The Minister of Finance of Canada, Chrystia Freeland, has chosen to devote a large part of her budget to housing and the real estate market, marked by an imbalance between supply and demand and in the light of successive increases in interest rates of interest. Here are four measures that have just been announced to make home ownership more accessible.
• Read also: Billions of dollars to polluters to fight climate change
1 – Prohibition for foreigners to buy properties in the country for 2 years
This measure, promised by the Liberal government during the last election, aims to prohibit non-Canadian investors from buying residential properties in the country for two years.
According to the Liberal election platform, this is to allow Canadians to have “broader access to the purchase of properties” and to ensure that “investments by foreign buyers do not prevent Canadians from having access to housing” that this new regulation has just seen the light of day.
“It’s a fantastic idea to try to artificially modify demand, which is currently very strong,” says Dominic St-Pierre, Vice-President and General Manager at Royal LePage, in an interview with the 24 hours.
The real estate expert doubts, however, that this one-off measure will have major effects on the market as we know it. Before the pandemic – when foreign buyers were numerous – only 4% of real estate transactions carried out on the island of Montreal were made by foreign buyers. However, this issue is much more problematic in Vancouver and Toronto, where a 1% tax has been imposed on non-Canadian and non-resident owners of vacant or underused residential properties since January 1, 2022.
2 – Create a Tax-Free Housing Savings Account
This new measure will allow Canadians under 40 to save up to $40,000 ($8,000 per year) toward the purchase of their first home, tax-free. A way to accumulate your down payment more quickly.
Unlike the Home Buyers’ Plan, better known as the HBP, these accumulated funds do not need to be repaid, but just like the TFSA, withdrawals remain tax-free. The best of both worlds at first sight.
For Dominic St-Pierre of Royal Lepage, this measure could aggravate the real estate overheating that we have known for two years.
“By giving more purchasing power to the consumer, we will allow him to pay more for his properties and that will create more demand.”
Note also that the tax credit for the purchase of a first home will be doubled, thus making it possible to receive $1,500 rather than $750, and this, retroactively to January 1, 2022.
Royal Lepage
Dominic St-Pierre, Vice-President and General Manager at Royal LePage
3 – Prohibition of blind takeover bids
To curb real estate speculation, the Minister of Finance has announced that she wants to prohibit buyers from making a blind purchase offer, a very common practice in situations of multiple offers.
Blind sales prevent buyers from knowing the conditions of offers submitted by their competitors, which fuels overbidding.
“It’s extremely frustrating for buyers who experience multiple offer situations 6 or 7 times in a row and whose offer is constantly refused without knowing why”, explains Dominic St-Pierre, who says to himself “for more transparency on offers”, but skeptical about the real consequences in the market.
“We do not expect this to reduce the number of multiple offers and even that it will rather get worse. If each buyer knows what the other is offering, it will encourage overbidding,” the expert believes.
• Read also: Oil is still oil: let’s bring our politicians to their senses
4 – Imposed real estate “flips”
If you are thinking of buying a building, renovating it and reselling it for a profit, you should know that from next year you will have to pay tax on the profit from your sale if you resell your property less than 12 months after buying it.
This measure aims to curb the real estate speculation encouraged by these rapid resales.
Exceptions will apply, in particular for a death, the birth of a child, a new employment or a divorce, for example.
-With Marc-Andre Gagnon