In 2023, January 1st kicked off more than a host of New Year’s celebrations. It also marked the beginning of new legislation in the real estate market designed to make Canadian homes more affordable. Are these latest developments bad news if you plan on selling your home in the upcoming year? On the one hand, these new guidelines could impact your sale by making the pool of buyers smaller. However, there are other demographic changes taking place that might negate the effects of these new laws and even increase the demand for housing. Here are four new rules that all homeowners should be aware of, especially when planning to sell in the next year or two.
Two-Year Ban on Foreign Investors
For the next two years, foreign investors are banned from buying residential properties in Canada with very few exceptions. The penalty for contravening this ban could result in being forced to sell the property and a fine of up to $10,000.
The intention is to make houses more affordable and available for Canadian residents and their families. For many, it’s welcome news in light of the critical housing shortage in the current market.
Will the ban make a difference? Some experts think the effect will be minimal, given that foreign buyers only make up 6% of national homeownership as it is.
As a seller, this ban could remove some potential buyers who may be interested in your home. However, available listings are still lower than average, and plenty of local residents are still searching for suitable houses.
No matter how the market changes, some things will always stay the same! Check out some of our best tips for maximizing your sale at any time:
- The Power of Staging When Selling Your Home
- Minor Upgrades, Maximum Results
- How To Stand Out In A Changing Market
Anti-Flipping Tax
While still legal, flipping a house for profit has become far more expensive. Until recently, it was possible to buy a property, make a few minor cosmetic improvements and then sell it at a massive profit. We may not know the extent of how much flippers have contributed to the housing supply and affordability crisis. All we know is that the government is finally stepping in with a hefty tax that makes flipping far less attractive. The proceeds were once considered to be capital gains, which meant only 50% of the profits were taxable. Under this new legislation, 100% of all profits will be taxed as business income on any property held for less than 12 months. Some exceptions will apply for extenuating circumstances, such as:
- Death of a family member
- Divorce or separation
- Job loss
- Illness, injury or disability
The new tax implications combined with softer market values make it much more challenging to make a quick profit by flipping houses. Real estate investors will have to adopt more long-term strategies to make their properties financially viable.
When selling a residential home, this new law will likely have minimal impact as the population increases and more people re-enter the real estate market.
Still, you’ll want to do everything you can to achieve the best results. That may include staging your home and making minor updates to make it as visually appealing as possible. And, of course, don’t forget to work with a local real estate expert who can help you price and market your home effectively!
Vacant Home Tax
Though the entire province has faced a housing shortage, the City of Toronto has been hit particularly hard. The municipal and provincial government has been under intense pressure to take action. The result in 2023 is a new tax for homeowners in Toronto to contend with. Any residential property that sits vacant for six months out of the year will now be subject to an annual penalty of 1% of the appraised value. Exceptions will be in place in certain circumstances, including:
- The principal resident goes into care
- The death of the registered owner
- Extensive renovations or repairs are being performed
- Transfer of ownership to an unrelated person or corporation
- A court order probits occupation
- The property is required for employment purposes where the owner has a primary residence outside of the GTA
The purpose of the Vacant Home Tax is to encourage existing homeowners to either sell or rent out their properties and free up much-needed housing for city residents. With the average house price in Toronto currently sitting at over $1 million, this tax could be a significant burden, especially with no rental income to help cover the carrying costs. The revenue collected will support affordable housing initiatives in the city.
How will this tax affect the real estate market in the GTA? Any homeowner wishing to avoid paying might rush to list their vacant property, which could result in a temporary influx of houses for sale. If you plan on listing your home in the next few months, you may need to work extra hard to stand out from competing sellers.
You can’t discount the power of accurate information if you want to sell your home and get the best results. The resources below will help:
- What’s Your House Really Worth?
- Should You Wait Until the Timing is Better to Sell Your Home?
- How To Negotiate A Real Estate Contract
Canada’s Immigration Targets
All of the above legislation may have worked to make housing more affordable. However, Canada’s new immigration targets may offset any benefit. One of the lasting effects of the pandemic was that a vast number of people permanently left the workplace.
To assist businesses scrambling to fill staffing shortages, Canada will welcome approximately 1.5 million new residents to the country over the next three years.
Many of these newcomers will settle in or near the GTA, and all will need housing. As the population grows, we could soon see another surge in demand for both rentals and properties to purchase. If that happens, the market could become more competitive, with houses selling quickly and commanding higher prices.
Do you have questions about the selling process or how to maximize your results in the current market? Our trusted experts are standing by and happy to help! Reach out today right here or call our office at 905-332-9223.
