Investors and the housing industry in general, likely celebrated following the release of this year’s budget.
The government decided to leave well enough alone by avoiding any big housing policy decisions in this year’s budget.
“I’m happy to say that they didn’t do anything to slow housing and they actually said that they thought the actions that had been announced in October would already mitigate the excess activity in housing,” Dr. Sherry Cooper, chief economist for Dominion Lending Centres, said following the budget’s release. “The other piece of good news is they didn’t do a thing to capital gains taxes.”
Most notably for investors, perhaps, was the refusal to increase capital gains taxes on homes.
Days prior to the release of the 2017 budget, Ontario Finance Minister Charles Sousa urged the government to crack down on speculative housing investing by increasing taxes on profits.
In a letter to Finance Minister Bill Morneau, Sousa argued hiking the taxable amount above 50% would discourage investors to purchase homes on speculation. It’s one way to address ever-increasing housing prices in the country’s hottest housing market and thus help first-time homebuyers currently priced out of the market break in.
“My primary focus is to address the concerns of middle class Canadians who are worried about buying their first home,'' Sousa wrote in the letter. “Additionally, it is important that the housing market remains stable, meaning that borrowers and lenders are resilient and able to withstand economic shocks.''
The suggestion was met with criticism by many industry players, including the head of one of the nation’s largest brokerages.
“I think it’s a horrible idea. The proposed change would be a huge change in Canadian taxation policy. It would hurt employment. It’s just generally bad for the economy. It flies in the face of the innovation focus of the economy that the prime minister wants to build,” Phil Soper, president or Royal LePage, told Canadian Real Estate Wealth. “It’s bad policy, specifically the rationale the Finance Minister put forward. I don’t think it would help Toronto home prices. The portion of the market that is tied to home flipping or short-term speculators … that’s a very small portion of the market. Of any market in Canada.”
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