REALTORS® from across the country converged on Ottawa last week to speak to Members of Parliament about issues that are important to organized real estate.
The Canadian Real Estate Association, which is based in Ottawa represents over 100,000 REALTORS® and for over 25 years have been advocating on behalf of home buyers, property owners and communities. They have been a big supporter of the next generation of parliamentarians and public policy leaders through being a major sponsor of the Parliamentary Internship Programme.
The following is a summary of the three main issues covered with MPs, including a brief update on the current state of the national real estate market.
The Canadian resale housing market is projected to remain stable in 2012 and 2013, with annual sales roughly on par with the 10-year average.
Resale home sales will edge higher by 0.3 per cent to 458,800 units in 2012, and ebb by 0.3 per cent to 457,200 units in 2013.
The national average price is expected to ease by 1.1 per cent in 2012 to $359,100. Prices will rebound modestly in 2013, inching upward 0.9 per cent nationally to $362,300.
Total consumer spending from MLS® home sales and purchases will add an estimated $19.4 billion to the economy, and create over 159,000 jobs in both 2012 and 2013.
Recent research shows that a typical multi-unit residential income property transaction in three of Canada’s largest cities generates $287,850 in ancillary spending. In addition, more than one job is created for every two sales.
The first issue deals with opening the door to homeownership. CREA is calling for indexing the widely accepted and successful Home Buyers’ Plan (HBP) to the Consumer Price Index (CPI) in $2,500 increments to ensure it never loses its purchasing power.
Budget 2009 recognized the need to adjust the HBP for inflation. The limit was raised by $5,000, the first increase since 1992. In 2012, more than 45,000 homes were purchased using the HBP, resulting in over $1.9 billion in spin-off spending and more than 16,000 jobs.
The HBP has allowed over two-million Canadians to save for both retirement and a home without needing to choose one priority over the other.
Tax Free Savings Account (TFSA) limits are indexed to the CPI and rounded to the nearest $500. As well, the HBP should be indexed incrementally.
Using Budget 2009 as a starting point, the plan would adjust by $2,500 in 2015 at a cost of $7.5 million. A further $2,500 increase would occur in 2019.
As an adjunct to this request on the HBP, CREA has put forward a new proposal on opening up acceptance of buyers to this plan based on significant life changes. The intent here is to help Canadians maintain homeownership after job relocation, the death of a spouse or a marital breakdown.
Job relocation, the death of a spouse or a marital breakdown often triggers a move, and can impact an individual’s ability to purchase another home that accommodates their circumstances.
Jobs are the foundation of a strong economy. The price of housing need not serve as a barrier to relocation for employment. Allowing the use of the HBP would ease affordability concerns.
The HBP can already be used more than once as a result of a major life change. Individuals requiring new housing as a result of becoming disabled can use the HBP, as can those who have been out of the housing market for more than five years.
Unlike a costly tax credit, the HBP effectively amounts to a zero-interest self-loan because it allows Canadians to borrow from their own savings.
The HBP is not a cost unto itself. Costs are attributable to Canadians contributing more to their RRSPs in the year of a home purchase in order to take advantage of the HBP.
The third issue brought to MPs attention was on community reinvestment through allowing the deferral of previously written-off depreciation (Capital Cost Allowance) on an investment property when owners sell in order to reinvest.
Investors who sell an income property often have insufficient funds after tax to acquire a property of similar value. Consequently, many hold on to properties instead of reinvesting in the community. Over half of individuals who would benefit from this policy change have incomes below $50,000.
Real estate developers get tax advantages unavailable to small real estate investors. This includes the ability to defer tax, and a much lower tax rate, depending on their type of business.
Investment property triggers renovations, retrofits and redevelopment, which accelerates the economy, greens the environment and revitalizes communities. The average property investment generates $287,850 in economic spin-off activity. In addition, more than one job is created for every two investments.
The direct cost will be almost completely offset in the first year, and revenue positive in year two by the collection of other funds, including Capital Gains Tax from property sales, and GST/HST and income tax from spin-off activity. All deferred tax is ultimately collected when investors decide not to reinvest, or later through their estates.