News and Articles

Rate Increase

(Jan 25, 2023) As anticipated, the Bank of Canada increased its benchmark interest rate by another quarter percent this morning.

Analysts expect that this could be the only rate increase of 2023, and that we could see some downward movement toward the end of this year. We will continue to monitor these changes carefully as it impacts our variable rate mortgage clients as well as clients with lines of credit.


Introducing the FHSA 

(Jan 16, 2023) The federal government's last budget proposal included a new savings plan to help Canadians buy their first home. Along with doubling the federal first-time homebuyer's tax credit, there is a new way to save up to $40,000 for your first home tax-free called the Tax-Free First Home Savings Account (FHSA).

The new program will start in April 2023 and will allow Canadians to save up to $40,000 for their first home. If eligible, you can make tax deductible contributions of up to $8,000 each year AND you will have up to 15 years to use your savings toward your home purchase. Funds will accumulate tax-free, provide a tax deduction in the year of contribution and are withdrawn tax-free so long as the funds are used toward home purchase.

Who is eligible?
There are three important components to qualify:
• You need to be a resident of Canada
• You must be at least 18 years of age (or the age of majority in your region)
• You can't own a home in the year the account is opened or previous four years.
You are considered a first-time homebuyer, for the purposes of this plan, if you haven’t owned a home within the last four calendar years. For example, if you bought your first home in 2015 and sold it in 2018 and have been renting or living with parents or a non-spouse ever since, you would be considered a first-time homebuyer again.

What happens if you don't use your tax-free home savings?
If you don't use your Tax-Free First Home Savings Account to buy a home, you can transfer the funds to an RRSP account anytime within 15 years. The transfers will not impact your RRSP’s contribution room. Alternatively, you can withdraw the amount, but the funds would be subject to withholding taxes.

What about the RRSP Home Buyers’ Plan (HBP)?
Right now, you can withdraw up to $35,000 of your RRSP towards a new home (called the RRSP Home Buyer's Plan) tax free. The catch is that with the RRSP Home Buyers Program, you are borrowing from your RRSP and must replace your RRSP funds within 15 years. With the new FHSA, you won't need to replace those funds. If qualified, Canadians will be able to use both an FHSA withdrawal and a RRSP HBP withdrawal for the same home purchase.


 

Property values for taxes updated 

(Jan 3, 2023) - BC Assessment has now refreshed their database to reflect this year's assessed values for property taxes. According to BC Assessment, most homeowners around the province can expect about a 5 to 15% rise in assessment values, as assessments are based on July 1st 2022 valuations.

Since July 1, the real estate market values have changed and your 2023 property assessment will likely be higher than what the current market value might be. BC Assessment notes that everyone will be in the same situation and that an increase in assessment value does not necessarily result in an increase in property taxes unless your property values has changed more than the average value change for your community.

To check your home's value and compare your home to neighbouring properties, check your assessment. On the BC Assessment site, scroll down below your property details, and you will find an option to sample sold properties. This will show you some of the comparable sales used to determine your property valuation. Keep in mind that values are a snapshot at July 1st of 2022.

If you think that valuation is not accurate, you can appeal the value. To appeal your value, there is a specific process, and you must file your intent to appeal by January 31, 2023.


 

The Prohibition on the Purchase of Residential Property by Non-Canadians Act

(Dec 28, 2022) The new ban is effective January 1st and prohibits the purchase of residential by non-Canadians for 2 years. This new federal legislation was created to mitigate soaring housing prices across the country by reducing demand from foreign buyers. The ban will apply to purchase agreements written on/after January 1, 2023 but does not apply to purchase agreements written before Jan 1, 2023 as long as the purchase closes in 2023.

