Federal Budget a Disappointment

Many if not most Canadians were disappointed this past week with the Conservatives Federal budget including the real estate community. The Canadian Real Estate Association (CREA) was disappointed that a plan to introduce a deferral of capital gains taxes and the recapture of capital cost allowance on property was not part of the new budget.
“REALTORS® welcome investments in infrastructure and transit that have been made by Minister Flaherty in this budget, and in previous ones,” says CREA CEO Pierre Beauchamp. “The fact remains that there are still punitive tax consequences for small investors when they sell and reinvest in a new property.” Capital gains tax adjustment remains the last unfulfilled major Conservative Party campaign promise from the last election. “We believe the Conservative government remains committed to fulfilling its promise to permit capital gains tax deferrals, and REALTORS® will continue to work with the government, and with members of all parties, to ensure this becomes a reality”
As REALTORS® we know that real property investments continue to be at a disadvantage in Canada’s tax code and believe that small investors should be allowed to sell and reinvest in the same way that they can with their stocks and bonds inside an RRSP. It is CREA’s view that tax deferral on reinvestment in rental property would promote the supply and affordability of rental housing, promote environmentally friendly urban regeneration, and lead to greater equity compared to the income tax treatment of shares, businesses and owner-occupied properties.
One of the issues that continues to be of growing concern in the Collingwood area is the overall lack of affordable housing and this is not a problem that is unique to our area. “Canada’s rental housing markets continue to face a problem that some other countries have addressed. Properties are ’locked-in’ because small investors essentially lose their growth in capital if they choose to sell and reinvest,” CREA's Beauchamp explains. “However, they still aren’t selling because they can’t afford to pay the capital gains taxes.” CREA’s research and policy analysis for the capital gains rollover proposal shows the tax deferral on reinvestment in rental property will promote the supply and affordability of rental housing, promote environmentally-friendly urban regeneration, and result in greater equity compared to the income tax treatment of shares, businesses and owner-occupied properties.
Hopefully the Conservative party will make good on their pre-election promise and address this issue in the near future. Anything that will promote investment in residential real estate can only help to benefit the shortage of affordable housing not only in our area but across Canada as well.