On February 27th, the Canadian government unveiled its Federal budget with new measures that directly affect the Real Estate Market. We’ve listed some of the key highlights from the budget below.
General housing conditions in Canada
The budget makes reference to the overheated real estate conditions in Vancouver and Toronto, but does little to further cool property prices, since previous measures implemented provincially in those cities have already begun to balance out the markets.
In Vancouver and Toronto prices have continued to grow for condos, whereas prices of single family homes have decelerated. In Alberta, the housing market has picked up, and Montreal’s housing market is starting to boom.
Rising interest rates and stricter mortgage regulations rolled out at the beginning of the year are also expected to temper prices.
More emphasis on the rental market
The budget emphasized the issue of rental availability and affordability in Canada’s metropolitan cities. With 30% of Canadians being renters, low demand and high supply have been driving up rental prices across the country. In response, CMHC launched the Rental Construction Financing Initiative in April 2017, which aims to supply $2.5 billion worth of low interest loans to incentivize rental project builders. This will hopefully lead to more than 14,000 newly constructed rental units in Canada.
Bubble… or no bubble?
The question of whether or not Canada is heading towards a housing market crash has been on everyone’s lips since mid 2016.
The consensus in the Federal Budget is that there is no imminent crash on the horizon, and that although certain cities are at risk of a bubble, safety precautions have been put in place in a timely manner.
Overall, the Canadian economy appears to be in a good shape:
“Since November 2015, Canadians have created almost 600,000 new jobs and the unemployment rate has fallen from 7.1% to 5.9%— close to its lowest level in over four decades. The Canadian economy has been remarkably strong, growing at a pace well above that of all other G7 countries since mid-2016.”
Consumer debt and real estate
The budget indicates a decrease in real compensation over the past decade, meaning that while employment rates have increased, people earn comparatively less at their jobs than they did in 2007. Low interest rates and housing prices have driven up consumer debt, making Canada the only country in the world with a higher household debt than GDP.
The household debt is mainly due to mortgage debt, which makes the housing market the most vulnerable economic area in Canada.
Safe and affordable housing for visible minorities
The emphasis of the Federal Budget of women and women’s needs is notable: at least 25% of the $40-billion National Housing Strategy investments is targeted towards projects supporting the unique needs of women and girls.
Over the next decade it will create 100,000 new housing units, repair 300,000 existing housing units, and create and repair 7,000 shelters for survivors of domestic violence.
“Because of their relatively low household incomes, single mothers, women with disabilities, and senior women living alone often find it especially hard to find affordable housing. And for the thousands of Canadian women and children who are homeless due to family violence, housing in shelters doesn’t just provide a safe place to sleep, it saves lives.”
The Budget also addresses in detail the needs of Indigenous Peoples, emphasizing the need for safe, adequate and affordable housing.
“Nearly one in five Indigenous people live in housing that is in need of major repairs, and one in five also live in housing that is overcrowded. Access to adequate and affordable housing is a particular challenge for Indigenous women. Lack of adequate housing can compound barriers to security, employment and overall well-being, which tend to disproportionately affect Indigenous women.”
Aggressive strategies against tax avoidance
Lastly, the Government is taking strict measures to combat international tax avoidance, including tax avoidance through shifting property income into foreign resident corporations. The measures include rules ensuring that non-residents pay fair taxes on income derived from Canadian real estate.
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