VANCOUVER (NEWS 1130) – One of the most outspoken critics of the lack of intervention in the housing market feels vindicated by the federal government’s move to track how the primary residence tax exemption is being used.
The BC NDP’s housing critic says a key change in this bill will make it easier to catch abusers.
The law will force primary residence sellers to report the sale on their income taxes even if they qualify for the capital gains tax exemption.
David Eby says CRA auditors can investigate when people are breaking the rules for example declaring more than one primary residence in one family.
“If somebody is continually buying and flipping houses in our real estate market, they may no longer be able to claim the capital gain because it’s not a principal residence anymore. It’s actually a business they’re running. The second reason is we need better data about what’s happening in our real estate market and it’s only by collecting this information that we can know actually whether a family, for example, is purchasing multiple properties under the names of different family members in order to run an investment style scheme instead of using the principal residence exemption as it was intended.”
Speaking of data, the BC government is expected to release another batch of foreign buyer numbers tomorrow. It will be the second release since the province brought in its foreign buyers tax.
Changes worrying the real estate and mortgage industry
Realtor Dave Robles says the changes will drastically affect who is qualified for the mortgage they need to afford something in this market.
“For example, if a client makes $80,000 per year now, with the same terms now, they would be able to get approved for $530,000 based at today’s rate of 2.49 per cent. After October 17th, the changes will come in and they will have to be approved at the bank’s fixed rate, which is a higher rate. It means they would only be approved for $418,000. So that’s a difference of $112,000. That’s going to be a huge change when it comes to what they’re able to afford.”
Meanwhile, President of the Canadian Mortgage Brokers Association Ajay Soni says this is going to hit first time buyers hard.
“It actually doesn’t appear to make sense when we have this entire debate about affordable housing. You’re making this unaffordable for people to borrow money so they can buy a house. It’s going against the grain… This is going to affect the people that can least afford to buy a home even more.”