I’m sure many of us will find common ground in hoping for some measure of stability in 2023, the new year coming as it does upon the heels of one which featured unprecedented ups and downs in the real estate market (just in case you weren’t already sick enough of seeing the word ‘unprecedented’). And, happily, there are a handful of favourable indicators to the prospect of a more normal year ahead. While by no means entirely behind us, the pandemic and its trappings are finally consuming less newsprint and psychological bandwidth, inflation is beginning to show signs of slowing to a more typical pace, and signs are pointing to a stabilization of Canada’s overnight lending rate at or around four and a half percent in the coming months. So, while mortgages seem likely to remain decidedly more costly than they were one year ago, a more balanced housing market and some measure of predictability should at least allow homebuyers and sellers to gain a better idea of where they stand in today’s market.
Here in Waterloo Region, 2022 closed out with average sale prices down significantly from where the year started out. As we’ve already seen, this cooling of the real estate market was the result of a combination soaring interest rates and general uncertainty within global financial markets. As of the end of December, the average sale price of a home in Waterloo Region stood at a little over $720,000 – that’s a drop of 15.5% since the same time last year. Zeroing in on specific property types, that decrease was a little more significant for detached homes (down by 17.% to $825,450), ditto for semis (down by 18.7% to $616,671) but markedly less painful for apartment-style condos (down by 7.9% to $460,994). Although I should caution you that activity in the condo market tends to lag somewhat behind those of other property types. As is to be expected, market activity this past December was the slowest of the whole year, as folks understandably prioritize family gatherings and well-deserved time off over other business matters. Correspondingly, the average length of time required for a home to sell was up in December, to 25 days. That’s a good deal longer than we’ve seen in the past couple of years.
This coming year is also set welcome the introduction of a range of new housing policies implemented at the federal level. The current Liberal minority government ran in September 2021, in part, on a platform aimed at controlling what was then seen as an over-inflated real estate market, and protecting Canadian homebuyers from the perceived threat of spiraling prices caused by foreign investment in our residential markets. One can argue the merit of the basis for the laws now being implemented, but these are significant new programs that will need to be navigated by consumers and Realtors alike in 2023 and beyond. What follows is a brief synopsis of these policies, provided by the Canadian Real Estate Association (CREA). For more information and CREA’s full press release, please follow this link or, if you have any questions that are specific to your own situation, please don’t hesitate to contact me (or your Realtor) directly.
“To address Canada’s current housing crisis, the federal government introduced new housing policies and measures that have come into force or will in 2023. With so many changes it can be hard to keep up with it all. That’s why we’ve compiled everything you need to know before kicking off 2023.
On April 7, 2022, Deputy Prime Minister, and Minister of Finance, the Honourable Chrystia Freeland tabled A Plan to Grow Our Economy and Make Life More Affordable. Within the budget, the federal government committed to several initiatives including:
First-Time Home Buyers’ Tax Credit (HBTC)
Coming into force: 2022 and subsequent taxation years.
Budget 2022 proposes to increase the amount used to calculate the First-Time Home Buyers’ Tax Credit to $10,000 (from $5,000), which would provide a tax credit of up to $1,500 to eligible home buyers. This amendment applies to the 2022 and subsequent taxation years.
Two-year Ban on Non-Canadians Purchasing Residential Property
Coming into force: January 1, 2023.
The two-year ban on non-Canadians purchasing residential property comes into force on January 1, 2023. The federal government released the regulation on December 21, 2022. Regulations includes definitions, exceptions, and enforcement elements to help individuals understand and comply with the law.
Multigenerational Home Renovation Tax Credit
Coming into force: January 1, 2023.
The Multigenerational Home Renovation Tax Credit is a refundable credit that allows families to claim up to $7,500 to build a secondary unit in their home to accommodate seniors or adults with disabilities. Any expenditures to be claimed should be incurred after January 1, 2023.
The home may be owned by the senior (65+) or an adult with a disability, a family member, or a trust. The qualifying individual or their cohabiting spouse or common law partner can claim the credit, and so can a qualifying relation. The secondary unit must be a self-contained housing unit with a private entrance, kitchen, bathroom and sleeping area. It should be inhabited within 12 months of its renovation/construction ending. The credit does not cover recurring repair and maintenance, appliances or housekeeping.
Residential Property Flipping Rule
Coming into force: January 1, 2023.
Budget 2022 proposed to introduce a new rule to ensure profits made from flipping residential real estate are subject to full taxation. Specifically, profits arising from dispositions of a residential property (including a rental property) that was owned for less than 12 months would be deemed to be business income. Bill C-32 defines ‘flipped property’ as: “a housing unit of a taxpayer located in Canada that was owned by the taxpayer for less than 365 consecutive days (less than a year) prior to the disposition of the property”. The measure would apply in respect of residential properties sold on or after January 1, 2023.
Tax-Free First Home Savings Account (FHSA)
Coming into force: April 1, 2023.
The Tax-Free First Home Savings Account (FHSA) is designed to give first-time home buyers the ability to save $40,000 on a tax-free basis with an annual contribution limit of $8,000. The government is working with financial institutions to have the infrastructure in place for individuals to be able to open an FHSA and start contributing at some point in 2023. Chartered Professional Accountants of Canada says Canadians can begin contributing to the FHSA in 2023 even though the rules don’t come into effect until April 1, 2023.”
