Yesterday, we posted a story about an upcoming official announcement on Canada’s housing market. Finance Minister Bill Morneau announced the new rules in Toronto today. Here’s what we know:
There will be a move to close a loophole in current tax laws that enable non-residents to buy homes in Canada. Currently, foreigners buying homes get a tax exemption to avoid paying capital gains when they sell the home by claiming it’s a principal residence.
"An individual who was not a resident in Canada in the year the individual acquired a residence will not be able to claim the exemption for that year," Morneau said.
"There's a lot of people who are declaring their homes as principal residences when they're not," said Toronto real estate lawyer Bob Aaroon in an interview. "I think it's more of cracking down on the existing law rather than plugging a loophole."
Borrowers will be tested against their ability to pay their mortgage if actual rates were as high as the big bank's five-year posted mortgage rates. The Bank of Canada says these rates currently average 4.64 per cent.
"This measure will make it harder for buyers to qualify for a loan, especially in high-priced regions," said BMO economist Sal Guatieri. "This means that many potential buyers won't qualify for an insured mortgage, which requires the total carrying costs of a home ... to consume no more than 39 per cent of gross family income"
Read the September 2016 issue of Business Review USA & Canada magazine
SOURCE: [Business Insider]