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Updates to the Residential Tenancy Act – effective Jan. 22, 2025

These changes include the requirement for the seller / landlord to generate a Three Month Notice to End Tenancy for Purchaser’s Use (RTB-32P) form using the Residential Tenancy Branch (RTB) web portal. Additionally, the legislation imposes stricter penalties for non-compliance or bad-faith evictions.

Changes take effect on Wednesday, January 22, 2025. Sellers / landlords will no longer be required to upload a copy of the Contract of Purchase and Sale to the web portal. Instead, the RTB has created a new form requiring specific non-confidential information to be uploaded. Furthermore, minor language updates will occur on the web portal to better align it with current practice and requirements of the Residential Tenancy Act.

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MORTGAGE CHANGES

  1. OSFI (Office of the Superintendent of Financial Institutions) has removed the stress test for straight switches of uninsured mortgages (i.e. the homeowner has more than 20% down (equity)) – effective Nov 21, 2024.  Those borrowers were in essence locked into their current lender as to go to another financial institution they would have to requalify at 2% above the typical 5 year fixed interest rate (i.e. the ‘stress test’)
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Inflation and Taxes

Inflation. 

The government says inflation is currently at 2.7%.  See below for the June 2024 inflation rates for the individual items in the CPI ‘basket’. Food is only 2.1% higher today than a year ago?  

See below for the weighted percentages of the basket items.  As of June 24, 2024 the CPI basket weights have changed – that info is not yet available.

Estimates from economists regarding the Producers Price Index (PPI) say the cost to produce local goods has risen over 30% in the past 2 years. The PPI excludes imported goods and taxes on goods.

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New Anti Flipping Tax

Anti-Flipping Tax – Provincial – Starting January 1, 2025 , If a property is sold after January 1, 2025 and was only owned/lived in less than a 1 year you will pay a 20% provincial tax on the profits.  This tax declines to zero after 24 months  BC anti Flipping Tax. 

Exemptions to this tax are; Separation or divorce, Death, Disability or illness, Relocation for work, Involuntary job loss, Change in household membership, Personal safety, Insolvency.

Anti-Flipping Tax – Federal – If bought and sold within 1 year, the profit is taxed as Income. No capital gains exemption and no Principal residence exemption Federal Flipping Rules

All other BC taxes on Real Estate:

GST – 5% tax on new, never lived in or substantially renovated properties. With a 36% rebate on new homes up to $350,000 purchase price GST Info & Calculator   Also GST is (may) be payable on the sale of vacant land.   Examples of when G.S.T. would be applicable include:

1) the sale of land that is capital property that had been used primarily in a business;

2) the sale of land in the course of a business; and

3) the sale of a parcel of land created by subdividing another parcel into more than two parts. The sale of land by an individual that had been kept for personal use would be exempt from G.S.T.

Sale of Farm land.    Farmland GST ?

PTT (Property Transfer Tax) – 1% on the first $200,000 of purchase price plus 2% up to $2,000,000 plus 3% from $2,000,001 to $3,000,000. Plus 5% over $3,000,000  PTT Info & Calculator

Under-Used Housing Tax – Federal – a 1% tax on Vacant or ‘underused’ housing. “Under used” is defined as less than 180 days in a year. You will be exempt if “The property was occupied by certain parties for at least 180 days in the year, made up of one or more periods that are at least one month long.”  Fed’s Underused tax info

Speculation & Vacancy Tax  –  2% of the fair market value for satellite families and foreign owners. OR  0. 5% for Canadian citizens. To avoid the tax you must rent out your non-principal residence, for at least 6 months of the year.  

This tax applies to areas:

  • The Metro Vancouver Regional District (Vancouver, Surrey, etc.)
  • The Capital Regional District (Victoria, Saanich, etc.)
  • The City of Abbotsford
  • The District of Mission
  • The City of Chilliwack
  • The City of Kelowna
  • The City of West Kelowna
  • The City of Nanaimo
  • The District of Lantzville

And expanding in 2024 to ;

  • Lions Bay
  • North Cowichan
  • Ladysmith
  • Lake Cowichan
  • Squamish
  • Duncan

BC Speculation and Vacancy Tax

Vancouver Vacant Homes Tax: – Applies to the City of Vancouver only.  Started in 2017 at 1% of the tax assessed value and is now 3% of that value.

A Vancouver ‘vacant home’ is one that is unoccupied for more than 6 months in calendar  year.

