The Canadian real estate industry got what it wanted from the latest budget — nothing. The Government of Canada (GoC) released Budget 2021 this afternoon. Despite housing becoming a boiling point issue, it was largely ignored. There were few commitments that would impact market prices in the near term.
Beneficial Ownership Won’t Be Arriving Until 2025
Great news if you’ve been money laundering in Canada — you have 4 years to clean up your holdings. One key point is bringing transparency to corporate ownership. Opaque ownership in Canada has made it difficult to figure out who the ultimate owner of a property is. Often the ultimate owner of a company that holds or funds the buy of the asset is unknown, and not tracked. Canada plans to end that in the very distant future.
The Government has given $2.1 million in support to create a publicly accessible registry. The registry has a target date of 2025 however, way in the future. The long implementation date means not much will happen in the near term. In fact, you’re likely to pick up a shiny new home at a higher price from someone looking to avoid being revealed. For context, the UK had a similar issue, and they launched their registry this year.
National Foreign Buyer Tax of 1% Annually
Canada will implement a national tax on non-resident, non-Canadian-owned residential real estate. The tax will be an annual recurring 1% of assessed value, on property considered vacant or underused by a non-resident. The tax will be implemented by January 1, 2022. The impact should be minimal, considering Toronto and Vancouver already have non-resident taxes. Vancouver has a recurring vacancy tax as well, and Toronto will have it implemented by next year too.
Non-resident buyers have been less and less of an issue for the past few years. It’s unclear what they’re trying to accomplish with this one. Recent data from BC shows non-resident buyers represented around 1% of transactions. Not exactly enough to move the needle by much, and a demographic more likely to pay the tax.
Foreign capital is a different issue that’s not addressed by this in any way. This is when citizens or permanent residents earn income abroad but live in Canada. The issue was brought up by a politician earlier this month, who said housing is out of reach for locals. There doesn’t seem to be much of a solution to this one. Local pay is low compared to similar countries.
Funds To Shelter The Most Vulnerable
The Government is committing funds to shelter the most vulnerable. There was $3.8 billion in funding, with $2.5 billion of that money being new. The new money will be used for projects primarily for marginalized communities. Low-income housing, and shelter for persons with accessibility challenges are amongst the demographics to be assisted.
The remaining $1.3 billion was reallocated existing funding, or advancing previous commitments. This funding is grouped into various commitments to build, repair, or convert or create housing. Details are scarce, but this sounds like subsidizing market-based housing. This arguably preserves home prices at higher levels, but that’s a different conversation.
Housing is one of the biggest issues for the government, but they showed weak commitments. Overall the funding will create around 35,600 units of shelter over several years. That barely puts a dent in the number of units needed. This either means the BoC has something in the pipeline later this week, or they’re totally ignoring the market. The latter isn’t entirely a bad thing, as long as they ignore home prices on the way down as well.
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