The federal government adopted new housing policies and actions that are already in effect or will be in 2023 in an effort to alleviate Canada’s current housing crisis. Here’s what you need to know about the eight new initiatives.
1. Two-year Ban on Non-Canadians Purchasing Residential Property
As of January 1, 2023, the government has prohibited non-Canadians from buying residential real estate for two years. The federal government published the rule on December 21, 2022. According to the Canadian Mortgage and Housing Corporation, this ban aims to “make houses more affordable” for Canadian citizens that are prospective buyers.
In November 2022, the Canadian Real Estate Association reported that the national average home price was $632,802. Although this figure is down 12% year-over-year, benchmark prices in major cities, including Vancouver and Toronto, are still above the $1 million mark, and buying a home feels unattainable for too many Canadians.
A tax credit of up to $1,500 will be available to qualified homebuyers under Finance Canada’s Budget 2022! Budget 2022 increased the threshold used to determine the First-Time Home Buyers’ Tax Credit from $5,000 to $10,000. This modification is effective for tax years beginning in 2022 and later.
We know buying a home can feel daunting, especially when your bank account isn’t ready. With many markets still above the $1 million mark, this initiative may help relieve some financial burdens for new homeowners and encourage more buying in the new year.
3. Multigenerational Home Renovation Tax Credit
A supplementary apartment can be built in a property to accommodate older citizens or persons with disabilities. Families could claim up to $7,500 in tax credits under the Multigenerational Home Renovation Tax Credit if construction began after January 1, 2023. The qualifying person, their spouse, common-law partner, or qualifying connection can claim this tax credit. A self-contained dwelling unit with a private entrance, a kitchen, a bathroom, and a sleeping area must constitute the secondary unit.
Whether you’re an investor looking to upgrade your property for a return on investment in ten or 20 years or an empathetic family member looking to help, this initiative is for you. Supplementary apartments will increase property value in the long run while saving you and your family member money after construction.
On January 1, 2023, the Residential Property Flipping Rule took effect to guarantee that earnings from flipping residential real estate are fully taxed. Profits from selling residential properties, including rental properties, in possession for less than a year would be considered business income.
A “flipped property,” according to Bill C-32, is “a dwelling unit of a taxpayer situated in Canada that the taxpayer possessed for fewer than 365 days in a row (less than a year) previous to the disposition of the property.” Residential homes sold on or after January 1, 2023, would be subject to the measure.
If flipping properties is your way of making an income, this new bill will impact your business plans for 2023. While this is helpful for those finding unaffordability caused by renovations-for-profit, it will change how investors operate.
5. First Home Savings Account, Tax-Free
Beginning in April, first-time home buyers may save up to $40,000 tax-free with the help of the Tax-Free First Home Savings Account (FHSA), which has an $8,000 yearly contribution cap.
The FHSA, a saving account designed to help you save money and make your dream of home ownership come true, was created to help first-time home buyers save for the future without paying taxes. This is favourable for first-time buyers and people saving for their future goals.
6. Goods and Services Tax/Harmonized Sales Tax (GST/HST) Assignment Sales
Beginning in May, all assignment sales of newly built or significantly renovated residential dwellings, including those made by individuals, would become subject to GST/HST under the proposed change. All assignment agreements made after May 6, 2022, are subject to the proposed modification.
GST/HST assignment sales will impact new homes sold by builders and owners of existing homes on assignment. Like the new property flipping rule, significantly renovated properties are also impacted. Investors must add this to their business plans when deciding if a property is worth the investment.
7. The Unoccupied Tax
A 1% yearly tax will be applied to the value of any non-resident, non-Canadian property deemed unoccupied or underutilized. By discouraging foreign ownership of Canadian dwellings as an investment, this tax encourages owners to either list their properties for rent or sell them to Canadian residents. The tax aims to decrease upward pressure on housing prices and enhance housing availability. Some Canadian owners of residential property will have to file UHT forms for the calendar year 2022 by April 30, 2023, since the yearly tax will have been in effect since January 1, 2022.
Taxing vacant homes is a crucial tool to combat the negative impact of foreign capital on housing affordability. However, investors and landlords have taken a hit with this new initiative. For those looking to buy or sell, you may see more affordability and enhanced inventory throughout the year.
8. The Stress Test
The Office of the Superintendent of Financial Institutions (OSFI) said on December 15, 2023, that it would not be changing the stress test. Additionally, according to OSFI, a review of Guideline B-20 on the qualifying rate for uninsured mortgages will begin in January 2023.
Banks will still stress test borrowers to ensure they can make their monthly mortgage payments if rates continue to increase.
Whether you’re looking for affordable starter homes or have already caught your eye on that dream condo, we hope this list has helped you learn about the new guidelines. If you haven’t found a place to call home, don’t worry—we can help! Speak to one of our expert real estate agents, who can assist you in finding your dream home.
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Abbey is Zoocasa's Content Marketing Specialist, creating content to help Canadians make informed decisions on the real estate market. As a textbook Hamiltonian, Abbey enjoys walking the Bruce Trail near the Devil's Punchbowl. You'll catch Abbey soaking up the sun, reading a book or watching Netflix with her furbabies when she's not working.