How the 2022 Federal Budget Impacts BC Real Estate

 

Budget 2022 was introduced on April 7 with a significant focus on the supply and affordability of housing in Canada. BCREA was encouraged to hear Canada’s Minister of Finance Chrystia Freeland accurately diagnose the root cause of the country’s housing affordability problem. “Canada does not have enough homes,” Freeland said. “We need more of them, fast.”

New spending towards housing totalled $10.1 billion, which – apart from climate change and Indigenous reconciliation – was the largest area of new spending in the budget and demonstrates that the government is beginning to seriously prioritize tackling Canada’s housing crisis.

Below is an overview of new commitments in the budget that may impact BC’s real estate sector.

Housing supply

Many commitments made to increase housing supply align with BCREA’s ongoing advocacy. The largest of these commitments was a new Housing Accelerator Fund, which will invest in municipal housing planning and delivery processes to speed up developments. Existing infrastructure programs will now tie infrastructure funding to actions by provincial and local governments to increase housing supply, which BCREA called for in our pre-budget submission. Additionally, more funds are being allocated to the National Co-Investment Fund, which will expand co-op housing.

There was also a commitment to launching a Multigenerational Home Renovation Tax Credit, which will allow families to claim 15 per cent (up to a $7,500 credit) in eligible renovation and construction costs incurred to construct a secondary suite for seniors or adults with disabilities.

Several proposals within the budget specifically target housing supply for Indigenous Canadians, including the initiation of an Urban, Rural and Northern Indigenous Housing Strategy.

Assistance for First-Time Homebuyers

The budget also increases much-needed incentives for first-time homebuyers, through a new Tax-Free First Home Savings Account. Beginning in 2023, it will give prospective first-time homebuyers the ability to contribute up to $40,000. Like a Registered Retirement Savings Plan (RRSP), contributions would be tax-deductible, while withdrawals to purchase a first home would be non-taxable, like a Tax-Free Savings Account (TFSA). In addition, the First Time Home Buyers’ Tax Credit will be doubled to $10,000, retroactive to homes purchased on or after January 1, 2022.

Home Buyers’ Bill of Rights

The budget also re-affirmed the government’s commitment to introduce a Home Buyer’s Bill of Rights. This would include a national plan to end “blind bidding” as well as possibly include a legal right to a home inspection and ensuring transparency on the history of sales prices on title searches. While we support the intent to protect homebuyers, independent research shows that banning “blind bidding” would likely lead to higher prices in a hot real estate market.

Reducing Foreign Demand

The budget committed to introducing legislation designed to reduce foreign demand in real estate. The legislation would prohibit non-Canadian citizens or permanent residents as well as non-Canadian commercial enterprises from acquiring non-recreational, residential property in Canada for two years. We are concerned this measure needlessly targets non-Canadians, creating barriers for attracting foreign investment, and will potentially result in reciprocal policies from other countries targeting Canadian “foreign” owners.

Other demand-side measures

In addition to targeting demand from non-Canadians, the government will also conduct a review of housing as an asset class to better understand the role of large corporate players in the market and the impact on renters and homeowners. They will also introduce legislation to introduce an “anti-flipping tax” beginning January 1, 2023.

Energy Retrofits

Another core aspect of the budget was new commitments to improve the energy efficiency of homes. These include strengthening affordability and energy efficiency requirements within the Rental Construction Financing Initiative, developing a Canada Green Buildings Strategy, creating the Deep Retrofit Accelerator Initiative and expanding tax deductions for business investments in clean energy equipment to include air-source heat pumps. These initiatives are designed to reduce Canada’s greenhouse gas emissions reductions targets of 40 per cent below 2005 levels by 2030.

While there are several proposals that raise concern in Budget 2022 and require further consultation, detail and scrutiny before implementation, overall, BCREA is encouraged that the federal government is taking initial steps to tackle the country’s affordability crisis.

Are you looking to buy or sell property? If you’d like, we can have a real estate expert show you the most efficient process that saves you thousands of dollars, a lot of time, with little or no inconvenience to you. Contact us today!

Source:  BCREA

 

Bidding wars are the new normal for buying a home today. In desirable areas, there may be multiple offers, which might force you to up the ante in a dizzying quest to come out on top.

Yet in the heat of the moment, many buyers run the risk of becoming overzealous, making mistakes that cost them the deal—or worse, land them with a house they regret. Don’t be one of them!