Foreign Buyer Tax.      The BC Foreign Buyers Tax is a 20% tax added to the property Transfer Tax when a foreign citizen or non-permanent resident of Canada purchases a residential property in the following areas;    Foreign Buyer Tax areas

“School Tax” –  BC introduced the  ‘School tax’ in 2016 – funds collected go into General Revenue’  – and spent on ??   It amounts to  0.2% of your assessed value from $2 million to $4 million plus .4% of your value over $4 million.   And, as it is not indexed to inflation (like the PTT), it may end up applying to the majority of BC properties – not just the high end properties.  BC School Tax info

Translink –  As of Jan.1, 2023  Translink collects (through your municipal property tax remissions .2172 times the value of your property divided by 1000. So a $1 million dollar property will pay  $217.20 per year.

Municipal Property Taxes – in Coquitlam for 2024 the City is proposing a 7.7% (base) property tax lift – Citing Unprecedented growth and high inflation in Coquitlam are prompting a proposed 10.79 per cent hike in property taxes next year — if all asks are approved.

The 2023 Coquitlam residential rate is:  .392%  of your property’s value. So a $1,000,000 home would pay $3920 in annual property taxes. (plus water & sewer taxes, Translink, etc)

BC’s New Secondary Suite Incentive Program (SSIP)

 – Aims to provide more affordable housing options by encouraging homeowners to create secondary suites, such as basement suites, garden suites, or laneway homes. 

– One key feature is the provision of 50% forgivable loans. Homeowners can receive up to 50% of construction, design, and implementation costs, with a maximum forgiveness cap of $40,000. So if it costs you $80,000 to build a secondary suite, the program will forgive 50% or $40,000 of that cost. The forgivable loan is registered on the title, and it is repaid over five years, with 20% forgiven annually. Applications for the Secondary Suite Incentive Program will open in April 2024 and will be processed on a first-come, first-served basis. Click here SSIP Details

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2024 Housing Tax Rules

Property Transfer Tax Exemption Increased from $500,000 to $835,000 but…..you will pay 2% tax on the portion of purchase price above $500,000 – as long as it is below $835,000.

For First-Time Home Buyers: The First-Time Homebuyers’ Program, which provides qualified homebuyers an exemption on Property Transfer Tax now extends to homes with a purchase price of up to $835,000. Here’s how it breaks down depending on the fair market value of the home:

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Does the Bank of Canada’s REALLY make Interest rate decisions?

In a 2011 Lawsuit against the government of Canada it was alleged that the Bank of Canada was established in 1938  to  – among other things –  provide interest free loans to Federal, provincial and municipal governments to finance public infrastructure projects. Examples of the projects financed in this way are; the TransCanada Highway, St Lawrence Seaway, electricity projects, pipelines, airports, universities etc. Further benefits of the Bank of Canada is that no interest – or low interest – loans could be made to unstable (failing?) financial institutions in Canada. A lender of last resort if you will.

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Foreign Buyers Ban – Causing prices to Rise?

When the market was over heated (Demand much greater than Supply) – prior to spring 2022 – prices were crazy and buyers were stressed. So our federal government decided they had to do something. Casting foreign buyers (2% of all buyers in Canada / 3.3% in B.C.) as the scapegoats responsible for driving real estate prices to dizzying heights, the government decided they had to do something. 

When the market was cooling down, as a result of a massive increase in interest rates- driven by inflation, the Feds decided now was the time to unveil  The Prohibition on the Purchase of Residential Property by Non- Canadians Act  . 

This Act was passed in June 2022 but the details were not released until late December 2022 and came into force January 1, 2023 – less than 2 weeks later.

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Will Interest rates continue to rise?

The Bank of Canada says no new rate hike IF inflation falls.

And in his prepared remarks Tiff Macklem said, “We are prepared to raise interest rates further.” 

So the question is – where is inflation going?

  • In 2018 it was 11.4 cents / KWH. In 2022 it was 12.6 cents  a 10% increase in 4 years
  • BC Hydro set to raise electricity bills 2% this year and 2.7% next year

https://www.narcity.com/vancouver/bc-hydro-is-dropping-electricity-bills-but-brace-yourself-for-price-hikes-in-2023-2024

  • For natural gas in 2018: 

Basic charge (for maintaining infrastructure and delivery system ) = $.389/day

Delivery Charge (?) = $4.355 per Gjoule

Storage & Transportation (?) = $.758 per Gjoule

Gas cost = $1.549 per Gjoule

  • The average BC house uses about 10 Gigajoules per month averaged over the year.
  • 2023 Rates;

Basic Charge = $ .4216 per day

Delivery charge = $5.933 per Gjoule

Storage & Transportation = $1.134 per Gjoule

Gas cost = $5.159 per Gjoule

Cost per month in 2018 = $78.29

Cost per month in 2023 = $134.91          a $56.62 increase or 72.3% increase in 5 years 

= 14.5% increase per year.

