canadian Revenue Agency has been keeping a close eye on home flippers.
In the past, flippers and investors may have been able to use tax loopholes such as declaring profits from a flip as capital gains or even using the personal residence exemption, which is intended to give homeowners a tax break when selling their primary residence, Under the “anti-flipping tax” rules, the CRA will now consider all profits generated from selling a property owned for less than 365 days as personal income.
Also, under the new rules, if you have owned the property for less than 365 days, you’ll pay taxes on the full profits, at your personal tax rate. Some exceptions may apply, of course.
Cooling-off period for homebuyers
B.C. is the first province to introduce a “cooling-off period” for homebuyers. Homebuyers will now have a three-day grace period where they can change their mind after their offer has been accepted.
The three-day period isn’t meant for buyers to just walk away from a deal (in hindsight they do not like), and walking away won’t come for free. If a buyer decides to walk away during the three-day cooling-off period, they will still owe the seller 0.25% of the selling price as a “breakup” fee.
I highly recommend anyone who is looking to purchase real estate enlist the assistance of the a professional – a mortgage broker, a realtor, a real estate lawyer or an accountant.
If you have any questions regarding how the new changes will affect your mortgage qualification, please reach out to me at [email protected] or you can book a time for a chat at www.calendly.com/april-dunn.
This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.