The 2024 federal budget focuses on helping younger voters, particularly Millennials and Gen Z, navigate rising housing costs and inflationary pressures. However, the budget takes aim at wealthier Canadians with new tax measures, including an increase in the capital gains inclusion rate from 50% to 66.6% for gains over $250,000. This change will impact individuals selling stock or properties that are not their primary residence, as well as businesses for all capital gains.

The budget also projects a deficit of $39.8 billion in FY24/25 and includes new spending measures, such as a $480 billion government spending plan for the next fiscal year, which includes $54 billion in debt payments. Critics argue that the budget’s spending outpaces the savings found in a strategic spending review, making it challenging to achieve fiscal credibility.

On the housing front, the budget introduces various measures, including allowing 30-year mortgage amortizations for first-time homebuyers of new builds and increasing the RRSP Home Buyers’ Plan limit from $35,000 to $60,000. Additionally, the budget aims to create a renters’ bill of rights and tenant protection fund while incentivizing the construction of new purpose-built rental units.

Overall, the budget’s focus on taxation and spending may have limited impact on housing affordability and the broader economy. Concerns remain regarding low productivity growth, insufficient business capital spending, and the challenges of investing in residential rental real estate.

Published by Dr. Sherry Cooper

https://mailchi.mp/dominionlending/canadian-federal-budget-2024-higher-deficits-higher-government-spending-and-higher-taxes-for-the-wealthy?e=d20e214ea7

The federal budget for 2024 has prioritized housing, introducing $52.9 billion in new spending to tackle affordability challenges for young Canadians, particularly concerning homeownership. The budget projects a deficit of $39.8 billion this fiscal year, with a gradual decline to $20 billion by 2028-29. One significant change is the increase in the capital gains inclusion rate for secondary home sales, from 50% to 66.7% starting June 25, 2024. This affects gains above $250,000 for individuals and all gains for corporations and trusts. Sales of principal residences will remain exempt from capital gains tax.

To illustrate, if you sell a vacation home for a $300,000 profit, previously you would have paid taxes on $150,000 of your gain, but under the new rules, you’ll pay taxes on $200,100. Around 11% of Canadians own at least two homes, according to 2023 research from Royal LePage.

Other housing initiatives include longer amortization periods for first-time buyers, increased withdrawal limits from RRSPs for home purchases, and measures to protect renters. The budget also plans to build nearly 4 million new homes by 2031 and support programs that aim to train and recruit skilled trades workers for housing construction.

In addition, the government plans to enhance data collection and crack down on mortgage and real estate fraud by consulting with the mortgage industry to develop income verification tools through the Canada Revenue Agency.

Published by Steve Huebl

https://www.canadianmortgagetrends.com/2024/04/budget-2024-housing-highlights-capital-gains-inclusion-rate-on-secondary-homes-rises-to-66-7/

The Canadian Real Estate Association (CREA) reported that national home sales remained steady in March, while new listings dipped slightly. Prices showed little movement, but CREA experts anticipate a stronger housing market in the upcoming months. There is significant demand for housing due to rapid population growth and first-time homebuyers’ concerns about potential price hikes if the Bank of Canada lowers interest rates.

Ottawa is providing support for first-time buyers through measures such as resuming 30-year amortization on insured mortgages for new construction and easing restrictions on the RRSP Home Buyers’ Plan. These initiatives aim to assist at-risk homeowners and stimulate the market. However, there are potential downsides, including possible unintended consequences for mortgage-backed securities and increased borrowing costs for all participants.

March data showed a slight rise in national home sales and a decrease in new listings, resulting in a tightened sales-to-new listings ratio. The market remains balanced overall, with inventory levels unchanged from February. Although March’s national average home price increased slightly year-over-year, it remains below early 2022 levels due to interest rate hikes.

In conclusion, the spring housing season is poised to be strong as pent-up demand continues to grow. The expected interest rate cuts by the Bank of Canada later this year could further boost the housing market. Stay tuned for more insights as we review the federal budget and its impact on the housing market.

Published by Dr. Sherry Cooper

https://mailchi.mp/dominionlending/canadian-job-market-whimpers-in-march-while-us-roars-430742?e=d20e214ea7