The Federal Government has released Budget 2022: A Plan to Grow Our Economy and Make Life More Affordable (the “Budget”). In connection with the Government’s efforts to make housing more affordable and available to all Canadians, the Budget introduces several measures that will impact real estate across the country. The following is a brief, high-level summary of some of these measures.
Home Buyer’s Bill of Rights
Over the next year, the Government, working together with the provinces and territories, plans to develop and implement a Home Buyers’ Bill of Rights. This Bill is set to include, among other things:
- potential rights afforded to buyers to conduct home inspections;
- additional transparency on sale price history; and
- an end to blind bidding in Canada (this involves buyers submitting offers to sellers, where sellers can opt not to disclose the details of other bids).
Ban on Foreign Investments in Canadian Real Estate
The Budget proposes a two-year prohibition on foreign commercial enterprises and people who are not Canadian citizens or permanent residents from acquiring non-recreational residential property in Canada. Exemptions to this ban are expected to include refugees, individuals in Canada on work permits, and international students on the path to permanent residency.
Tax on Property Flipping
The Budget imposes new tax rules on property flipping. Specifically, any individual selling a property that has been held for less than 12 months would be deemed to be “flipping” that property and would be subject to full taxation on any profits as business income. The measure would apply to residential properties sold on or after January 1, 2023. Exemptions would be available for Canadians who sell their home due to certain life events or hardship circumstances.
Taxing Assignment Sales
As discussed in our previous article, GST would apply to all assignments of newly constructed or substantially renovated residential property, effective May 7, 2022.
Measures for First Time Homebuyers
The Budget introduces a new Tax-Free First Home Savings Account, which is available for first-time homebuyers, allowing tax-deductible contributions (like an RRSP) of up to $40,000. Withdrawals for the purpose of purchasing a first home would also be non-taxable.
In addition, the First Time Home Buyers’ Tax Credit would be increased from $5,000 to $10,000, and would apply retroactively to homes purchased on or after January 1, 2022.
Increasing Housing Supply
As part of its initiative to increase housing supply in Canada, the Government is proposing to provide $4 billion over five years to the Canada Mortgage and Housing Corporation to create a new Housing Accelerator Fund. The aim of the Fund is to create 100,000 new housing units over the next five years, with flexibility to address the needs and realities of cities and communities across Canada.
Clark Wilson’s Commercial Real Estate team will update and provide more information as these proposals are implemented and as further details are revealed.