For almost 20 years (in the Lower Mainland especially) real estate has been a pretty sure thing. Many people we’ve talked to over the years have said that real estate is a guaranteed money maker. In most areas of BC this may have been true; ask the people of Detroit and they may think otherwise. Recently, we have seen a softening of the real estate market. So what seems to be driving this softer market?
1. Increase in Interest Rates – The Bank of Canada has increased interest rates over the last year and they are expected to continue this upward trend.
2. Restrictions in Lending Rules – The Federal Government introduced legislation on the lending rules for Canadian banks and credit unions. This reduced borrowing power in some instances by 18%. (Read more about Financial Stress Test: New Mortgages Rules here!)
3. Foreign Buyers Tax – There had been some speculation that foreign buyers were distorting the BC real estate market. As result, BC Government introduced a 15% tax on foreign buyers.
4. Speculation Tax – In strong real estate areas (such as the GVRD, Kelowna, West Kelowna, Victoria and the Fraser Valley) BC introduced a tax on empty properties or properties that are rented for less than 30 days at a time. This tax is 0.5% if you live in BC, 1% if you live in the rest of Canada and 2% if you are a foreign buyer.*
5. Rent Controls – The BC government recently made it more difficult for landlords to increase rent in BC.
The result: the market has softened in BC and in other parts of Canada as well. Depending on the area, prices have dropped more than 5%.
USEFUL LINKS:
If you have any questions on how these changes may affect your financial future, do not hesitate to contact us!
According to the government’s calculations is that less than one per cent of British Columbians who pay income tax in the province will be hit by the tax.
“Over 99% of British Columbians will not pay the tax…only those who own multiple properties and leave them vacant in major cities will be asked to contribute… The tax is intended to improve housing affordability in areas where the need is most acute, while exempting rural cabins and vacation homes.” – Carole James, B.C. Finance Minister
Follow the chart to see if the new BC Speculation Tax applies to you. This tax is applicable to all Canadian’s and Permanent Residents who live in BC.
The income sprinkling rules outlined in July 2017 held strong and the rules pertaining to passive investment income weren’t as harsh as predicted. Specifically, Budget 2018 has implemented two simple measures as it pertains to passive investment income: Limiting Access to Small Business Tax Rate Budget 2018 proposed to provide for an alternative reduction to the […]
As some of you may know, there have been some imposed changes that will decrease our borrowing power when it comes to purchasing a home. As of January 1, 2018, you will need to qualify under more stringent rules in order to get the mortgage you desire. Assuming all other factors remain unchanged, once the […]
In the competitive market we face today, purchasing a home can be a daunting task. There are a few things to be aware of that can help make it a little less daunting. The First Time Home Buyers Plan and some new advantages that were recently introduced by the Provincial Government help soften the blow. […]
Singer Olfert Financial GroupUnderstanding recent market volatility