Canadian Real Estate Advice in 2022

Getting started with Canadian real estate doesn’t have to be difficult. There are a variety of resources available to help you make an informed decision. Start by studying the market and what factors determine property values in each region.

Once you have a clear understanding of your target market, you can choose a location and a property type. For example, if you want to appeal to working professionals, you should focus on small apartment buildings and condominiums.

1. Low-interest Rates

The Canadian real estate market has been characterized by historically low mortgage rates. In mid-2016, the Bank of Canada held interest rates at zero, but by early 2022 it began to increase its benchmark rate.

In July 2022, the benchmark rate rose from 0.25% to 2.5%. However, the Canadian Real Estate Association reported that prices fell 5.3% year over year.

Low-interest rates have exacerbated affordability issues for Canadian real estate. A recent National Bank of Canada report estimated that an average family would need 63.9% of their income to carry a mortgage in Q2 2022, an increase of 10.4 percentage points from the previous quarter.

However, the central bank predicts that rates will soon reach a peak and yields will stabilize. Regardless, Canadian home prices are expected to continue to decline.

2. Limited Inventory

Canada’s major real estate markets are seeing a limited inventory of homes for sale. Active listings were below the 10-year average in July, according to the Canadian Real Estate Association (CREA). The report shows that inventory levels are lagging behind demand in most markets. But inventory could rebound if interest rates increase.

While inventory has improved in some markets, in the Greater Vancouver area, the inventory has declined 16 percent since July 2003. Despite an overall increase in new housing stock, the inventory level is still far below its historical average.

The CREA estimates that this situation will continue into 2022, causing a severe supply-demand imbalance in the secondary market.

3. Taxes

If you are considering buying real estate in Canada, you should know about the taxes that are associated with it. The tax regime for real estate in Canada is progressive and flexible, which makes it an excellent choice for investors.

Investments in Canadian real estate are tax-deductible, and the property taxes in major cities are set to decrease in the near future. There are several factors that determine the assessment of property taxes.

The most basic rule regarding taxes in Canadian real estate is that you must have a home as your principal residence. This means you must live in the property in question for at least one year. There are several exceptions, though.

For instance, if you own a house in Canada and are married to a Canadian resident, you can designate it as your principal residence, and you can only designate it as such for a period of twelve months after buying it. Also, if you own more than one property in Canada, you need to decide which one you want to designate as your primary residence.

4. Down Payment

If you are considering purchasing Surrey houses for sale, it is important to understand how much down payment you need to make. The minimum down payment for a home in Canada is 5% of the purchase price, which is around $13,174. If you plan to buy a house that costs more than $500,000, you will need a 10% down payment.

In addition to the required down payment, you may also need to consider the cost of closing costs. The cost of housing in Canada is continuously on the rise.

According to the Canadian Real Estate Association (CREA), the MLS Home Price Index (HPI) increased 23.4% year-over-year in October 2018. As a result, the down payment you need is increasing.

5. Rental Income

The income from a rental property is one of the primary ways to make a profit in Canadian real estate. Most Canadian markets produce income from rental properties well over a thousand dollars per month.

However, other costs can cut into the profits. These expenses include taxes and insurance. Let’s look at how rental income is taxed in Canada.

The income from rental properties is taxed in the same way as the owner of the property. However, if you own a multi-unit property, you might be able to qualify for a tax deduction on some of these expenses.

In this case, you should consult a tax accountant before making a rental property acquisition. You may also want to consult a property management company in Toronto before making a final decision.

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