
Housing affordability and the lack of it continues to play into the Real Estate Market in Canada, and now it’s becoming more of a nationwide issue rather than one that is primarily factoring into Toronto and Vancouver’s markets. One thing hampering the federal efforts to get more new homes built is the lack of trades available for the task, and that’s an acute shortage given the influences that are pushing the demand for housing higher all the time.
The reality of course is that higher median home prices mean fewer buyers will be able to qualify for mortgages than would be the case otherwise. This not only adverse for would-be homebuyers but it’s also not good for realtors who may be new to the profession and struggling to establish new clientele given these fewer numbers of buyers able to buy homes in whatever area of the country they are located in. Our online real estate lead generation system here at Real Estate Leads is a way to counter that trend and be put in touch with legitimate potential real estate clients.
But affordability and housing supply remain the issue, and in Vancouver and Toronto there are few if any detached homes that are valued at less than $1 million. So this has lead to the suggestion that putting a tax on home value when it is at or above this mark is being floated now.
$1 Million Baseline
A University of British Columbia Think Tank called Generation Squeeze is suggesting a new 0.2% tax on homes worth $1 million and up, and then progressively larger taxes on homes valued at $3 million and up and so on. The think tank has received some funding from the CMHC, Canada’s federal housing agency. According to the study’s author, Paul McGreesy, the tax would be calculated annually but then payable only when the home is sold.
The idea there is that it would function in the same way a land tax would, and those are taxes that many provinces and municipalities already have in place. McGreesy says more than 90% of homeowners wouldn’t pay any of this tax at all since it would only apply to those who are much higher on the real estate ladder and fortunate to be sitting on massive windfalls of currently non-taxable gains.
The money gained from the tax could then be redirected into affordable housing, something that is very much needed in many Canadian cities.
The counter argument here is of course what about homeowners who have been in their homes for many decades and are looking to use some of the equity in their home to fund their retirement. They have not been any part of the reason why their homes have exploded in value, so why set an arbitrary number to apply to them based on the pre-existing value of their home based on what type of home it is and where it’s located.
Suggested Home Ownership Tax Shelter
Going with this belief is one that there is a home ownership tax shelter in Canada that motivates us to bank on rising home prices to gain wealth, but while that is true it’s important to also understand the extent to which Real Estate contributes to the country’s GDP. The current system that is benefitting some and disadvantaging others is one that was very much put into place by successive governments over the past 3 decades and each one has been quite happy to leave it in place.
However, only the portion of a home’s value above a threshold would be taxed at that 0.2% level, so for example a $1.2 million home would have tax applying to $200,000 of the value.
The belief is that the tax would be similar to what a mid-level salaried employee would pay, but again the premise of this would be that owning a home is a source of income and while that is true in an indirect way it has been that way for generations and one has to wonder if you make a change simply because of current realties and ones that may not be permanent.
Skepticism
Many experts think adding new taxes on existing owners is not the way to do it. We can at least say the most effective way to address the imbalance in the market isn’t to try to suppress demand, but to build more housing to satisfy that need without encouraging bidding wars for what little housing is available.
Targeting the demand side of the market will be less effective than addressing supply issues, and the only sustainable way to moderate price growth will be to bring on more supply. If that’s not possible because of available land for development, zoning regulations, or a lack of people qualified to build that number of homes then those are realities that should be taken into account and addressed first.
One thing this may actually do is encourage owners of single family homes to stay where they are and making the supply problem worse as a result. Keep in mind as well that adding a surtax to owners of multiple-unit properties would results in rental charging more rent in order to meet their needs as the owner and maintainer of the rental property.
The problem of housing affordability needs to be addressed, but yet again this proposed measure is off the mark and especially if it is going to punish people for when they bought the type of home they did, and where they bought it.
