The 2022 federal budget announcement could be changing things for homeowners and prospective buyers alike. New measures are in place to address the high prices and the low number of homes available for sale. This trend has seen many prospective buyers priced out of the market over the past year.
Let’s have a look at the six major housing-related proposals the federal government put forward in the budget announcement.The Tax-Free First Home Savings Account (FHSA)
First-time homebuyers may soon have access to a new tax-free savings option. The new account will include tax-deductible contributions of up to $40,000 and tax-free withdrawals for purchasing a first home. However, there is an annual $8,000 contribution limit and any leftover contribution room won’t carry over to the next year.
Homebuyers can still fund their home purchase with up to a $35,000 withdrawal from their RRSP. They must, however, begin to repay the amount after two years and have paid it back fully within fifteen years.
Ban on Foreign Buyers
The federal government plans to ban non-residents from purchasing residential property in Canada for the next two years. This, however, does not include refugees, international students, soon-to-be permanent residents, and those with work permits.
The ban will give the government time to examine the impact foreign money has on Canadian housing costs and, if necessary, could be extended.
Creation of a Home Buyers’ Bill of Rights
$5 million in funding is being set aside over the next two years. This will give homebuyers more transparency by giving them the legal right to a home inspection, ending blind bidding wars.
This will include extending anti-money laundering financing requirements to unregulated mortgage lenders in a year.
House flipping tax
After Jan. 1, 2023, there will be new tax rules for those who flip houses to make a quick profit. Any sale of a new or heavily renovated residential property, within 12 months of purchase, will be fully taxed and treated as business income.
Doubling of the First-time Homebuyers’ Tax Credit
To make buying a home a more realistic goal, the First-time Homebuyers’ Tax Credit will double from $5,000 to $10,000. This will provide buyers with a $1,500 tax rebate on their home purchase instead of the current $750.
Multigenerational Home Renovation Tax Credit
The 2022 budget includes a new tax credit of up to $7,500 to put toward home renovations for households with adult family members who require extra care. For example, building a secondary suite for a senior citizen or an adult living with a disability.
There are a few exemptions to this rule; needing to sell due to a new job, a divorce or the birth of a child.
These new measures should hopefully slow down the market and give more Canadians the opportunity to purchase their own home. To see how this will affect you, give us a call, we are always more than happy to go through numbers with you!