{"id":9096,"date":"2021-04-20T13:57:05","date_gmt":"2021-04-20T13:57:05","guid":{"rendered":"https:\/\/www.canadianrealestatemagazine.ca\/federal-governments-budget-misses-mark-on-housing\/"},"modified":"2023-10-24T04:17:58","modified_gmt":"2023-10-24T04:17:58","slug":"federal-governments-budget-misses-mark-on-housing","status":"publish","type":"post","link":"https:\/\/www.canadianrealestatemagazine.ca\/news\/federal-governments-budget-misses-mark-on-housing\/","title":{"rendered":"Federal government\u2019s budget misses mark on housing"},"content":{"rendered":"

As expected, the federal budget released Monday afternoon contained measures to, at least ostensibly, cool runaway prices in Canada\u2019s housing market.<\/p>\n

Most notably, the government is introducing a 1% tax on non-residents that\u2019s believed will generate $700 million in revenue through four years beginning in 2022-23. Additionally, the budget will apportion the Canada Mortgage and Housing Corporation with funds that will be spent on social housing programs.<\/p>\n

\u201cThe government has a plan to invest $2.5 billion, and reallocate $1.3 billion in existing funding to speed up the construction, repair, or support of 35,000 affordable housing units. And, the government will introduce Canada’s first national tax on vacant or underused residential property owned by foreign non-residents,\u201d said a federal government statement.<\/p>\n

However, at 1%, the non-resident tax is nominal and, therefore, too meek to make any sort of difference in the housing market, charges a wealth advisor, adding that, on a $1 million home, the tax amounts to a paltry $10,000.<\/p>\n

\u201cIt\u2019s probably not going to cool housing because if people are speculating on real estate, I don\u2019t know that 1% is much of a deterrent,\u201d Paul Shelestowsky, a senior wealth advisor with Meridian Credit Union, told CREW<\/a>. \u201cThey\u2019ll just factor 1% into what they want to get on their returns. It will generate revenue for the government because it wasn\u2019t there before, but I don\u2019t see it slowing things down because there\u2019s so much demand for so little supply.\u201d<\/p>\n

Ultimately, creating more demand for housing will exacerbate unaffordability, and Shelestowsky believes that raising interest rates is the only way to quell scorching demand. However, he noted that rate hikes would undo everything that\u2019s sustained the economy for the last 12 months.<\/p>\n

Low interest rates aren\u2019t the only reason Canadians are buying real estate in a frenzy. The COVID-19 pandemic has adversely affected lower income earners, but for the middle and upper-middle classes, it\u2019s been fortuitous. The Canadian savings rate has surged 28% and there\u2019s believed to be close to in the country\u2019s households, which, in tandem with low interest rates, has sparked a housing rush. But things could become dicey when that excess cash is rapidly injected into the economy.<\/p>\n

\u201cWhat has economists worried is all this stimulus out there; the vaccines are rolling out, so we could see something in three to six months where people have all this extra money to spend and they may want to go on trips again, but when they spend their excess savings, it drives prices up and that creates inflation,\u201d said Shelestowsky. \u201cThe way you slow inflation down is by raising interest rates.<\/p>\n

\u201cIt\u2019s a big paradox because Canadian savings has gone up by 28%, and that\u2019s money that will create price pressure when it\u2019s deployed. All the money sitting on sidelines is why the housing market won\u2019t slow down\u2014because interest rates are so low and people are sitting on all kinds of cash.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

As expected, the federal budget released Monday afternoon contained measures to, at least ostensibly, cool runaway prices in Canada\u2019s housing market. Most notably, the government is introducing a 1% tax on non-residents that\u2019s believed will generate $700 million in revenue through four years beginning in 2022-23. Additionally, the budget will apportion the Canada Mortgage and […]<\/p>\n","protected":false},"author":6,"featured_media":23478,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[4],"tags":[],"acf":[],"_links":{"self":[{"href":"https:\/\/www.canadianrealestatemagazine.ca\/wp-json\/wp\/v2\/posts\/9096"}],"collection":[{"href":"https:\/\/www.canadianrealestatemagazine.ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.canadianrealestatemagazine.ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.canadianrealestatemagazine.ca\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/www.canadianrealestatemagazine.ca\/wp-json\/wp\/v2\/comments?post=9096"}],"version-history":[{"count":1,"href":"https:\/\/www.canadianrealestatemagazine.ca\/wp-json\/wp\/v2\/posts\/9096\/revisions"}],"predecessor-version":[{"id":23477,"href":"https:\/\/www.canadianrealestatemagazine.ca\/wp-json\/wp\/v2\/posts\/9096\/revisions\/23477"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.canadianrealestatemagazine.ca\/wp-json\/wp\/v2\/media\/23478"}],"wp:attachment":[{"href":"https:\/\/www.canadianrealestatemagazine.ca\/wp-json\/wp\/v2\/media?parent=9096"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.canadianrealestatemagazine.ca\/wp-json\/wp\/v2\/categories?post=9096"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.canadianrealestatemagazine.ca\/wp-json\/wp\/v2\/tags?post=9096"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}