Government reveals new measures to handle housing
After years of watching Canada’s housing markets spiral out of control, the federal government is finally introducing new measures to protect it from getting any worse.
Bill Morneau, Minister of Finance, announced today that the federal government will introduce a couple new measures on October 17 to help protect the Canadian housing market from risk of a collapse. CBC reports that those measures are as follows:
- Closing a loophole with the principal residence tax exemption
- Requiring mortgages to pass an affordability stress test
The tax exemption measure takes aim at foreign housing investors yet again. The new rules will require someone to be a resident of Canada at the time of purchasing and selling their home in order to be exempt from taxes on the increased value of their home. Foreign buyers would sometimes take advantage of this oversight to evade paying taxes on homes they were speculating instead of living in. This is the second major government measure meant to take the wind out of Canada’s foreign real estate investment market.
The other big change is in regards to how easy it is to qualify for a mortgage. With today’s low rates it’s been easy for many buyers to get mortgages and buy property, but there’s concern about people being able to afford these homes in a higher rate environment. To help protect the market from a devastating correction the new measures will require borrowers who apply for fixed rate mortgages with terms of 5 years or more to qualify not for the low rates most lenders are offering, but for the Bank of Canada’s posted rates, which are about twice as high.
Having to qualify for that higher rate will hopefully prevent first time home buyers from stretching their money too far and defaulting on their mortgage payments when they get higher.