Real-estate market 'almost at a crisis situation'

[JBen]

New for 2016 the Feds have changed the capital gains tax on houses, primary dwellings. So starting this year if you've sold your house you have to include it on your return ( I did). Thankfully over the years I never claimed any part of my house as office space etc. Else there would be significant taxes owing......I imagine there is going to be a lot of kicking and screaming over it, but it makes sense. If you've been claiming 10-15-20% of your primary dwelling as office space, and that same has increased in value over the years, then it should be taxed as a CG when it's sold. No differently than an office that's separate from the primary residence.

There is a lot of speculation ( when theres that much smoke, theres usually a fire) that more changes are coming to capital gains taxes. We find out very very soon.

I will not be at all surprised, if there is significant changes to capital gains relating to real estate. And they might be significant enough to make many investors (land lords and would be land lords) think twice....or thrice. It's one thing to pay tax on 50% of any capital gain, it's quite another when more of its taxable, and there is always the possibility of a correction or loss. Wouldn't be surprised if there are changes to rental income as well. How many "investors" have bought property and either sat on them or flipped them in the past 4-5years and pocketed a ton of money. Most of it, "tax free".

All kinds.

That will cool the market.

[JBen]

http://www.moneysense.ca/save/taxes/...2017-finances/

[werner.reiche]

JBen - just went through this discussion on another forum. The rules re: capital gains have not changed and there are no plans to change them. They are trying to find a way to enforce them. Specifically, if you are claiming CCA for floor space in your home for a home business (WHICH YOU SHOULD NOT BE DOING), you will owe capital gains tax on that floor space. That is fair and reasonable. Also if you significantly modify your home to accommodate your home business, those modifications are taxable.

[Bluebulldog]

I'm fortunate. I live in a bungalow just outside the GTA, which has seen it's value grow exponentially in the past 2 years.

I leveraged a small part of that equity, and paid off all of the unsecured debt we were carrying as a family. ( Not a lot however). Our family isn't growing, and our house is a modest size ( 1700 SqFt). Due to the nature of my employment, I'll remain in-situ until I retire. At which point, despite any market volatility, I should have a tidy return on my investment. I will then relocate to an area which has low property values. ( I'm very surprised that it has stayed that way, but glad nonetheless. Jben you've been there with me).

I do however dispair for the younger generation coming up. I worry about my son, and his ability to chase his dream when he gets to that age.

[JBen]

I may not have worded it well Werner.
"where theres smoke theres fire"

I was using CCA on home based businesses, to lend credence to the speculation that there will be more changes with respect to CG taxes on residences. What is new for the 2016 calendar year was indicating on your return if during 2016 you sold your primary residence and the disposition.........Whether you have or haven't claimed any CCA in past.

[JBen]

BBD.
Yep and in possibly 5 years time we might be your neighbour ( that area along with two others are the target zones) . Our 5-10 year plan involves one more move. There's a chance this is our forever home and we have fallen for it and the area deeply. But the plan has always been one more move. Really depends on me, and employment or income.

[werner.reiche]

I may not have worded it well Werner.
"where theres smoke theres fire"

I was using CCA on home based businesses, to lend credence to the speculation that there will be more changes with respect to CG taxes on residences. What is new for the 2016 calendar year was indicating on your return if during 2016 you sold your primary residence and the disposition.........Whether you have or haven't claimed any CCA in past.

Agree on the smoke/fire thing. But as of 2016, there haven't been any changes to the taxation laws - only what has been reported. I do know of people who have skirted the law re: no capital gains on the principal residence, so I see this mandatory reporting as a good thing.

[Hawkman]

Well... I have managed to avoid getting involved in this discussion so far, but as a full time realtor for the past 12 years, I get emails such as the one below and I thought I should share it today:

On March 22, the Government of Canada released their 2017 budget, which included several provisions related to housing and the real estate industry.

Pulling from summaries provided by the Ontario Real Estate Association (OREA) and the Canadian Real Estate Association (CREA), below is a summary of the provisions included (and excluded) in budget 2017.

