Canada loves investing in real estate. In the wake of the 2008 stock market crash, Canadians have gravitated towards tangible, stable investments like real estate that can provide predictable income streams, steady appreciation, and tax advantages. In cities like Toronto and Vancouver, in fact, real estate is so highly valued that the governments of Ontario and British Columbia have been forced to institute policies to control the runaway market.
Of course, launching your real estate investment portfolio isn’t a simple process: real estate markets are often regulated by all three levels of government, and property ownership comes with obligations and responsibilities. An experienced Ontario real estate lawyer can help you safely and legally navigate this complicated industry.
With that in mind, here is a brief look at some of the key challenges facing real estate investors in Ontario today.
Land Transfer Tax
Ontario’s Land Transfer Tax applies to individuals who are purchasing a home, land, or a beneficial interest in land. The tax is based on the value of the land in question and is paid at the close of a transaction. In Ontario, the land transfer rate for homes or land worth more than $400,000 is 2 per cent; for homes worth more than $2-million, it goes up to 2.5 per cent. The situation is more complicated in the City of Toronto, which implements an additional municipal land transfer tax of its own.
Foreign Buyers Tax
The foreign buyers tax – officially named the Non-Resident Speculation Tax (NRST) – was the centerpiece of Ontario’s efforts to regulate the out-of-control housing market in and around Toronto. This 15 per cent tax applies only to the purchase of residential properties within the Greater Golden Horseshoe Region (GGH) by individuals who are not citizens or permanent residents of Canada. The GGH includes many of Ontario’s largest and fastest growing population centres, including Toronto, Hamilton, Guelph, and Barrie.
Capital Gains Tax
In Canada, profits made from the sale of a primary residence are not subject to the capital gains tax under the ‘principal residence exemption’ (PRE). For that reason, the sale of a primary residence did not have to be reported on tax statements until last year, when Ottawa introduced legal changes that require all real estate sales, even those eligible for the PRE, to be reported.
The change could prove tricky for some for real estate investors, as it was designed to allow the CRA to more easily identify short-term occupiers who buy homes, live in them long enough to claim them as principal residences, and then re-sell them. It could also impact owners of cottages or summer homes; consult with an Ontario real estate lawyer to learn more about this important change in the tax code.
Whether you are an experienced real estate speculator or a novice investor hoping to enter the market, an experienced and knowledgeable Ontario real estate lawyer can help you navigate thorny legal issues and conduct business in an ethical, legal, and profitable manner. For more information, contact Nanda & Associate today to speak to a member of our team.