We saw more changes to the Real Estate act January 1 of this year than any other time in history. In an effort to ‘cool’ the market, both the Provincial and Federal governments have implemented multiple changes.
1. Buyer cooling off period /recission period
Buyers now have 3 full business days to back out of any contract. It comes at a cost to the buyer of 1/4 of a percent of the offer price. For example, to exercise the right to back out of an $800,000 offer will cost the buyer $2000, which is paid to the seller. BUT… the market has already changed and buyers can usually get out of a contract with one of the subject clauses so I don’t expect to see this used that often.
2. No foreign buyers permited to purchase in Canada for 2 years
Foreign buyers are not allowed to purchase residential homes in Canada for the next 2 years. This is in an effort to cool the market and to open up more rental units. The area is not all of Canada and is limited to centers of 100,000 or more or agregate areas of 10,000 or more which leaves the rural areas still open for purchase. On Vancouver Island anything North of Campbell River and Tofino/Ucluelet are still available for foreign purchase. Foreign buyers are also able to purchase a four-plex or larger and commercial property so I think we may see a shift in their purchasing habits. True foreign ownership in our area is not prevalant and I anticipate a low impact on the sales numbers.
3. Anti flipping law
This was sort of a rule-of-thumb in the past – That you had to own a home for 1 year to avoid capital gains on the sale, but now it is official. Effective January 2023, if you plan to flip a home while owning it for less than 365, expect to be on the hook for taxes on the full value of your profits as the Principal Residence Exemption will no longer apply. Make sure you speak to a professional accountant if this situation may apply to you
And more…
We also recently saw a vacant property tax of up to 2% of the assessed value every year added into the mix – also intended to increase the rental pool of homes.
And finanly, we have always had to get identification and employment details when we receive a deposit but that has been expanded to now getting the bank account number and type of account, even when it is a bank draft.
Wow! Lots of changes that all come with more paperwork and new contracts. It will be interestiing to track and see what kind of impact these have on sales and pricing.
