Ontario urging Ottawa to change tax rules in bid to curb real estate speculation

Ontario Finance Minister Charles Sousa is urging Ottawa to address speculative investing in the country's housing markets by changing how such profits are taxed.

Currently, capital gains tax is charged on 50 per cent of the profits on the sale of a home, unless the property qualifies for the principle residence exemption.

In a letter to federal Finance Minister Bill Morneau on Friday, Sousa says that boosting the taxable amount above 50 per cent could reduce the incentive for people to purchase homes on speculation. Morneau is set to release his latest budget on Wednesday.

Speculative investing in the real estate market _ buying a home in the hope of turning a profit rather than to live in _ is believed to be one of the culprits behind soaring house prices in certain markets including Toronto and Vancouver and their surrounding areas.

Sousa says curbing speculative real estate purchases could help address dwindling housing affordability so that first-time buyers are able to get into the market.
Such a measure could also generate tax revenue to put towards other housing affordability initiatives, he adds.

``My primary focus is to address the concerns of middle class Canadians who are worried about buying their first home,'' the letter reads.

``Additionally, it is important that the housing market remains stable, meaning that borrowers and lenders are resilient and able to withstand economic shocks.''


The Canadian Press

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COMMENTS

  • by Jeremy 2017-03-20 5:12:40 PM

    Another politician crying victim. Get off your ass and make policies specific to your own provincial issues...don't drag the rest of Canada into this! Implement a tax like BC did. But let me guess...he doesn't want to look like the bad guy.

  • by David 2017-03-20 5:14:47 PM

    There is a big difference between speculating in the market and running a rental property investment business. I do hope that if changes are made that they take into account those investors who are purchasing property for long term investment and not immediate turn-over. This will cause a lot of pain points for real estate investors who are not short haul speculators.

  • by Arnold Handelman 2017-03-20 5:26:00 PM

    If a person buys a house for purposes of flipping it, it is a venture in the nature of trade, and fully taxable.

    If he buys it for rental income purposes, and keeps it to earn income, and it does earn income, then it's a capital investment and the ultimate gain will be a capital gain with only 50% taxable.

    I would suggest that if a person buys a property, say a condo apt., and rents it at a negative cash flow, ie he loses money every month; or if he barely breaks even, then he is really buying it to make a profit by selling it. So then, it is again, a venture in the nature of trade, and should be fully taxable.

    So I don't see any need for changes in the taxation of real estate. Removing the principal residence exemption would be political suicide for any government. The CRA already has clarified and limited abuses regarding a taxpayer having various properties which could be called his prinicipal residence. He has to pick one, and that's it. It can't be the cottage, and then the house.

    Where there is a weird evolution in taxation of investments, is the stock market. You could buy a stock that pays no dividends. So obviously you bought it for purposes of selling it at a profit. That should be fully taxable, by using the same logic as for real estate. The stock purchase was a venture in the nature of trade. Even more un-capital, buying commodities, options, derivatives, forex. All very specualtive ventures in the nature of trade. But, the tax laws as they've evolved enable these speculative ventures to be only taxed at capital gain rates.

    So we can see, that real estate investment isn't the arena getting favoured status, it's the stock market, the derivatives, options, commodities and foreign exchange markets that get unjustly favoured status. That's the tax change that should be altered.

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