The real estate sector features prominently in the 2019 Canada Budget. The Finance Minister of Canada, Bill Morneau, has focused majorly on non-compliance of taxes in the real estate sector. The Budget was tabled on the 19th of March, 2019 as per reports and Morneau has already stated that the Government will be working to initiate crackdowns against those who are rampantly bypassing rules or evading their taxes or those who are using real estate/property for purposes of money laundering. These are factors, according to him, which contribute towards lowering the affordability of housing in Canada and deprive several prospective and needy home buyers as a result.
$37.5 million will be given to the CRA by the Canadian Government over a period of 5 years with a bid towards building four brand new residential and commercial realty audit teams. These will be based in regions with higher levels of risk and there will be special emphasis on both Ontario and British Columbia. These dedicated teams will be focusing on several aspects. These include the following:
- All sales volumes of taxpayers are reported in a timely manner for principal residences on their tax returns.
- Capital gains that arise from sales of real estate
- Money that is earned from flipping of real estate and reporting of the same as income
- Commission which is earned and reported in the form of taxable income
- Remission of the suitable tax amount (goods and services tax/sales tax) to the CRA by developers of new residential units
The Canadian Government is expecting that this new initiative will help in raising a sum of CAD68 million in a period of 4-5 years. The Government will be providing an amount of CAD1m to Statistics Canada in a period of 2 years for executing an extensive assessment of federal data requirements along with enhancing overall tracking of real estate transactions and timely information sharing. The aim in this case will be streamlining of information sharing between the provincial and federal governments with a bid for ensuring greater tax compliance and prevention of money laundering.
The real estate sector will be carefully inspected by the Financial Transactions and Reports Analysis Centre of Canada according to reports and it will be emphasizing majorly on British Columbia for smoother detection of money laundering. For assisting with costs and deposits linked to first-time home purchases, the Government will also be scaling up the amount that can be withdrawn by first-time homebuyers from their Registered Retirement Savings Plan for building/buying a new home without having to fork out taxes on the withdrawal. The amount will go up to CAD35,000 from CAD25,000 as per reports.
Other measures for the real estate sector in Canada
The Budget 2019 has focused extensively on the real estate sector in Canada and here are some of the other key aspects worth highlighting.
- The Budget 2019 aims at making housing in Canada more affordable for younger buyers or millennials.
- The First Time Home Buyer Incentive has been unveiled to this effect.
- This is an interest-free mortgage that will be shared with the CMHC (Canada Mortgage and Housing Corporation).
- This initiative covers more than billion dollars in funding and 10% of finance will be offered on the buying price of new housing units and 5% on the buying price of resale units under this initiative.
- The loan will only be available for first-time homebuyers who have household incomes lower than $120,000 annually. This may help in lowering mortgage repayments by up to $228 on a monthly basis on homes worth approximately $400,000.
- Finance Minister Bill Morneau has reiterated his intention to come up with more housing initiatives for first-time homebuyers and for millennials and families who require some assistance in owning property.
- The budget will be looking at spurring higher supply of housing units through the provision of a bigger amount of loan for new homes as compared to existing housing units.
- The bigger shared equity mortgage in case of newly built housing units may be boosting home construction volumes.
- This may go a long way towards filling up the gap of housing in several Canadian cities.
- Close to 100,000 first-time homebuyers are expected to reap the benefits of this new plan over a period of 3-4 years as per reports.
- The plan is slightly different from the B.C. Home Buyer Loan initiative that was unveiled by the B.C. Liberal Party and discontinued last year as per experts.
- The Government was expected to scale up measures for younger homebuyers and millennials in order to improve affordability levels and supply of housing at the same time.
- Higher supply will also keep prices at more balanced levels, thereby ensuring higher affordability for younger buyers, many of whom have started their careers recently.
- RRSP withdrawals for first-time homebuyers have been increased to $35,000 from $25,000 under the Home Buyer’s Plan. This will apply to non-first timers as well who are going through marriage breakdowns or even common law partnerships.
- Combined measures are expected to make the home buying process easier for younger buyers.
- The federal government will infuse $10 billion over a period of 9 years for the Rental Construction Financing Initiative till 2027-28 as per reports. This will enable the development of 42,500 brand new rental housing units throughout the country, particularly in areas which have lower supply levels.
- The Expert Panel on the Future of Housing Supply and Affordability has already been formed by the Province of British Columbia and Government and will be backed over the next 2 years with investments of $4 million and an additional $5 million for data gathering and modelling of top-notch housing supply.
- Groups and communities will also get a chance to come up with new initiatives that will help make housing more accessible. There will be $300 million of funding for the Housing Supply Challenge as part of the Impact Canada Initiative.
All in all, these measures are expected to give a major boost to the real estate market in Canada as opined by industry watchers and experts.