the Budget 2021 won’t make Canadian real estate more affordable for homebuyers, but consumers have dodged a political ‘bullet’ after much speculation about changes to the capital gains tax exemption or other measures aimed at cooling the booming Canadian housing market.
The federal government has introduced the following budget items related to housing:
- $ 2.5 billion to Canada Mortgage and Housing Corporation over seven years to fund the Quick Housing Initiative, the Affordable Housing Innovation Fund, the Canada Housing Benefit and the Federal Initiative community housing
- $ 1.3 billion, advanced and reallocated to previously announced funding to build and repair units and convert commercial space into rentals
- $ 3.8 billion to build, repair and support 35,000 affordable housing units
- Tax based on the proposed 1% value on vacant dwellings across Canada owned by non-resident foreigners
The budget does little to address the serious housing shortage in the Canadian housing market. In fact, the only measure that would affect the resale market is the one per cent tax on non-resident residential properties owned by non-Canadians that are considered vacant or underutilized, effective January 1, 2022.
This tax is unlikely to affect most Canadian real estate markets, given that speculators are not a factor, according to a recent study by RE / MAX. In a recent survey of RE / MAX brokers and agents, 96% said end users were the main buyers of homes in their area and speculators were not a factor in the price hike.
RE / MAX is in line with the federal government’s additional commitment to continue to build affordable housing and allocate funds to address urgent housing issues. However, Canada still lacks a national housing strategy that would increase supply and help cool the market in the most efficient way possible. Failure to comply with conventional changes in tax and / or mortgage policies, as has been rolled out in the past and reintroduced in this budget as a tax on foreign buyers, will not provide a long-term solution to the crisis. affordability of housing in Canada.
Only by roughly increased supply in the Canadian housing market to reach the majority of home buyers, make all purchases conditional on financing reduce the financial overextension of buyers, and implementing regulations concerning the quotation price thresholds, will we find the answer to the cooling exuberance that surrounds Canadian real estate.
Yes, we have a problem given the unprecedented levels of activity in the Canadian real estate market – from soaring prices coast-to-coast, spurred by overwhelming demand, to profound affordability challenges. housing. While COVID-19 made this much more pronounced, the issues facing the Canadian housing market were brewing long before the pandemic hit.
Previous government interventions have had many unintended consequences that have actually exacerbated our current situation. In many ways, Canadian real estate is still reeling from the pent-up housing demand of 2017, when cooling measures such as the foreign buyers tax and the mortgage stress test caused many homebuyers to back down. the gap. People bided their time and in many cases saved their money in an attempt to come back to the market at a later date.
That time has come, in large part because of COVID-19. The self-reflection of Canadians on everything to do with quality of life, coupled with record household savings and abundance of “cheap money” thanks to low interest rates, created the problem that we know today.
Cooling measures used by the federal government in the past have certainly offered some relief in the short term, but failure to address the housing supply means this problem will continue to reoccur in the long term. Without helping cultivate a much healthier balance between supply and demand, all other government interventions will be mere one-off remedies.