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Impact of Taxation on the Canadian Housing Market

Posted by S. Kotliar on April 2, 2022
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Taxation creates a major impact on the Canadian housing market. If you can take a look at taxes, you will even be able to predict how the Canadian housing market would behave in the next five years.

The house purchasing power of Canadians is determined by numerous factors. Climate change, economic recession, high interest rates, public transport, and taxation hold a prominent place. The Canadian economy could experience a 5.2% decline in the year 2020, but it saw an increase of 4.6% in the year 2021. Post-pandemic economic rebounds contributed a lot towards the above-mentioned fact. In the meantime, acute inflation pressure is forcing the Bank of Canada to increase their interest rates. The conflict between Ukraine and Russia is creasing an impact on the overall economic growth of the country as well.

The Canadian real estate market was going hot due to economic growth of the country. However, the federal government came up with a decision to remove capital gains tax exemption, which was applied on the principal residences for the period of next five years. This would lead us to a hybrid real estate market. This would create an impact on the Canadians who are looking forward to secure full gains out of selling their principal home for funding retirement.

Taxation was the solution to stiffen most supply issues that took place in the recent past. This would create an additional barrier in between the buyers and sellers who are looking forward to buying or selling their homes. However, most experts believe that pushing Canadians with another tax would not be a perfect solution to address the issue. Instead, they believe that it is important to address challenges associated with the supply, so that more property listings would be available for the people who wish to invest on them.

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