Category Archives: Canada

Sellers must disclose residency for tax purposes

It has long been the case that buyers are responsible for withholding 25% of the purchase price for the CRA to determine if capitol gains are owing, but now there will be a checkbox for the seller to indicate their residency status:

The B.C. government will soon require sellers to disclose their residency during a real-estate transaction so that information can be shared with the Canada Revenue Agency (CRA).

Observers say it’s a much-needed change that replaces an honour system that was open to abuse by speculators seeking to avoid paying capital-gains tax on properties they don’t live in. But some worry that because the province is placing the onus for confirming that information on the buyer, it exposes them to potential fines or even jail time if they get it wrong. A buyer who doesn’t properly certify a seller’s residency status could also be on the hook for unpaid capital-gains tax.

The government has changed a tax form used to collect the property-transfer tax to include whether the sellers in real estate transactions are Canadian residents under the Income Tax Act. Canadian resident homeowners do not pay tax on the increased value – or capital gains – of a property designated as a principal residence. Non-residents must pay capital-gains tax at the time of a sale.

Read the full article here

More supply in a bubble leads to a bigger crash

Southseacompany pointed out this article:

“The BC government has promised to tackle the housing affordability crisis in Metro Vancouver by “aggressively” increasing supply. A new study coming out of Princeton suggests that the NDP government may want to reconsider that strategy. In Economic Consequences of Housing Speculation, researchers link increased supply to a more severe crash when the bubble bursts”

“But Zhenyu Gao, Michael Sockin, Wei Xiong found that “housing speculation, anchored, in part, on extrapolation of past housing price changes, led not only to greater price increases and more housing construction during the boom in 2004 to 2006, but also to more severe economic downturns during the subsequent bust in 2007 to 2009.”

Read the full article here

How resilient is CMHC to a US style housing crash?

Kabloona points out this article asking yet again how this country would fare in a US style housing market crash, but particularly how the CMHC would fare:

Canada Mortgage and Housing Corp., which protects financial institutions in the case of consumer default and is 100 per cent backed by Ottawa, said in a release Wednesday that it looked at anti-globalization, earthquakes, a steep oil price fall and a U.S.-style housing correction to see how its insurance portfolio would hold up. It did not look at a combination of any of those scenarios.

The verdict is a U.S.-style correction would be its worst scenario for its insurance program with a cumulative loss of $217 million from 2017 to 2022 which would come on top of a need for the Crown corporation to suspend its dividends to Ottawa. CMHC paid Ottawa a special dividend of $4 billion in June because of excess capital and issued a $240 million dividend in August.

Read the full article here.

Is more supply the answer?

Southseacompany posted a link to this story about housing supply in the Vancouver area.

“What’s causing the supply shortage is the restrictive single-family home neighborhood zoning on 85% of our residential land base. That keeps out young families, middle income earners and renters, who can’t afford single-family homes,” said Anne McMullin, president and CEO of the Urban Development Institute, Pacific Region.

“We clearly need a regional housing strategy with more homes for more people,” she added. “That means more high-rise apartments along rapid transit corridors and more townhomes, rowhomes [and] multi-family low-rises.”

But recent studies show the reverse is true: fewer people can afford to buy condominiums in the Metro suburbs that have seen the greatest increase in supply over the past two years.

Read the full article here.

Mortgage carrying costs to rise 8% next year

Scotiabank is forecasting a big bump in mortgage carrying costs:

New buyers can expect home ownership to become even less affordable next year as mortgage costs rise, while current owners will be largely insulated from higher rates.

Add it all up, and the bank forecasts that Canada’s housing market seems to have “peaked” and is expected to cool down from its recent breathtaking pace.

Read the full article here.