The ban does not include permanent residents, refugees and temporary residents in specific circumstances. The specifics of the ban inclusions and exclusions are lengthy. In general, if a corporation is controlled by a non-Canadian, the act prohibits purchase of property by that corporation. Ownership is defined as direct or indirect ownership of shares or interests that make up more than 3% of voting rights. Anon-Canadian can still purchase in Canada if they are buying with a spouse or common-law partner who is eligible to purchase residential property in Canada.

Temporary Resident exemptions are available if the resident is:
1) enrolled in a program of authorized study at a designated learning institution and:
a) the purchase price of the property does not exceed $500,000
b) they have filed income tax returns in Canada for five years before the purchase year
c) were physically present in Canada for a minimum of 244 days each of the five calendar years before the purchase was made
d) have not purchased more than one residential property

2) holding a work permit or are authorized to work in Canada and:
a) have worked full-time in Canada for a minimum of three years within the four years before the purchase year
b) they have filed all required income tax returns for a minimum of three of the four tax years before the purchase year
c) they have not purchased more than one residential property

Other Exemptions:
Foreign nationals who hold a passport that contains a valid diplomatic, consular, official or special representative acceptance issued by the Chief of Protocol for the Department of Foreign Affairs, Trade and Development
• acquisition of an interest or real right resulting from death, divorce, separation or a gift
• the rental of a dwelling unit to a tenant for the purpose of its occupation by the tenant
• the transfer under the terms of a trust created prior to the Jan 1, 2023
• the transfer resulting from the exercise of a security interest or secured right by a secured creditor.

Penalties for Contravention of the Act 
Anyone found to be in contravention of the act will be subject to court ordered sale of the property, a fine up to $10,000,and foregoing of any appreciation of the valueof the property. This penalty also applies to any person that assists a prohibited person/company from buying residential property. Language in the Act is broad enough to capture sellers, realtors and professional advisors.


New Legislation in January Gives Buyers an Out - But For a Fee

(December 20, 2022) The new provincial legislation was conceived during an intense real estate market that saw bidding wars, rapid price escalation, and multiple competing, and often condition-free, offers. The legislation was intended to protect buyers from pressured buying conditions by giving them a way out of a contract. Currently, buyers wanting to terminate an unconditional contract could face significant financial penalties (like loss of purchase deposit) and/or legal ramifications.

How does the new HBRP work?
The HBRP (or rescission period) will give buyers the right to withdraw from a purchase agreement within 3 business days after an offer is accepted. To protect sellers from buyers walking away from contracts (or multiple contracts) the HBRP legislation also includes a fee paid to the seller if a buyer exercises their right rescind a contract.

As the 3 business day rescission period is expected to run concurrently with any other conditions such as for financing, inspection, appraisals, the impact of the HBRP is obviously more significant in condition-free scenarios.

The legislation applies to ALL residential property transactions (including private sales), with a few notable exclusions:
· sales of residential property or interests on leased land,
· sales at auction and sales under supervision or order of a court
·pre-construction sales (multi-unit) and Assignment of Contract

How does a buyer rescind a contract?
If a buyer decides to rescind their offer, the legislation requires that buyers serve notice by specific methods (similar to serving legal documents) and that the notice contain specified information to be valid.

What is the cost to rescind?

Buyers who exercise their right to rescind will have to pay a fee of 0.25% of the purchase price. For a $1,000,000 home, this would result in a $2,500 fee paid to the seller.

Application of the new legislation

If a purchase deposit has been collected by the realtor up front - as is the case in condition free purchase offers - the legislation directs that the brokerage release the rescission fee to the seller upon notice of rescission. The balance, if any, is returned to the buyer. For offers with conditions, it appears that the rescission clause may be less applicable as the buyer may choose to not remove other conditions, and a deposit is not likely to have been collected yet.


Rate Update

(December 8, 2022) As anticipated, the Bank of Canada increased its benchmark interest rate by yet another half percent to 4.25%this morning. Given that we started 2022 at 0.25%, the rate of increase is the fastest pace since the 1990s. Interest on variable rate mortgages will rise as lenders increase their prime rate.