Feds target housing market speculators

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




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

West Coast’s FM radio licences up for renewal

Deadline for comments on broadcasting rights for both Tofino and Ucluelet is July 29.

Ucluelet set to celebrate Pride on Saturday

Pride Walk begins at Ucluelet’s Army, Navy and Air Force Veteran’s Club at 6 p.m.

Tofino mourns sudden loss of municipal councillor and community champion

Longtime resident Dorothy Baert died on Wednesday.

Short documentary showcases Chez Monique’s on Canada’s West Coast Trail

“The story we are trying to share is of the loving haven they created and sustained for decades.”

Confirmed case of Parvovirus could spread through Tofino-Ucluelet puppy population

“We need to keep this contained and the animals within communities need to stay at home.”

Rich the Vegan scoots across Canada for the animals

Rich Adams is riding his push scooter across Canada to bring awareness to the dog meat trade in Asia

Canadian high school science courses behind on climate change, says UBC study

Researchers found performance on key areas varies by province and territory

Six inducted into BC Hockey Hall of Fame

The 26th ceremony in Penticton welcomed powerful figures both from on and off the ice

RCMP investigate two shootings in the Lower Mainland

Incidents happened in Surrey, with a victim being treated at Langley Memorial Hospital

CRA program to help poor file taxes yields noticeable bump in people helped

Extra money allows volunteer-driven clinics to operate year-round

Recall: Certain Pacific oysters may pose threat of paralytic shellfish poisoning

Consumers urged to either return affected packages or throw them out

How a Kamloops-born man helped put us on the moon

Jim Chamberlin did troubleshooting for the Apollo program, which led to its success

Sexual harassment complaints soaring amid ‘frat boy culture’ in Canada’s airline industry

‘It’s a #MeToo dumpster fire…and it’s exhausting for survivors’

How much do you know about the moon?

To mark the 50th anniversary of the first lunar landing, see how well you know space

Most Read