WHAT’S TAX GOT TO DO WITH IT?
The federal government finally released their budget. While it’s taken quite some time to get this document out, it’s not what you and I would call a budget. It’s more of a statement of intention on what the government wants to spend money on versus trying to match income, expenses and priorities.
At the end of the day, what matters most here is that they still intend to provide a lot of funding to help the country survive and rebound from the pandemic-induced recession we’ve been in.
It’s important to note that there’s a lot of money being spent and debt being taken on by the country, and that means you and I, and our kids, will be asked to pay for this down the road.
I’m ok with most of this.
I’m also ok with the fact that the government didn’t try to intervene with housing in a significant way.
It’s been a pretty unbelievable ride for the national and Guelph real estate market these past 18 months. Thankfully the feds chose not to jump in and try to “fix” things.
Why not, you may ask?
The government has limited tools to fine tune programmes and markets like the real estate market – namely, regulation, interest rates, and of course, taxes. In the case of our current market, I firmly believe that the correction is already upon us and we’re seeing early signs of a market settling down and becoming more rational.
So what did this budget address in the housing market?
A new national tax on non-resident, non-Canadian owned residential real estate that is considered to be vacant or underutilized, or as the government named the programme, A Tax on Unproductive use of Canadian Housing by Foreign Non-Resident Owners.
According to summary documentation, this tax will be 1% of the value of the property, if the property is vacant or underutlized. It can could be avoided if the property is rented for a minimum period during the year. The thinking here is that the non-resident foreign owners of residential property in Canada will rent out these properties instead of leaving them vacant or underutilized, instead of paying the 1% tax.
Of course like every new programme there are a ton of unanswered questions. What does underutilized look like in the eyes of the government? Who gets to define what vacant is? Who will determine the value of the property for this tax, and enforce it? Lots of questions and very few answers so far.
This will have zero impact on the Guelph real estate market. Foreign nations that own residential properties here can likely afford the tax, and much like the foreign speculation taxes that have been implemented over the past few years, it is part of the cost of ownership and sheltering wealth. We won’t see a flood of properties coming on the market. Nor do I see a lot of these “vacant or underutilized” homes becoming available for rent.
This tax will likely cost more to implement and enforce than it will collect. The skeptic in me says it'll become another nameless and faceless bureaucracy that will be added to an already massive government.
The government also announced the creation of a new programme to focus on helping eligible homeowners and landlords with green-friendly upgrades and renovations. CMHC will administer this programme with interest free loans up to $40,000 to undertake retrofits that are identified through an energy audit.
You might recall from a few years ago one of the Liberal governments proposed that all residential homes would require an energy audit be conducted prior to going on the market.
The impact of this programme, while it fits in nicely with the government’s focus on being green, will not impact the real estate market in a meaningful way.
A home that is more efficient will sell faster and likely for more than a home that doesn’t have these features. A programme such as this does nothing to alleviate the low inventory levels or high prices we find in our current market.
There are a number of other initiatives that were buried in the massive document. You can expect the minimum qualifying rate for uninsured mortgages to be adjusted upwards, as one example.
If you sell a property, especially an investment property, expect that you will have to register the sale with CRA to determine any applicable taxes. A lot of property flippers have been avoiding capital gains tax with the rapid turnover of properties.
They say the devil is in the details. At 725 pages, there’s a lot of opportunity and information to pour through. The good news is that we now at least know what the government is planning. The maybe not-so-good-news is we now know what the government is planning.
THE PAST WEEK IN THE GUELPH REAL ESTATE MARKET
This past week in our local market, 54 homes were sold – a significantly busier week than the same week in 2020, where 29 homes sold. It is relevant to note that last week, 68 homes sold, and during the same week in 2019, 41 homes sold. We are now overlapping with the “market pause” we saw in Spring 2020, and so we’re taking a look at the median home stats in reference to a few other key weeks. See those comparisons below:
FEATURED PROPERTY:
459 COOPER STREET
CAMBRIDGE, ON
3+1 BED / 2.5 BATH / 1,952 SQ FT
Simply lovely! This Hespeler family home is warm and spacious, with a variety of flexible spaces throughout the three levels. Located on a generous corner lot (80’ x 115’!) with a park-like backyard, full privacy fencing, and a spacious back deck coming off the dining room. If you haven’t already fallen in love with Hespeler village, you certainly will! Shopping and dining, strolling along the many trails and parks, and great schools make for a lovely small town lifestyle – and just minutes to the 401, Cambridge, and Guelph.
Contact listing agent for inquiries & showings:
Jeff Moisan (519) 760-3227
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