One leader of the real estate industry explains why a potential increase to the capital gains tax on second homes is a bad idea.
Investors have one influential voice in their corner.
“I think it’s a horrible idea. The proposed change would be a huge change in Canadian taxation policy. It would hurt employment. It’s just generally bad for the economy. It flies in the face of the innovation focus of the economy that the prime minister wants to build,” Phil Soper, president or Royal LePage, told Canadian Real Estate Wealth. “It’s bad policy, specifically the rationale the Finance Minister put forward. I don’t think it would help Toronto home prices. The portion of the market that is tied to home flipping or short-term speculators … that’s a very small portion of the market. Of any market in Canada.”
Ontario Finance Minister Charles Sousa is urging the government to crack down on speculative housing investing by increasing taxes on profits.
In a letter to Finance Minister Bill Morneau, Sousa argued hiking the taxable amount above 50% would discourage investors to purchase homes on speculation. It’s one way to address ever-increasing housing prices in the country’s hottest housing market and thus help first-time homebuyers currently priced out of the market break in.
“My primary focus is to address the concerns of middle class Canadians who are worried about buying their first home,” Sousa wrote in the letter. “Additionally, it is important that the housing market remains stable, meaning that borrowers and lenders are resilient and able to withstand economic shocks.”
Under the current policy, capital gains tax is charged on 50% of home sale profits unless it’s a principal residence.
Starting this year, Canadians have to fill out an extra section on their tax return, the Schedule 3 “Capital Gains (or Losses)” in order to claim their principal residence and earn a tax break. Homeowners will provide information on the date of acquisition, the address, as well as other details for any sold home claimed a principal residence.