Federal Finance Minister Joe Oliver yesterday delivered the 2015 Federal Budget to a predictably mixed reception. But what we at REW.ca always want to know is: What, if any, effect will this have on the real estate market and local home buyers, sellers and owners?
Well, nothing huge. Most home owners, home buyers or sellers will see no changes directly trickling down from this budget. But there are three changes that could affect some people when it comes to buying, selling or owning properties.
Mortgages and Personal Finance
First, and most conspicuous by its absence, was the notable lack of changes in mortgage regulations. It had been widely speculated that Oliver would impose fresh restrictions to cool off what many see as Canada’s overheated housing market. But in fact Oliver made it clear that he does not consider most of Canada to be overheated, and that even the two hottest cities, Vancouver and Toronto, are showing enough strength to support their highly active markets.
“There has been an appropriate and desirable moderation in housing activity in most regional markets across Canada,” according to the budget document. “Toronto and Vancouver, in contrast, have continued to experience periods of strong sales and price growth, with housing market strength in these cities supported by such factors as population growth and land scarcity.”
Instead, Oliver opted to spend about $250 million a year on almost doubling the annual TFSA contribution limit to $10,000 from $5,500.
This should help not only those middle- to high-income earners who can afford to max out their TFSAs, but also those saving for a down payment on a home. Instead of putting all their funds into an RRSP so they can use the Home Buyers’ Plan to borrow funds for a down payment, first-time buyers taking that money from a TFSA won’t be required to pay it back.
Real Estate Investment Proceeds
If you’re like most people who own (or are looking to buy) just one home, this next change won’t affect you. But if you’re a real estate investor, especially those in a high tax bracket, here’s a new twist on capital gains tax.
Any profit made from the sale of a real estate investment – a property that is not your primary residence – will not be subject to capital gains tax if it is donated to charity. There is no requirement to donate all of the proceeds but tax relief will only apply to the donated portion.
For many low-level investors and house flippers, this would not be financially beneficial (unless you were planning on donating the money anyways). But the new rule could have some tax advantages for those in the high brackets, particularly commercial and multi-family unit investors.
This change will not come into effect until 2017, so those hoping to take advantage of it will likely be eager to see the Conservatives re-elected this year.
Seniors have been widely touted as the big winners in this federal budget, and the new Home Accessibility Tax Credit is a key part of that. But the construction industry is also celebrating the news, as it anticipates that home accessibility renovations will be boosted by the credit, and that it will help legitimize the industry by requiring a receipt.
Kevin Lee, CEO of the Canadian Home Builders’ Association (CHBA), said: “CHBA and our professional renovator members applaud the government’s recognition that seniors and persons with disabilities face special challenges related to making improvements to improve safety, access and functionality of a dwelling to meet their needs.
“We are very pleased to see this targeted home renovation tax credit that will not only help seniors make necessary changes to their homes, but by requiring receipts will help protect them from poor – sometimes dangerous – workmanship and outright fraud by cash operators.”
Overall, then, a budget that could somewhat boost the coffers of first-time buyers, real estate investors, senior and disabled homeowners and the renovation industry, with no immediately apparent drawbacks. Which is probably to be expected for an election-year budget.
What effects do you think the 2015 Federal Budget will have on our real estate market, or on you? We welcome your comments below.