Brace for a possible tax on speculative home purchases: CREA chief economist

The chief economist of the Canadian Real Estate Association says homeowners in the Greater Toronto Area should brace themselves for a possible tax on speculative home purchases. Gregory Klump says he would not be surprised to see policy-makers roll out such a measure just as the market begins to recover from the most recent round of changes.

“I don’t think they’re done yet,” Klump said during an Economic Club of Canada roundtable in Toronto Wednesday.

The Ontario government introduced a suite of policies in April aimed at cooling runaway house prices in the fast-growing Greater Golden Horseshoe region, including a 15 per cent tax on foreign buyers and expanded rent controls.

Home sales in the GTA plunged by 20.3 per cent in May, the month after the new rules took effect, suggesting that the measures are having the desired impact.

However, some economists say the impact may be short-lived as it was in Vancouver, where the introduction of a foreign buyer tax caused a temporary pause in sales activity before the market picked up again.

Klump says he could see it taking about six months for the housing market in the Toronto area to gather steam again, provided that no new measures are introduced between now and then.

He says he believes that a speculation tax would be misguided because such measures typically do little more than temporarily change market sentiment — pushing buyers to the sidelines for a bit while they wait to assess the impact.

Loopholes could allow some speculators to get around paying the tax, Klump says.

The Canadian Press

…actually, the headline should probably read  Speculators Fear CRA Will Enforce Taxation On The Profits From Their Actions   Profits from speculative buying and re-selling are already elligable for  taxation. Only a gain from the sale of your Principal Residence is tax free, and even then, there are some exceptions. CRA seems not particularly aggressive on this front in the past, probably because there appear to be some grey areas, such as,  do you have to own & reside in a property for it to be classed as a Principal Residence?  And for how long? For example, if you own a principal residence in which you normally reside, and you decide to sell your cottage that you reside in only for the summer months,  the net gain in value realized since you purchased the cottage would likely be subject to Capital Gains Tax. As an individual or a married couple you normally can only have one Principal Residence.  It’s best to always talk with your Accountant or Financial Advisor before selling any property you may own.            – Just my opinion.   

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