You’ve seen the headlines. Housing affordability is further out of reach than ever before. That sounds grand for the slim few taking advantage of this ‘buyer’s market’. However, it doesn’t fair well for the larger majority, who are qualified, and eager to secure a piece of the ownership pie. In a delicate attempt to re-balance the market, BC has introduced a few new laws every house hunter should understand. We’ve got you covered. Navigate ‘The Big BC 3’ to make home ownership work for you with a few easy tips.
1. Introducing the ‘Frenemies’ that are Speculation and Vacancy tax
BC’s strong market value and lifestyle perks, make it an ideal place to own a second home for weekend getaways and holiday retreats. It’s that very trend however, that’s led to the difficulty year-long residents are facing when it comes to securing a home that meets their needs and budgets. As a result, the province has introduced speculation and vacancy tax (0.5%), a first-of-its-kind legislation for the entire country (lucky us!) in a step towards protecting from foreign capital and speculative investments that lay vacant and crowd the market.
How can you buy that second home and avoid that pesky tax?
Buying a second home will not necessarily mean a second tax for all BC residents, as long as it doesn’t sit uninhabited for more than six months out of the year. Consider that a great incentive for those looking to purchase homes with the option to rent for a certain period of time – a win for the market and your pockets. What’s more, the new regulations are bolstering a shift in development and design trends and location to better match rental potential for purchasers. There’s also, of course, the opportunity to side-step the tax option entirely while getting better value for your dollar.
2. Paying the condo pre-sale piper
While condo pre-sales used to be a tax-free haven for investors, the government’s introduction of a first-of-its-kind Condo and Strata Assignment Integrity Register puts the practice in a different light. It wasn’t so much the fact that buyers were making a profit, it was the loophole in the systems that hindered the government’s ability to enforce income tax, capital gains and tax for property transfer. The days are numbered when it comes to putting that 5% deposit down to secure a home and enjoy that strong return. In its place, a required pre-registration process that will collect data of the purchaser and purchase price during the development and construction phase.
Why is a Pre-sale still a good investment?
The good news is, as a buyer, you have nothing to do but sit back and relax, leaving the responsibility with the developers when it comes to reporting to the appropriate divisions. Most importantly, however, to match the price-tag crunch, developers are strengthening their package incentives, making allowances and upgrades more affordable on presales and in turn maximize resale value. So, if you’re interested in that top-of-the-line kitchen without opening the wallet much further, now’s the time to ask.
3. No one likes the stress of a test
A home is by far one of the most expensive things most will buy in their lifetime, and as much as we’d all like to be able to put down a hefty payment to secure it without getting the support of someone or something else, statistics show that’s rarely the case. Whether good, bad or otherwise, the recent introduction of stricter mortgage lending rules has added yet another layer to mix. The B20 stress test requires lenders to confirm that they can make payments at two percentage points higher than the qualifying mortgage rate. It also forces those seeking a mortgage to prove they would be financially capable even if interest rates were to rise above their initial rate.
How can you relax the nerves and get the score you want?
Money matters are nothing to take lightly, but there are ways to approach the new mortgage rules without the fear of being disqualified out-right. First, boost the size of your down payment as much as you can in an approach to reducing the size of your mortgage loan and stress test criteria. While that may be easier for some than others, there is still another option that’s worth considering, ‘drive until you qualify’; expanding your search by distance to ensure they still achieve those must-haves that make it their dream home. The great news is, developers are catching on to it too, pushing further past the city limits and building affordable, custom options for the buyer of today, including those that promise tax-free living.