Throughout our recent history, Canada – and British Columbia have felt the impact of world events, and diseases. Here is a graph of the average prices of real estate in the Lower Mainland from 1977 to today. Generally, one can see that the only dramatic effect on our prices was the Sub-Prime crisis and related recession from 2007-2009.
Why are strata building insurance rates rising 25- 300%?
The Strata Property Act Part 9 requires strata buildings to be insured for full replacement value of all common property, common assets, and fixtures.
Similar to lending rates, insurance companies are reacting to market forces and global disasters.
- Claims have increased in number, which hikes costs and premiums
- The cost of rebuilding has increased
- Property values remain high in BC and across Canada
- Extreme weather events globally have cost insurance companies more in payouts
- A boost to buying power by about 3%
- The 3% boost may change weekly
- The new stress test applies ONLY to buyers with less than 20% down
- Starts April 6, 2020
Scroll to the bottom to see the effect the old rule has had on Lower Mainland real estate
BC Housing Sector Urges Federal Parties to Act on
Too many British Columbians struggle to find an affordable home to rent or own because of a lack of housing options. Nearly six in ten uncommitted Canadian voters cite access to affordable housing as a top election issue, according to an August 2019
Angus Reid survey.
ALL the Real Estate Buying Taxes.
- Property Transfer Tax (PTT) – The PTT is calculated on the fair market value of a property and amounts to 1% on the first $200,000 of value PLUS 2% of the portion of value from $200,000 to $2,000,000 PLUS 3% of the value from $2,000,000 to $3,000,000 and 5% of the value over $3 million. An easy calculator to use can be found at
- PTT applies to all real estate purchases – Residential, commercial and industrial
- Exemption from PTT for used homes;
- Purchase price must be $500,000 or less (for full exemption)
- Buyer(s) must be a Canadian citizen or permanent resident. However, a refund may apply if one becomes a Canadian or permanent resident within 1 year.
- Must have lived in BC for 12 consecutive months immediately before the date of title transfer – OR have filed at least 2 income tax returns as a BC resident in the last 6 years.
- Must NEVER have owned an interest in a PRINCIPAL RESIDENCE anywhere in the world at anytime.
- You must move in within 92 days of title transfer and stay for at least 1 year.
- Exemption from PTT for NEW homes;
- The property must have a fair market value of $750,000 or less (for full exemption) – ($750,000 – $800,000 for partial exemption)
- Buyer must be a Canadian citizen or permanent resident amnd must move in within 92 days of title transfer and use the property as a Principal Residence for 1 year.
- If one purchases a vacant lot and build a home, one may apply for a refund once the home is completed and moved in – BUT the Fair Market Value must be under $800,000.
- Buyer must meet all of the above qualifications.
- Exemption from PTT for adding people to title:
- You can add your spouse, parents, grandparents and your children and grand children BUT NOT siblings or aunts, uncles, cousins etc.. The definition of a ‘spouse’ is having a ‘marriage-like’ relationship for 2 consecutive years – and includes same gender relationships.
- The property must be a principal residence of the Buyer or Seller for at least 6 months immediately prior to title transfer.
- Applies to Residential property only AND classified as residential by BC Assessment.
- The Land component must be 1.24 acres or smaller. There is a partial exemption for larger parcels.
- There can be partial exemptions if one buyer is related and the other is not.
- Recreational Residence (less than $275,000)
- Marriage breakdown – starting over again
- Family farms involving individuals – or to or from a Family Farm Corporation
- To correct a conveyancing error or pursuant to an Agreement for Sale
- A Registered charity
- To or from Joint Tenants to Tenants in Common
- Some others on the government website.
2. SPECULATION TAX
- This tax applies to the owners – not with the land – and is based on the ownership as of December 31 each year.
- Tax is due by July 2nd each year
- Applies to; Metro Vancouver Capital Regional District, Abbotsford, Mission, Chilliwack, Kelowna, West Kelowna, Nanaimo, Lantzville. But EXCLUDES reserve lands, treaty lands and lands of self-governing Indigenous Nations.
- 0.5% of the property’s assessed value for EVERYONE in 2018. In 2019, it is 2% for foreign owners or satellite families and 0.5% for Canadian citizens or permanent residents.
- A ‘Satellite family’ is defined as an individual or spousal unit whose majority of total worldwide income is not reported on a Canadian tax return.
- Declaration must be completed by each owner.
- EXEMPTION from Speculation Tax
- The property must be your Principal Residence or occupied by a tenant (The tenant can be family if it is their Principal Residence for at least 6 months, and no rent need be paid)
- There is no tax carry over when buying a property from someone who has not paid the tax. The tax is owed by the seller of the property.
