Purchasing a home in Canada is now relatively easier for new immigrants and Canadians. The Canadian government made amendments to a specific Act, which initially prohibited non-Canadians from purchasing a Canadian residential property. Several financial institutions will be able to provide tax-free home savings accounts for the first time. However, this will be applicable onwards April 1, 2023.
Moreover, this will significantly contribute to a Budget 2022 proposal.
Purchasing a home in Canada- reduced restrictions for non-Canadians
Some time ago, Canada brought forth a new law concerning the residential property and its purchase. The law imposed restrictions on non-Canadians from purchasing residential property. Ever since, they have amended this law, allowing non-Canadians to purchase residential property in Canada for those with a work permit.
This amendment came in the form of an announcement on March 27 by the Canada Mortgage and Housing Corporation. The modified Act states that non-Canadian holders of a work permit will be able to buy a combination of commercial and residential land, provided they fulfill all essential criteria.
The day the amendments were declared, they became effective from that day itself. CMHC claims that work permit holders will possess eligibility in the case of having 183 days or above validity on their work permit or work authorization. This must apply to the time of purchase.
Also, they must not have a purchasing record of over one Canadian residential property. According to the Act, the residential property falls under the category of detached or semi-detached houses, residential condominium units, rowhouse units, and other premises or similar buildings.
Additionally, there is yet another modification within the Act related to the provision of vacant land.
Non-Canadians can purchase the vacant land applicable for residential and multipurpose use. Further, they can use it for any purpose, and this could even be residential development.
Tax filings and their proof will not be necessary
The existing tax filing provisions and the previous work experience are witnessing a withdrawal. According to the original act, temporary residents could purchase a Canadian home, provided the work and study permit holder fulfilled all essential criteria.
Primarily, people in Canada with work permits had to meet the following requirements:
- Have a Canadian work experience of a considerable minimum of three years period within the four years after the year in which the purchase took place. However, the work experience must be full-time per subsection 73(1) of the IRPA.
- They must possess a record of filing income tax returns. It must be under the Income Tax Act for at least a period of three to four taxation years. These years must be followed after the year in which the purchase took place.
- They must not hold a record of buying more than one residential property.
First Home Savings Account
The 2023 budget officially declared the introduction of the Tax-Free First Home Savings Account. This was a part of the federal government’s budget for 2022. Onwards April 1, financial institutions will begin to provide the plan to Canadians. First-time buyers of homes will have the chance to save $40,000 due to the tax-free attribute. The total yearly contribution will account for $8,000. Additionally, the plan’s contributions will be prone to tax deductibles. The withdrawals will not be taxable for first-time home buyers, just like the Tax-Free Savings Account, which is a measure by the Canadian government. It aims to provide feasible housing to those buying homes for the first time in Canada. Per the government’s estimate, the FHSA will likely offer $725 million to support them over the next five years.
Participants must be able to open an FHSA through the following eligibility criteria:
- Hold Canadian citizenship;
- Must be eighteen years old or beyond; and
- A home buyer for the first time
The FHSA account might remain open for a period of fifteen years or even toward the end of the year when the participant completes their 71st year. It could also apply to the year after a qualifying withdrawal takes place through an FHSA for the first home purchase. This will depend on which occurs first.
Purchasing a home in Canada- the cost details
The Canadian Real Estate Association data depicts that the actual cost of the national average of homes appeared to be $662,437 as of February 2023. This was a decline of 18.9 percent from the overall record in February 2022. Furthermore, the March 23 data revealed that national home sales increased to 2.3 percent monthly since February. This is despite the 8 percent drop in the newly listed properties during the same period.
Canada’s housing cost is mixed. Per the CREA, it’s not a surprise that prices have largely fallen from their peaks in more costly areas in Ontario and British Columbia, given the much higher borrowing costs. In comparison to Quebec and the Maritime provinces, prices have fared significantly better in Alberta, Saskatchewan, Newfoundland, and Labrador.
However, in 2023, the national housing price will nearly decline by 5.9 percent on a year-to-year basis.
