10 Apr 2021
In This Overheated Real Estate Market, Will The Government Policymakers Impose A Capital Gains Tax On Principal Residences?
There are rumors that the government may consider tampering with the principal residence exemption from capital gains tax, as a measure to cool down the overheated housing market – the quarterly pace of sales returned to levels not seen since 2017, leading to significant price increases. While this may not happen, however, because the housing market has become so overheated, it has become a topic of conversation. COVID 19 has forced people to work from home, prompting them to look for more space. With rock-bottom interest rates and the fear of missing out, buyers are frantically buying any property they can get their hands on. Listings are being sold with multiple offers at prices well over asking, in a matter of days. This is resulting in soaring home prices and a fear that policymakers will intervene at some point to bring some sanity to this market, as they have done in the past. However, in the current market, buyers are genuine local homebuyers, and not speculators or from overseas. While the real estate industry and others would prefer a boost in the limited housing supply that has been a contributor to this problem, this solution will take time, and as mentioned earlier, the recent surge in home prices has the implication that regulators may have to intervene somehow to stabilize the market. Hence the conversation about the capital gains exemption. The capital gains exemption is one of the modern engines of Canadian home ownership and retirement planning – typically homeowners have sold their homes and used the huge non-taxed gains to fund their retirement. Any attempt to disrupt this sacred cow would be like “an atom bomb on the retirement savings to Canada’s vast middle class.” In the unlikely event that this should happen, homeowners would probably stay longer in their homes, diminishing the supply of startup homes and move up homes in the market, thereby exacerbating the current shortage problem. Ready to jump into the market? Whether you are looking to buy, sell, or learn more about the market changes, reach out to our team today! We’ll help you make the right move! Contact us by email or call us on 604 913 1000.