__
Housing affordability and the lack of it continues to play into the Real Estate Market in Canada, and now it’s becoming more of a nationwide issue rather than one that is primarily factoring into Toronto and Vancouver’s markets. One thing hampering the federal efforts to get more new homes built is the lack of trades available for the task, and that’s an acute shortage given the influences that are pushing the demand for housing higher all the time.
The reality of course is that higher median home prices mean fewer buyers will be able to qualify for mortgages than would be the case otherwise. This not only adverse for would-be homebuyers but it’s also not good for realtors who may be new to the profession and struggling to establish new clientele given these fewer numbers of buyers able to buy homes in whatever area of the country they are located in. Our online real estate lead generation system here at Real Estate Leads is a way to counter that trend and be put in touch with legitimate potential real estate clients.
But affordability and housing supply remain the issue, and in Vancouver and Toronto there are few if any detached homes that are valued at less than $1 million. So this has lead to the suggestion that putting a tax on home value when it is at or above this mark is being floated now.
$1 Million Baseline
A University of British Columbia Think Tank called Generation Squeeze is suggesting a new 0.2% tax on homes worth $1 million and up, and then progressively larger taxes on homes valued at $3 million and up and so on. The think tank has received some funding from the CMHC, Canada’s federal housing agency. According to the study’s author, Paul McGreesy, the tax would be calculated annually but then payable only when the home is sold.
The idea there is that it would function in the same way a land tax would, and those are taxes that many provinces and municipalities already have in place. McGreesy says more than 90% of homeowners wouldn’t pay any of this tax at all since it would only apply to those who are much higher on the real estate ladder and fortunate to be sitting on massive windfalls of currently non-taxable gains.
The money gained from the tax could then be redirected into affordable housing, something that is very much needed in many Canadian cities.
The counter argument here is of course what about homeowners who have been in their homes for many decades and are looking to use some of the equity in their home to fund their retirement. They have not been any part of the reason why their homes have exploded in value, so why set an arbitrary number to apply to them based on the pre-existing value of their home based on what type of home it is and where it’s located.
Suggested Home Ownership Tax Shelter
Going with this belief is one that there is a home ownership tax shelter in Canada that motivates us to bank on rising home prices to gain wealth, but while that is true it’s important to also understand the extent to which Real Estate contributes to the country’s GDP. The current system that is benefitting some and disadvantaging others is one that was very much put into place by successive governments over the past 3 decades and each one has been quite happy to leave it in place.
However, only the portion of a home’s value above a threshold would be taxed at that 0.2% level, so for example a $1.2 million home would have tax applying to $200,000 of the value.
The belief is that the tax would be similar to what a mid-level salaried employee would pay, but again the premise of this would be that owning a home is a source of income and while that is true in an indirect way it has been that way for generations and one has to wonder if you make a change simply because of current realties and ones that may not be permanent.
Skepticism
Many experts think adding new taxes on existing owners is not the way to do it. We can at least say the most effective way to address the imbalance in the market isn’t to try to suppress demand, but to build more housing to satisfy that need without encouraging bidding wars for what little housing is available.
Targeting the demand side of the market will be less effective than addressing supply issues, and the only sustainable way to moderate price growth will be to bring on more supply. If that’s not possible because of available land for development, zoning regulations, or a lack of people qualified to build that number of homes then those are realities that should be taken into account and addressed first.
One thing this may actually do is encourage owners of single family homes to stay where they are and making the supply problem worse as a result. Keep in mind as well that adding a surtax to owners of multiple-unit properties would results in rental charging more rent in order to meet their needs as the owner and maintainer of the rental property.
The problem of housing affordability needs to be addressed, but yet again this proposed measure is off the mark and especially if it is going to punish people for when they bought the type of home they did, and where they bought it.
__
Sign up for Real Estate Leads here and receive a quota of qualified, online-generated buyer and / or seller leads that are delivered each month and provided only to you. YOU are the only realtor who will receive them and that creates an exclusive opportunity for you to be in touch with these prospective clients. This is a proven-effective way to get more out of your client prospecting efforts and do so quite quickly.