Brian O'Donoghue

Sales Representative

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 Housing market crash unlikely … Immigration and smaller household sizes are expected to help drive prices upward.


New data released Monday by Statistics Canada found home prices increased by a mere 0.1 per in July compared with June — the smallest increase in more than two years and well below the average annual inflation rate of 7.6 per cent for that month.


But while experts are predicting the housing downturn could be the largest in four decades, they say two factors will protect the market from a full-blown crash: immigration and additional households as a result of Canadians choosing to live alone or in smaller groups.


If the rate of immigration and current changes in household formation behaviour persists, we would likely not have a housing crash over the mid-to long-term,” said Kate Choi, an associate professor of sociology at Western University.


A crash refers to a scenario where prices fall by about 30 per cent and housing demand completely erodes, said Carrie Freestone, an economist at RBC and the report co- author. The bank forecasts benchmark prices to fall by 13 per cent during this correction period — significantly less than the 30 percent threshold for a crash.


Between 2016 and 2021, the average Canadian household size declined by 0.02 people, according to a new report released Aug. 17. There were about 140,000 new households nationwide between 2016 and 2021 as a result of Canadians, especially young adults, starting out new, and that households have become smaller as more people are choosing to live alone and parents are having fewer children.


This trend will be responsible for just under 90,000 of the 555,000 new households created by 2024 and will provide a significant boost in housing demand.


“A greater number of households overall means that those households will need more housing,” said Choi. “So that, in turn, will exert an upward pressure on housing prices.”


That, paired with the federal government’s targets to bring in a record 1.3 million new permanent residents by 2024 — adding about 555,000 new households — will help drive housing demand and “contain a housing spiral.”


Between 2017 and 2019, there was a “pretty significant” housing correction because of Ontario’s Fair Housing Plan and the new federal mortgage stress test. That led to the first wave of demand, which was unleashed during the pandemic amid low-interest rates and households sitting on a significant amount of money.


However, when this housing correction period began in February, largely due to rising interest rates, the market never got a chance to fully catch up or satisfy all the organic demand that was coming through from that first correction. A caveat to the report’s findings, Choi noted, was demand and housing prices could dampen further if household size trends reverse and more young adults choose to live with their parents longer due to the rising cost of living, thus leading to fewer new households. Despite this housing correction, there is still a severe lack of housing supply to meet the demands of the market when this correction is over.

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Canada’s Tax Authority Has Been On A Multi-Billion Dollar Real Estate Crackdown!

 

Canadian real estate owners are stuck paying huge penalties after trying to avoid taxes owed.

New data from the Canadian Revenue Agency (CRA) shows their crackdown on real estate

owners/sellers has led to billions in recouped revenue. Data provided by the agency also shows

they’ve collected substantial fines adding up to hundreds of millions, after diving into real estate

transactions. The program is largely focused on Greater Toronto and Vancouver, as a high volume

of red flags were being set off.

 

The CRA has been on a mission to crack down on real estate tax evasion, especially in Ontario and

BC. Red flags they’re looking for include:

 

Property flippers: People who regularly flip property for income without properly disclosing the

funds might get a second look.

 

Unreported capital gains: Sold property and didn’t declare? That’s a problem, even if taxes aren’t

owed.

 

Unreported worldwide income: Have cash coming in from outside of the country? If the CRA finds

hints of it and you haven’t told them where it’s coming from, they might have some questions.

 

Unreported GST/HST on a new or substantially renovated home: Built a new home on a lot and

sold it? You were supposed to collect GST/HST. Ditto in some cases where owners “substantially

renovate” a property before selling it (think gutting it and leaving a shell, probably not just adding

a new kitchen).

 

Lifestyle Assessments: If the owner is rolling in a high value home and there’s a big gap between

income and the payments, the CRA might want a second look.

There are other flags as well since the agency can correlate data, but those are the big ones they

mentioned.

 

Just in Ontario and BC. From April 2015 to March 2022, the CRA’s real estate crackdown produced

$2.2 billion in audit assessments. Included in that amount was $298.9 million in penalties for nonpayment.

The audit assessment values are split into three major categories: Income tax, GST/HST, and GST/

HST New Housing and new residential property rebates. Ontario and BC both showed about $1.1

billion in audit assessments respectively, but for very different reasons.

 

Ontario’s audit assessment included $147.6 million of income tax, and another $332.2 million

GST/HST. Most of the value was in GST/HST New Housing and new residential property rebates,

coming in at $662.9 million for the period.

 

The tax authority says they primarily focus on Greater Toronto and Greater Vancouver. Pricey

real estate combined with high transactional value, and aspiring investors that might not know

the rules are concentrated in these regions. The recent real estate boom and our recent dive into

property registry data shows a huge investment surge across the country, perhaps resulting in wider crack downs.

 

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