What Was Included

$11.2 billion over 11 years to National Housing Strategy
$11.2 billion will be invested over 11 years to build, renew and repair Canada's affordable housing stock. The Canada Mortgage and Housing Corporation (CMHC) will be responsible for implementing a series of initiatives identified by various stakeholders as part of the National Housing Strategy consultation process, in which TREB took part in the fall of 2016.

$39.9 million over 5 years for a Housing Statistics Framework
The creation of a Housing Statistics Framework was promised in the budget. The proposed framework will include a nationwide database of all properties in Canada and data from the framework will be published by Statistics Canada starting in the fall of 2017. The Framework will also provide up-to-date information on purchases and sales, including the degree of foreign ownership, as well as information on homeowner demographics and financing. This data will allow policymakers to accurately analyze the housing market.

$5 billion over 11 years for a National Housing Fund
CMHC will receive funding to address housing issues by prioritizing support for vulnerable citizens.

$67.5 million over 4 years for Energy Efficiency Programs
In addition to the creation of a national program to review existing building codes, retrofit existing buildings and build new net-zero buildings, the $67.5 million will also be used to renew and continue existing energy efficiency programs.

Commitment to Study the Utility of Personal Real Estate Corporations (PRECs)
OREA noted that the federal government's decision to study the utility/use of private corporations doesn't preclude Ontario from acting to permit PRECs but the decision could make it more difficult for OREA to effectively lobby for this at the provincial level.

Changes to Legislation on Anti-Money Laundering and Anti-Terrorist Financing Regime
The government reinstated their commitment to strengthening the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTF) by making changes to the legislation. These changes would focus on compliance and the functionality of the legislation.

What Wasn't Included

Changes to Capital Gains Tax
Despite much speculation that the budget would see an increase in the capital gains tax inclusion rate, the federal government opted to keep the rate at 50%. Instead of raising the inclusion rate, the government has stated that it will issue a consultation paper on the use of tax planning strategies involving private corporations that allow high-income earners to reduce personal taxes.

In light of this, OREA has noted that the chances of Ontario introducing its own demand-side tax measure to try and cool the housing market have increased. OREA further suggests that when Ontario releases its budget in April, it is expected that the province will introduce a number of measures to address affordable housing, including a possible measure to curb speculation and/or foreign buying activity in the housing market.

CREA has noted that they will monitor this issue closely and participate as necessary.

Changes to Home Buyers Plan
The budget did not include a provision for the extension and indexation of the Home Buyers' Plan (HBP), an issue TREB and CREA have long lobbied for. Given the recent changes to mortgage rules amid federal government concerns about home prices, CREA notes that they did not expect this provision to be included. CREA will continue to press for improvements to the HBP in meetings between PAC representatives and MPs at CREA PAC Days this fall and TREB will join them in this endeavour.

What's Next
As CREA notes, the 2017 federal budget did not further tighten housing market regulations. The government has mentioned that changes announced in October 2016 are expected to have a modest, temporary impact on housing in the short term and that the government is ready to further adjust the housing finance framework, if and as required.

[BIG MAC]

Well the search is over ( wipes brow ) , got lucky and found a place yesterday, first day on market for this house, supposed to have an open house today and tomorrow but asked agent if they would accept offers before and the answer was YES. My thinking is these people really didn't want to face the onslot of a 2 day open house with lots of strange people coming through their house. Found out they had 3 bidders so a 33 1/3 chance of getting the house, better than the 8% chance on the last one, went in at 9 % over asking and got LUCKY. 4 month closing so saves us a lot of CASH in carrying the second house so all in all ahead of the game, and got the house we WANT, not something we would have SETTLED on. All in all a Good Friday and now can delete about 20 alerts I was getting every day. Glad to get that out of the way as Windsor is getting crazy as well, agent said someone paid $100, 000. + over asking on a place just last week, so now onto getting ready to sell at this end sometime this summer.

[73hunter]

We live in a subdivision that was developed in the late '70's/early '80's, bought here in 2009 and all the houses very similarly priced were going for +\-$250K.....we've been watching the steady increase but all the neighbours were shocked when a house sold yesterday for $510K !!

Absolutely nuts