Home sales in Canada have sored over the past year, continually setting new monthly records in the hottest real estate markets throughout the pandemic. With many homeowners benefiting from low borrowing costs and higher savings, buyers are seeking larger properties where they can work from home.
Since the pandemic’s work-from-home mandates started, many people have been moving to the suburbs and cottage country which provide more breathing space, room for a home office and access to a garden.
If you are one of the many who moved-up or moved-out in 2020 do not forget to report the sale of your condo, cottage, or home on your income tax return.
Starting in the 2016 tax year, the CRA allowed the principal residence exemption only if the homeowner reported the disposition and designation of their property on their income tax return. If you sold your home and did not report it to CRA you must go back and amend your return for the year of the sale and file a late designation ASAP. Furthermore, if you sold a property that was not your principal residence such as a rental property or cottage, you must report any profit or capital gain on the sale.
Overall, the home prices rose 15% year over year across the Toronto region, with the biggest price increases outside the city. North of Toronto in Simcoe County, prices rose 35% and to the east in Durham region the house prices increased by 29%. In Prince Edward County and Kawartha lakes the prices are up more than 30% year over year.
Because of the increase in home prices, Canada Mortgage and Housing Corp. and the Bank of Canada have recently raised concerns about rising mortgage debt. However, even though property values have gone up significantly, they have not increased at the same pace as they did in 2016 and 2017, according to the Toronto real estate board.
To curb speculation and ensure homeowners could afford their mortgage payments, stricter mortgage qualifications and foreign residential real estate taxes were implemented in 2016. Because of these measures Governor Tiff Macklem believes the country is in a “better position” today, than it was then.
Buying a Home for the First Time
With more buyers coming into the market and inventory limited, people are having to pay higher prices to get into a home. To help, qualifying taxpayers may withdraw up to $35000 from their RRSPs (tax free) to buy a home. The Home Buyer’s Plan (HBP) is available to first-time home buyers who plan to live in the home within one year of buying or building it. The taxpayer has up to 15 years to repay the total amount withdrawn from their RRSP. To qualify as a first-time homebuyer, you either; must never have owned a home before; you must not have lived in a home owned by you or your current spouse/common-law partner in the last 4 years; or, you have recently gone through a breakdown of a marriage or common-law relationship.
As always if you want more information please do not hesitate to contact me.
Have a great week,
Tracey
Sources: Article posted on Advisor.ca Tax Tips for clients who should bought or renovated homes in 2020 by Staff, posted 03-24-2021. Article by Rachelle Younglai, The Globe and Mail, Toronto, Vancouver home sales soar as condo market rebounds, low rates drive up prices, posted 03-03-2021. Dynamic funds website