New legislation affecting real estate in 2023
On January 1st, 2023, several new policies impacting buyers, sellers and real estate professionals in Canada were implemented. Here is a breakdown of the new policies:
Federal policies
Prohibition on the Purchase of Residential Property by Non-Canadians Act (Foreign Buyer Ban)
- The federal government began prohibiting non-Canadians from purchasing residential properties in Canada for a period of two years, beginning on January 1, 2023. This legislation was implemented in an effort to make housing more accessible to Canadians.
- According to the Act, a residential property includes detached homes, buildings with three dwellings or less, semi-detached homes, rowhouses or residential condominium units.
- Penalties: The Act states that a non-Canadian that contravenes the prohibition, or any person or entity that knowingly assists a non-Canadian in contravening the prohibition, can be fined up to $10,000. In addition, a court may order the sale of a property purchased if a non-Canadian is found to have acquired property in contravention of the Act.
- Exemptions include (but are not limited to) temporary residents who are working towards permanent residency, refugee claimants, and international students (if they meet certain criteria); recreational properties such as cottages or lake houses; and homes in municipalities with a population of less than 10,000, are not subject to this ban. The ban does not apply to non-Canadians who are looking to rent a residential property, or those with a spouse or common-law partner who is a Canadian citizen, permanent resident or person registered under the Indian Act.
Residential Property Flipping Rule (Anti-flipping Tax)
- Profits arising from the sale of a residential property (including a rental property) sold on or after January 1, 2023, that was owned for less than 12 months are subject to full taxation as business income.
- Under the new Rule, the Principal Residence Exemption (PRE) would not be available, meaning that the entire profit will be taxed as 100% business income.
- If the owner loses money on the sale, the loss cannot be claimed as a business loss.
- Exemptions include (but are not limited to) death, divorce or separation, disability or illness, insolvency, or other major life events.
- New legislation is being considered to extend the anti-flipping tax to assignment sales and would apply to transactions occurring on or after January 1, 2023.
More information can be found on the Government of Canada’s website.
I am happy to answer your questions about the real estate market and the listing and buying processes.