In his Dec.2022 speech, Tiff Macklem said;

“One single thing didn’t cause inflation to climb to the highest it’s been in decades. Several unexpected factors combined and interacted with each other to drive prices upward:

  • Supply chain problems were more widespread and lasted longer than expected. This increased the prices of many goods imported into Canada.
  • Russia invaded Ukraine, causing the prices of oil and some agricultural products to rise around the world.
  • When the Canadian economy fully reopened, consumers wanted to catch up on what they had missed during two years of lockdowns. But businesses couldn’t keep pace with the higher demand—especially for services.

Not helping with inflation is the recent BC government penalty on the fuel needed to heat our homes – from 7% tax to 12% tax.  That is a 71% tax increase.

  • A carbon pollution price (carbon tax) of $20 per tonne of carbon dioxide equivalent (CO2e) in 2019, rising by $10 per tonne annually to $65 per ton in 2023

 = a 225% increase over 4 years.

Food prices & ? –  

Mr Macklem said: “Supply chain problems were more widespread and lasted longer than                                      e                              expected.”

How is the government helping? 

  • More to come this year?  Bird flu culling?

Gasoline Prices;

Mr Macklem says;“Russia invaded Ukraine, causing the prices of oil and some agricultural   products to rise around the world”.   But….

  • 78 cents per litre is tax. (which includes 2 provincial carbon taxes amounting to 31 cents / litre). 47% of the price you pay at the pump is Tax.
  • In February 2018 – regular gas was $1.44 per litre. For most of 2022 the price per litre was $1.90 to $2.04 – a 39% increase from 2018.  
  • Canada’s Oil reserves (168 Billion barrels) accounts for 75% of North America’s reserves which is 188 times our annual consumption. 
  • Canada holds 170,863,000,000 barrels of proven oil reserves as of 2016, ranking 3rd in the world and accounting for about 10.4% of the world’s total oil reserves of  

            1,650,585,140,000 barrels. 

  • Canada has proven reserves equivalent to 188.3 times its annual consumption.

What about the impact of Government debt on inflation.

  • Financial Post says Canada leads the world in debt.  Canada accumulates $75 million per day in interest charges alone.
  • BC’s debt is $98 Billion.  Canada’s Federal debt is $1.2 Trillion
  • Moreover, the federal and provincial governments are on track to have collectively accumulated $395.9 billion (inflation-adjusted) in total net debt between 2019/20 and 2022/23, an increase of 23.4%.
  • The interest we pay on that debt amounts to just over 2% ,  so Canada is paying an extra $7.9 BILLION in interest in 4 years = almost $2 billion per year in interest!

https://torontosun.com/opinion/goldstein-trudeaus-runaway-spending-hiked-canadas-debt-160-billion-before-pandemic-hit-report

  • During the 2015 federal election that brought him to power, Trudeau promised three years of “modest deficits” — $9.9 billion in 2016, $9.5 billion in 2017, $5.7 billion in 2018 — and a balanced budget with a $1 billion surplus in 2019.
  • Instead, he delivered annual deficits of $19 billion in both 2016 and 2017, $14 billion in 2018 and $39.4 billion in 2019 — all before the pandemic hit in early 2020.
  • Canada’s combined federal debt — the total of all previous deficits plus interest — went over $1 trillion for the first time in 2020-21 during the first year of the pandemic and is now projected to increase to $1.36 trillion by 2026-27

And while the government debt is not part of the Basket of Goods used to calculate the Consumer Price Index (i.e. inflation), it nonetheless has a major impact on the purchasing power of our dollar.  Consider this;

  • The Canadian dollar has lost 96% its value since 1915 (up to January 13, 2022)
  • $100 in 1915 is equivalent in purchasing power to about $2,467.68 today, an increase of $2,367.68 over 108 years. The dollar had an average inflation rate of 3.01% per year between 1915 and today, producing a cumulative price increase of 2,367.68%.
  • This means that today’s prices are 24.68 times as high as average prices since 1915, according to Statistics Canada consumer price index. A dollar today only buys 4.052% of what it could buy back then.   So that $7 head of lettuce today would have been 28 cents in 1915.
  • https://www.in2013dollars.com/Canada-inflation

Will inflation come down?  

We will know more when The Bank of Canada meets March 8, 2023 for the next interest rate decision.