4 things to consider in the real estate market

We have now seen the impact that high interest rates have had on the housing market. While the number of transactions is down, affordability continues to be a problem. There isn’t a one-way solution or policy that can significantly improve the entire housing market. With that being said, there are a few things to consider in the current real estate market that can help you better understand what’s going on.

More Construction

If you are in Ontario, Canada for example, the government’s goal is to build 1.5 million homes in the next decade. To help achieve this number, there are proposed changes to zoning laws that exclude certain single-family neighbourhoods thus allowing them to turn their homes into multi family housing. There could also be reduction in levy costs that are charged to the builders. Reducing building costs means more houses faster.

Foreign Buyer’s Ban

Canada has implemented a 2-year ban on non–resident home buyers as of January 1^st, 2023. Although the ban has exemptions and does not apply to every type of property, the ban was brought in with the intention to house Canadians first. Refugees claimants, non-Canadians with a work permit and international students are some of the groups that are exempt from this group. Believe it or not, foreign owners make up a small percentage of home ownership across Canada. So the impact will be minimal.

Anti-Flipping

Home owners selling a home that they have owned for less than 12 months will be charged a sales tax. Profits from flipping properties will now be fully taxed as business income as though the seller had earned the income from another employment. The sale of a primary residence falls under the Principal Residence Exemption. However, there is a criteria that must be met to qualify, such as actually living in the home for a specific period of time. Investment properties will also be subject to this full tax instead of capital gains if sold under the 12-month period. The theory here is that flipping houses keeps homes vacant for longer periods of time and fuels increasing house prices. As with any rule, there are exemptions to this tax such as death, disability and divorce to name a few.

Vacant Home Tax

Any home owner with a vacant home will now have to pay a vacant home tax. In a housing crisis with low supply, this tax was built to motivate investors to either rent or sell their home. Therefore creating more housing options. There is a form that every home owner must fill out declaring if their home is vacant or occupied. The vacant tax amount is 1% of the home’s assessed value. The intention here is to maintain a health real estate market.

Feature image by Binyamin Mellish