- 3. Vancouver Empty Homes Tax
- Applies to the property not just the seller, so if you are buying a Vancouver property make sure the seller has paid the Speculation Tax. Ask the seller for a completed and filed status declaration – a warranty confirming the property has not been vacant for more than 6 months
- The Rate is 1% of the assessed value
- ALL homeowners (Vancouverites) must submit their declaration
- Detailed list of Exemptions at https://vancouver.ca/home-property-development/empty-homes-tax-frequently-asked-questions.aspx
- 4. Foreign Buyers Tax
- Pay 20% of the fair market value of the property – but ONLY RESIDENTIAL
- If the property is a mixed use (residential, commercial) then the tax only applies to the Residential portion
- Lands that fall under this tax are; Capital Regional District, Greater Vancouver Regional District, Fraser Valley Regional District, Central Okanagan Regional District and Nanaimo Regional District
- Applies to all buyers who are not Canadian citizens, permanent residents or registered under the Provincial Nominee Program
- A refund may apply if the buyer becomes a Permanent Resident within one year
- The Tax liability may be split if one buyer is eligible
- 5. Goods and Services Tax (GST)
- 5% tax on new or substantially renovated residential properties
- Substantially Renovated is defined as removal or replacement of most of the house construction, except for; the foundation, exterior walls, interior supporting walls, floor, roof and staircase.
- REBATES; 2 types
- New Housing Rebate – 36% of the GST paid on homes up to $350,000 with a partial rebate up to $450,000. The rebate is claimed on closing.
- New Rental Rebate (NRR) – 36% of the GST. The NRR is deferred so you will need to pay the full 5% GST and wait for the 36% rebate if you qualify
- The GST is generally deferred on non-residential properties
The missing link between home ownership and perpetual renting remains supply. Either supply of homes to purchase, or supply of money with which to purchase.
The 2019 Budget addresses neither of these supply issues.
1. Zero effort on creating additional housing supply.
2. Zero effort on creating access to money. On Jan 1, 2018 the Fed clawed back 40%+ of purchasing power (mortgage money) from you.
3. Dollar for dollar there is also a useless tweak to the RRSP loan program. Useless when the math is done.
4. A convoluted ‘shared ownership’ plan that creates more questions and concerns than it answers. Besides which it is only available if you borrow roughly 80% of what you currently qualify for today, which is closer to 50% of what you qualified for up until Jan 1, 2018.
5. Additional layers of complexity, that once the math is actually done on will demonstrate zero point zero zero zero zero one percent value to Canadian’s.
Already a homeowner? There is nothing in this budget for you. Access to your home equity remains extremely difficult, more expensive thanks to the Fed. And your ability to move to a new home remains impaired by your existing mortgage which you may no longer be able to re-qualify for under the new rules. Still no grandfather clause for you.
*The one minor exception re existing homeowners is for those divorcing (in 2020, so hang in there) for whom access to an extra $10,000 of RRSP money may somehow matter. (You can already break that money out of your RRSP if you truly need it, so all Fed is saving you is between zero and $4,500 depending on your tax bracket) – this will be of a slight benefit to somewhere around 16 Canadian households in 2020.
What about the ‘shared ownership’ thing? The 5% or 10% downpayment help?
To do the math on this is premature, we will have to wait and see what the details truly are. Does the government forgive part of the loan if the property drops in value at a time when you are forced to sell due to a life event? Do they share in the profit when the property rises in value? Lots of questions.
But again, how many CDN’s with combined household incomes of $120,000 or less are not already borrowing close to the maximum they qualify for? Very few. So this program helps… very very few.
How many CDN’s can reduce their approved shopping budgets from ~$580,000 to $480,000 just to qualify for this program? What’s left to buy in their markets at that price?
These are the same people that qualified for up to $800,000 a little over a year ago before the stress test was implemented. The same people that do not miss their payments through thick and thin. But we are all being restricted anyways… just in case.
The 2019 Budget measures are effectively a further incentive towards restricting demand. Yes more ‘demand side economics’ which simply do not work.
In any event, there are many unknowns around these programs that will go unaddressed until as late as September of this year.
Should you wait to buy until then?
We’ve discussed this topic before; No.
You should never wait to buy.
When should you buy? The day you find a property that fits your budget and lifestyle for the foreseeable future (defined as ‘ability to hold the property for seven years’). That’s when you should buy.
Waiting for the government to ‘fix’ the housing situation is not a prudent option. Clearly.
In its fourth fiscal plan, the Trudeau government spent its entire revenue windfall leaving the deficit projection little changed. In this election budget, Finance Minister Bill Morneau announced $22.8 billion over six years in new spending initiative mostly for homebuyers, students and seniors. Trudeau promised in his first budget to have eliminated all red ink by this year. He will instead head for an October election with an annual deficit of nearly $20 billion. Ottawa is projecting a string of double-digit deficits through the end of 2022.