Feds target housing market speculators

Tighter mortgage rules, crackdown on capital gains exemption abuse expected to help tame wild real estate market

Feds target housing market speculators




The federal government will make it tougher for speculators to profit tax-free from Canadian real estate investments, while further tightening mortgage qualification rules to help avoid excessive risk in the housing market.

The changes announced Monday by Finance Minister Bill Morneau are expected to put further downward pressure on hot housing markets such as Vancouver and Toronto.

Homes sold from now on won’t be eligible for the principal residence exemption from capital gains tax  if the seller wasn’t a resident of Canada in the year they bought the property.

Experts say that should bar foreign investors from using the capital gain exemption and also hit some Canadian citizens who have been abusing the exemption to use real estate as a tax-free investment.

The Canada Revenue Agency will now require taxpayers to report the sale of homes for which they are claiming the principal residence exemption.

NDP housing critic David Eby predicted the federal rule change could have more effect even than the B.C. government’s recent imposition of a 15 per cent foreign buyer tax on residential real estate sales in Metro Vancouver.

“I think there’s a great deal of domestic speculation in the housing market that is totally unaddressed by the foreign buyer tax,” Eby said.

“The reason people are putting money into real estate instead of shares of a company is because they can do so capital gains free.”

He suggested that with CRA auditors poised to take a harder look at potentially phony claims of the exemption, more real estate investors may shift to different investments.

Eby has been among the critics who have flagged cases of homemakers and students buying multi-million-dollar Vancouver-area homes with minimal to no declared annual income.

When those individuals sell a million-dollar home and avoid paying tax on a $300,000 capital gain, he suggested, they’ll be prime targets for “lifestyle audits” by the CRA.

The new disclosure requirement should also help the CRA unravel cases where multiple family members – mother, father and kids – are each declaring different principal residences to dodge capital gains despite a rule that a family could only declare one such property exempt.

Ottawa also unveiled a tightening of rules on mortgage insurance eligibility and a revised mortgage rate stress test that will be applied to all insured mortgages.

The revised stress test means more home buyers will have to have sufficient income to meet their mortgage payments not based on the mortgage rate a bank is offering them but based on the Bank of Canada’s posted rate for fixed five-year terms.

“That can be a two per cent difference in what you qualify for,” said UBC associate economics professor Tom Davidoff, who predicted it will make it considerably harder for buyers who are stretching to afford the biggest payment and mortgage they can get.

“I think the lower end of the market is going to feel it the most.”

B.C. Housing Minister Rich Coleman praised the federal measures.

“They are welcome steps that may help provide further fairness and stability in the market for home-buyers,” Coleman said.

Just Posted

Junior rowers with the Victoria City Rowing Club, (left to right) Teagan Zecher, Eryn Whale, Hui-Lin Shan, Willow Tzonev, Quinn Parfitt and Stella Graham, won the Rowing Canada Aviron Row to Tokyo challenge and are looking forward to getting back in the crew boats after the pandemic. (Devon Bidal/News Staff)
Young Greater Victoria rowers find community during solitary training sessions

Rowers train virtually, social distanced at Elk Lake amid COVID-19 restrictions

The Greater Victoria Rent Bank has seen an overwhelming need for financial assistance by renters. (Black Press Media file photo)
Funding will allow Greater Victoria Rent Bank to operate until March 2022

More than $300,000 distributed to 200 renters in program’s first 10 weeks

Victoria police are looking for Serene Cook after she was last seen in downtown Victoria on May 6. (Photo courtesy of VicPD)
MISSING: VicPD seeks high-risk Indigenous woman missing more than a week

Serene Cook, 38, last seen May 6 in downtown Victoria

Potatoes have two genetic centre of origins, one from the lowlands in Chile and the other from the highlands in Bolivia. The highlands potatoes flower and produce fruit profusely, which is where the seeds come from. They contribute to exciting and ecologically imporant genetic diversity of potatoes. (Submitted/Fiona Hamersley Chambers)
Metchosin farmer shares how to invent a new potato

Using seeds anyone can name their own variety

Daily confirmed COVID-19 cases reported to B.C. public health, seven-day rolling average in white, to May 12, 2021. (B.C. Centre for Disease Control)
B.C. preparing ‘Restart 2.0’ from COVID-19 as June approaches

Daily infections fall below 500 Friday, down to 387 in hospital

Chilliwack’s Kile Brown, performing as drag queen Hailey Adler, dances and lip syncs in front of hundreds of people during the inaugural Chilliwack Pride Barbecue at the Neighbourhood Learning Centre on Aug. 24, 2019. Monday, May 17 is International Day Against Homophobia, Transphobia and Biphobia. (Jenna Hauck/ Chilliwack Progress file)
Unofficial holidays: Here’s what people are celebrating for the week of May 16 to 22

International Day Against Homophobia, Talk Like Yoda Day, Sea Monkey Day all coming up this week

Sinikka Gay Elliott was reported missing on Salt Spring Island on Wednesday, May 12. (Courtesty Salt Spring RCMP)
MISSING: Salt Spring RCMP find woman’s car, still seek Island resident

Sinikka Gay Elliott is 5’3” with a slim build and dark brown short hair

Tagen Marshall of Parksville is looking to raise funds for a new specialized van. (Submitted photo)
Wolf: Parksville’s Tagen Marshall inspires others, aims to invest in himself

VIU honour student with spastic quadriplegia cerebral palsy seeks help achieving big dreams

Anyone with information on any of these individuals is asked to call 1-800-222-TIPS (8477) or visit the website victoriacrimestoppers.ca for more information.
Greater Victoria Crime Stoppers wanted list for the week of May 11

Greater Victoria Crime Stoppers is seeking the public’s help in locating the… Continue reading

A Saanich man received almost 10 years in Supreme Court in Courtenay for a shooting incident from 2018. Record file photo
Shooting incident on Island nets almost 10-year sentence

Saanich man was arrested without incident north of Courtenay in 2018

Bradley Priestap in an undated photo provided to the media some time in 2012 by the London Police Service.
Serial sex-offender acquitted of duct tape possession in B.C. provincial court

Ontario sex offender on long-term supervision order was found with one of many ‘rape kit’ items

Most Read