Real estate exec speaks out against increasing capital gains tax

One leader of the real estate industry explains why a potential increase to the capital gains tax on second homes is a bad idea.

Investors have one influential voice in their corner.

“I think it’s a horrible idea. The proposed change would be a huge change in Canadian taxation policy. It would hurt employment. It’s just generally bad for the economy. It flies in the face of the innovation focus of the economy that the prime minister wants to build,” Phil Soper, president or Royal LePage, told Canadian Real Estate Wealth. “It’s bad policy, specifically the rationale the Finance Minister put forward. I don’t think it would help Toronto home prices. The portion of the market that is tied to home flipping or short-term speculators … that’s a very small portion of the market. Of any market in Canada.”

Ontario Finance Minister Charles Sousa is urging the government to crack down on speculative housing investing by increasing taxes on profits.

In a letter to Finance Minister Bill Morneau, Sousa argued hiking the taxable amount above 50% would discourage investors to purchase homes on speculation. It’s one way to address ever-increasing housing prices in the country’s hottest housing market and thus help first-time homebuyers currently priced out of the market break in.

“My primary focus is to address the concerns of middle class Canadians who are worried about buying their first home,'' Sousa wrote in the letter. “Additionally, it is important that the housing market remains stable, meaning that borrowers and lenders are resilient and able to withstand economic shocks.''

Under the current policy, capital gains tax is charged on 50% of home sale profits unless it’s a principal residence.

Starting this year, Canadians have to fill out an extra section on their tax return, the Schedule 3 “Capital Gains (or Losses)” in order to claim their principal residence and earn a tax break. Homeowners will provide information on the date of acquisition, the address, as well as other details for any sold home claimed a principal residence.








Source: http://www.canadianrealestatemagazine.ca/news/real-estate-exec-speaks-out-against-increasing-capital-gains-tax-223175.aspx

Consumer confidence rises on real estate future

More Canadian consumers are expecting a rise in real estate prices in the next 6 months, while overall sentiment in the economy and personal finances is also up.

The weekly Bloomberg/Nanos Canadian Confidence Index was up to 58.22 in the week ending March 10, up from 57.42 a week earlier and setting a new 2017 high.

“Perceptions related to the value of real estate in Canada, which hit a seven month high in the weekly tracking, continue to be one of the top positive drivers of consumer sentiment” said Nanos Research Group Chairman Nik Nanos.

There were increases in positive outlooks for personal finances including mortgages, and the Canadian economy. However, there are still some challenges.

Canadian households are experiencing sluggish wage growth as the economy transitions from a commodity and manufacturing-based economy to one that for now looks to the lower-wage service sector for employment opportunities”, said Bloomberg economist Robert Lawrie.






-http://www.canadianrealestatemagazine.ca/market-update/consumer-confidence-rises-on-real-estate-future-222899.aspx

Commentary: Paying 20% down payment in full is the wiser choice today

Taking current economic and fiscal realities into account, it would be far more sensible to pay the initial 20 per cent down payment for a home purchase in full instead of saving the money for later, according to a veteran industry analyst.

In a March 10 piece for The Globe and Mail, markets observer Rob Carrick argued that the mortgage environment of today does not favor those who carefully save and spend their hard-earned funds.

“Home buyers who put less than 20 per cent down are seen as risky enough to require that they pay the cost of default insurance for their lender. But the best mortgage rates are in some cases going to people with small down payments,” Carrick wrote.

“The indignities for diligent savers are piling up. You’ll earn next to no interest on your savings, and then some mortgage lenders withhold their best rates when you buy a house.”

Carrick added that the increased popularity of high-ratio mortgages has led to the taxpaying public essentially bankrolling these mortgages in the event of defaults.

“Because they’re basically risk-free, high-ratio mortgages get the lowest rates at alternative lenders. The big banks, with their greater financial strength, don’t much look at down-payment size in setting mortgage rate discounts for in-branch clients,” Carrick explained. “But there are signs of a new favouritism toward people putting less than 20 per cent down. In a recent Bank of Montreal promotion offering up to $1,000 cash to first-time buyers, one of the conditions is that they require mortgage-default insurance.”

“Discrimination against people who save big down payments might be addressed if regulators follow through on a proposal to have lenders share some of the risk if an insured mortgage goes into default.”

In addition, RateSpy’s Robert McLister highlighted an additional benefit to fully paying the 20 per cent: More equity will prove invaluable to maintaining solvency, especially if residential reale state prices decline.

“If you’re trying to counsel people on being prudent, then you want to tell them to put down as much as they can,” Carrick quoted McLister as saying.







http://www.canadianrealestatemagazine.ca/news/commentary-paying-20-down-payment-in-full-is-the-wiser-choice-today-222758.aspx