Here are some common bidding war mistakes you might be particularly tempted to make in today’s crazy market, along with some smarter, saner alternatives to try.

1. Bidding every last penny you have

The market is so competitive these days that houses go for tens of thousands of dollars above the list price. I’ve had buyers who want to bid all the money in their budget in order to win a bidding war, and I counsel them away from it.

Why?

The house may require tens of thousands of dollars worth of repairs immediately, like a new roof or new plumbing. They would have no money left to cover these essential repairs.

In a heated market, the appraisal may come in low. This means the bank’s appraisal says the home is worth less than what you’ve agreed to pay for it.

Then you’d need a higher down payment to make up the difference.

What to do instead: “Unless my clients have families who can give them the extra funds, I advise them to hold back 10% to 40% beyond what they can actually afford. “If it’s a young couple who are out on their own, for example, and they have no other financial resources, I tell them, ‘Maybe this is just not the house for you. There will be others.'”

2. Bidding with many contingencies

You should never get involved in a bidding war before your financing is in place and you know exactly where your money is coming from. We advise against having your offer be contingent upon the sale of your current house.

The seller will always pick the bid with the fewest uncertainties. We once won a bidding war on a home with the third-highest offer it received. The reason? He was an all-cash buyer, which meant a quick and seamless closing.

What to do instead: Most of us aren’t in a position to offer cash, but we can get pre-approved by a lender before we go into the bidding war. We can also make sure the sale of our current house doesn’t enter into the deal. You could sell and then rent prior to bidding on a new house—or possibly sell and request a lease-back agreement from the new owner.

It’s seldom all about price. Find out what else is important to the seller and try to accommodate that better than anyone else.

3. Bidding with no contingencies

Managing partners of The Agency, have seen buyers get so excited while bidding that they release all contingencies. That includes waiving the right to a home inspection and the ability to back out of the deal if an inspection reveals major flaws.

What to do instead: “If buyers want to be competitive in this market, they need to compromise on a lot of things.” But the inspection is not one of them. If you win the bid on a house that’s crumbling and you can’t back out, it’s no win at all.

Instead, bid as high as you can comfortably afford, and make compromises on things like the length of time until closing and down payment. But never, ever sacrifice the right to inspection as a negotiation point.

4. Assuming you’ll get a second chance

Here in our area, bidding wars just won’t quit. Very often, we see hopeful buyers lose out on their second chance. Prospective buyers think they’ll have more chances to raise their bid if needed, and they are often wrong about that.

What to do instead: If you find yourself in a multiple-bid situation, we recommend writing your bid as if you will not have a second chance to negotiate. Consider it one and done!

5. Using the term ‘best and final offer’

You see people using this term on real estate reality TV shows. (Translation: “Negotiation is done, and I’m not offering you one penny or concession more.”) But what works on TV doesn’t always work in real life.

In a bidding war, negotiations are never over until the seller is ready to throw in the towel.

Never use the term ‘best and final’ because it usually isn’t the case. Once you use this term, the listing broker will not take you seriously if you actually counteroffer again.

There are other important negotiable things that the seller will probably take into consideration. These include the closing date, a larger down payment, or potentially removing a contingency, etc. If the seller sees the term ‘best and final,’ they may not come back to your bid to see about altering any terms other than price to make the deal work. Instead, they may choose another offer.

What to do instead: Even if you’ve bid as much as you can possibly afford, never tell the sellers that. They might take you at your word and cut you from the herd. There might be other contingencies you might be able to handle, like a few months of leasing the property back to the seller at a reasonable price. Sometimes sellers aren’t ready to move yet.

6. Not knowing a home’s true value

Some buyers are hesitant to offer above the asking price in a bidding war, thinking that the home is not worth more than that. What they don’t realize is that sellers often intentionally price their home slightly below its true value to get a bidding war going and have potential buyers drive the price much higher in the heat of competition.

Real Estate Agents note that buyers are less likely to win a bidding war if they “won’t step up to their highest price. Instead, they choose to believe the property is worth less.” As a result, they lose the house.

What to do instead: Refer to “numbers and proven stats that take into consideration the lack of inventory, market trends, how much the price of properties have increased in certain areas over time. This will give you a better understanding of what the property is worth.”

Are you looking to buy or sell property? If you’d like, we can have a real estate expert show you the most efficient process that saves you thousands of dollars, a lot of time, with little or no inconvenience to you. Contact us today!

Source:  realtor.com / Michael Cowling

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