This in combination with unexpected rising rates (if you recall we were all promised that the low interest rates we were seeing throughout the pandemic would hold until at least 2023) has definitely created a slowdown in sales activity - oddly enough during what are traditionally the busiest selling months in real estate.
Enter the inflation boom and let the back peddling begin as the Bank of Canada claims their total surprise at the persistence of eager buyers in an under supplied market where money is almost free.
Here are a few policies that have now been implemented:
Any property that has been held for fewer than 12 months will be subject to full taxation on profits as business income regardless of whether or not it is your principle residence.
It will be codified into the Income Tax Act and will apply to residential properties sold on or after January 1, 2023.
Yes, there will be 'life event' exemptions, but keep note of this new law should you be looking to turn a profit or need to sell sooner than you thought.
Remember the days when one could secure a pre-sale property with the anticipation of assigning over the contract prior to completion and enjoying a profit on that investment?
Now that profit is gonna get taxed to death.
GST will be now applicable on all assignment sales of new (or substantially renovated) housing (where GST is applicable to the Purchase Price).
I'll outline a quick example using simple math...
Let's say you purchase a pre-sale condo for $500k.
GST on purchase price would be $25,000.
As time goes on and the market goes up you now stand to sell this condo prior to completion by way of an assignment for $200k more than what you bought it for.
Here's how that will look:
Assignment (profit) amount: $200k
Less:
GST on assignment amount ($10,000)
Income tax on assignment amount
Brokerage commission
In the end you would walk away with less than the assignment profit.
In the future, if you are selling a home I would highly recommend seeking accounting and/or legal advice.
The Residential Property Flipping Rule
Any property that has been held for fewer than 12 months will be subject to full taxation on profits as business income regardless of whether or not it is your principle residence.
It will be codified into the Income Tax Act and will apply to residential properties sold on or after January 1, 2023.
Yes, there will be 'life event' exemptions, but keep note of this new law should you be looking to turn a profit or need to sell sooner than you thought.
GST on Residential Assignment Sales
Remember the days when one could secure a pre-sale property with the anticipation of assigning over the contract prior to completion and enjoying a profit on that investment?
Now that profit is gonna get taxed to death.
GST will be now applicable on all assignment sales of new (or substantially renovated) housing (where GST is applicable to the Purchase Price).
I'll outline a quick example using simple math...
Let's say you purchase a pre-sale condo for $500k.
GST on purchase price would be $25,000.
As time goes on and the market goes up you now stand to sell this condo prior to completion by way of an assignment for $200k more than what you bought it for.
Here's how that will look:
Assignment (profit) amount: $200k
Less:
GST on assignment amount ($10,000)
Income tax on assignment amount
Brokerage commission
In the end you would walk away with less than the assignment profit.
In the future, if you are selling a home I would highly recommend seeking accounting and/or legal advice.
Vancouver Empty Homes Tax Increase
Starting in January 2023, the City of Vancouver will now be charging a 5% Empty Homes Tax (up from the current 3%).
So essentially attempting to fix a problem that no longer exists. There were no Foreign Buyers over the past 2 years, which tell us the frenzy in the market was purely driven by locals!
Currently there are 1600 home in the City of Vancouver that are reported as vacant.
This also coincides with a ban on Foreign Buyers that's being put in place just as we are expecting record immigration levels.
For the time being, we are experiencing more balanced market conditions. We are still slightly above the 10 year average for the month of April, however, as interest rates continue to rise and uncertainty prevails I suspect this lull will last over the upcoming summer months as people are enjoying the freedom to travel once again.
My advice, watch closely. We've all seen this movie before where the 'market is falling' only to turn on a dime and get swept right back into another super cycle.
Please get in touch! My aim is to inform and educate so that you feel empowered as a consumer in the marketplace to make the best decisions for you.
I'm happy to chat, to be a resource, to be of service.
"Rather than trying to be brilliant, be of service."
~Julia Cameron
Questions about Buying or Selling?
I'm happy to chat, to be a resource, to be of service.
"Rather than trying to be brilliant, be of service."
~Julia Cameron
