“Owning a home is a keystone of wealth—both financial affluence and emotional security.” ~ Suze Orman
Prime Minister Justin Trudeau and his Liberal government’s federal budget has unveiled significant changes and proposals, especially for pre-construction homes and the housing sector in general. With the unveiling of the $480.5 billion federal budget for 2024, housing has taken centre stage with nearly $9 billion dedicated to addressing Canada’s housing crisis.
Here’s everything you need to know about the property tax and housing changes in Canada for 2024, with a focus on pre-construction homes.
Key Takeaways from the 2024 Federal Budget
The 2024 federal budget outlines several key measures aimed at tackling the housing issue in Canada, particularly for those interested in pre-construction homes. Let’s break down the most significant elements:
- Property Transformations: One of the pivotal components of the budget is converting various properties into homes. The government plans to spend $1.1 billion over ten years to transform 50% of federal offices into residential properties.
Also, Canada Post land will be used for new housing projects, potentially creating opportunities for pre-construction homes – leveraging the existing infrastructure of approximately 1,700 Canada Post offices.
- Apartment Construction Loans: The federal budget proposes an additional $15 billion for the Apartment Construction Loan program. This initiative, originally launched in 2017, aims to inject around 131,000 new rental apartments into the market by 2032.
This significant boost will support the development of pre-construction homes in urban centres, rural areas, and small communities across Canada.
- 30-Year Amortization Period: In response to calls from industry leaders and market watchers, the budget includes a provision to extend the maximum amortization period to 30 years for first-time homebuyers purchasing newly built homes.
This change, effective from August 1, 2024, is expected to make homeownership more accessible.
Financing Options and Support Programs
- Canada Secondary Suite Program: The Canada Mortgage and Housing Corporation (CMHC) offers homeowners up to $40,000 in low-interest loans to create secondary suites in their homes. This aims to enhance housing supply and support multigenerational living as well as rental income opportunities.
- Home Buyers’ Plan RRSP Withdrawal Limit: To assist Canadians in gathering the necessary funds for a down payment, the budget increases the Home Buyers’ Plan RRSP withdrawal limit to $60,000 for individuals and $120,000 for couples.
How Does It Impact the Property Tax in Canada?
The 2024 Canadian federal budget didn’t introduce direct changes to property tax rates – which are primarily set by provincial and municipal governments. However, it did bring about several indirect impacts and notable tax adjustments, such as:
- Capital Gains Tax Hike: Starting June 25, 2024, a larger chunk of capital gains from property sales will be taxed. The inclusion rate rises from 50% to 66.67% for individuals exceeding $250,000 in annual gains and for all gains by corporations and trusts.
- Lifetime Capital Gains Exemption Boost: To balance the tax hike, the exemption for qualified small business shares and farm/fishing property jumps to $1.25 million for dispositions after June 25, 2024. This could ease the tax burden for eligible property sellers.
- Property Market Ripple Effect: While not directly targeting property tax, the budget’s housing affordability measures could indirectly influence the market. Increased demand might affect property values and, in turn, future property tax assessments.
The Road Ahead for Pre-Construction Homes
The government’s commitment to addressing the housing crisis is evident in these new measures, particularly for pre-construction homes. For prospective homebuyers, the increased support and financing options can make a significant difference.
Kevin Lee, CEO of the Canadian Home Builders’ Association (CHBA), added, “CHBA and our members are very pleased to see the federal budget measures that will help the sector respond to the government’s goal of doubling housing starts to overcome the housing supply deficit.”
Conclusion
While the 2024 budget doesn’t directly change property tax rates, we recommend both buyers and sellers in the Canadian real estate market to consult a tax expert to understand how the changes in increased capital gains tax, boosted exemptions, and indirect tax impact of these measures are going to affect them.
