OTTAWA – Finance Minister Bill Morneau will unveil new measures on Monday aimed at slowing the flood of foreign money pouring into overheated housing markets like Vancouver and Toronto, a significant federal intervention in the sector.
Ottawa will close a tax loophole that allows non-residents to buy homes and later claim a tax exemption on the sales, a government source said Sunday. The government plans to make sure the principal-residence exemption is only available to individuals who reside in Canada in the year the home is purchased, reported Globe and Mail newspaper.
Housing prices have soared dramatically the last few years in the Vancouver and Toronto markets, triggering a vigorous debate about the role of foreign money. British Columbia has responded by imposing a 15-per-cent foreign buyers tax on homes and collecting data on who is buying property in the province.
Ottawa has also been preoccupied with the issue, with Morneau creating a working group to conduct a “deep dive” into the state of the housing market and make recommendations on possible policy actions.
Morneau will announce new measures to combat offshore speculation, including closing the loophole, in a speech in Toronto on Monday. The moves follow a Globe and Mail investigation that revealed a network of speculators flipping homes for profit and avoiding taxes by classifying them as principal residences.
Under the Canadian tax code, homeowners do not have to report the sale of any property that they designate their principal residence, and do not pay tax on the increased value – or capital gains – of that home.
