Canada’s real estate reliance

As our nation celebrates 150 years of straddling the world’s stage, Tembo has decided to prepare a blog outlining how important the real estate sector has become to our national economy and prosperity.

Historically, the bedrock of the Canadian economy has been primary resources. The cycle has been simple. A resource is discovered or harvesting begins, within a short period of time extraction then begins to boom. The boom provides wealth and opportunity and attracts migration, and then the process matures, the resource declines in value or is depleted or made obsolete by market changes: thus paving the way for a new staple to be collected. The first of these resources was Atlantic cod in the 15th century, then fur and pelts, then lumber, and eventually, minerals and oil by the end of the 19th and early 20th centuries.

By the end of the Second World War, the Canadian economy began to aggressively industrialize and the service sector began to grow expansively. Suburbia sprouted and real estate began to boom and grow as a major sector. From the late 1970s to the present, the post-war industrial components of the economy have gradually withered away. Manufacturing has especially declined in southern Ontario, due to higher costs, relentless foreign competition, and a decline of productivity and innovation.

High oil prices from 2003-2015 helped the economy boom, but as those prices collapsed real estate has taken oil and manufacturing’s place as the main economic engine for the country. Statistics show that most of the strong economic growth the country is currently experiencing comes from four major sources: finance/insurance, real estate/rental/leasing, construction, and professional/scientific, three of these four are real estate related. Manufacturing, farming, fishing, and forestry were sources of economic contraction. Without real estate, Canada would be in a recession.

Businesses are pouring money into real estate and new construction is soaring, while renovation activity is also growing strongly. Increases in housing wealth and home equity are also prompting consumers to borrow more money, spend more, and even leverage the purchase of vacation homes or homes for rental income and investing. Real estate has become so robust that recently, the national housing agency, the CMHC (Canada Mortgage and Housing Corporation) declared it would transfer a special $4 billion dividend to the Federal Government over two years. Soaring property transfer and land taxes are one of the main reasons the deficit prone Ontario Liberal government recently tabled a balance budget for the first time in over a decade.

Overall, the importance of construction, housing, and its financially related business has never been more fundamental to Canadian governments, consumers, and households.

Sold your house in 2016? Don’t forget to claim it on your taxes

Canadians didn’t used to report the sale of their home, but this has changed since the Liberal government introduced new federal mortgage rules back in October. If you fail to claim the sale of your primary residence, you could face up to $8,000 in penalties.

 “Starting this tax-filing season, a home sale that took place after January 1, 2016 needs to appear on your income tax return” Global News, Erica Alini 


 Here is what you need to know

 You still get the principal residence tax exemption
Although you will not have to pay a capital tax gains on the proceeds you made from the sale of your home, you will have to report the sale in order to claim the exemption.

Report the sale on schedule 3
You will have to provide information such as when you bought the home, when you sold it, how long you’ve been living there and how much you made off the sale. You will also have to include a general description of the home.

If you didn’t live in the house the entire time you owned it…
In that case, you will have to file Form T2091.

 If you rent part of your house or use it for business…
You might still be able to claim it as your primary residence. Read more about this here.

If you forget to report the sale this year
You should file an amended return as soon as you can. The CRA can impose a penalty of $100 for every full month since the filing deadline, capped at $8,000. For the first year, the agency has said they will only apply the penalty “in the most excessive cases”. If you don’t file, you won’t be eligible for the capital gains tax exemption.