Lots of changes are happening in BC’s housing market, but here are the 3 major changes that you should know going into 2023!
Cooling-Off Period
Starting January 1, 2023, BC became the first province to implement a 3-day mandatory cooling-off period for residential home purchases. The purpose of this is to protect buyers in an extremely hot market. After the purchase agreement is signed, buyers would have 3 days to consider if the purchase is right for them. If they decide to withdraw from the purchase, no justification is needed, but a 0.25% recession fee will apply. For example, if the buyer decides to back out of a contract with a $500,000 purchase price, they will need to pay a $1,250 recession fee to walk away, no questions asked. The recession fee will be held by the real estate brokerages and paid to the seller if buyers decide not to proceed with the purchase.
There are some exceptions and waivers to the cooling-off period, such as residential real estate located on lease land, auctions, or sales under a court order or supervision of a court… The best practice is to always make “subject to” clauses on your purchase contract, such as financing, inspection… However, if you must make a subject-free offer, you will be protected by the cooling-offer period.
Foreign Buyers Ban - 2 Years
For a period of 2 years starting January 1, 2023, non-Canadians are banned from making residential property purchases in Canada. The legislation, introduced by the federal government, aims to “make homes more affordable” for people who are currently residing in Canada, rather than foreign buyers purchasing properties for investment purposes.
Although the legislation targets non-Canadian buyers, there are many exceptions. For example, international students, temporary residents, and refugee claimants are exempt from the ban, subject to varying conditions, such as tax filing and residency obligations. Properties outside of a metropolitan area are excluded from this prohibition. Pre-sale purchases have been grandfathered. This means foreign buyers who have signed a valid pre-sale purchase contract prior to December 31st, 2022 will still be able to complete the pre-sale purchase in the next 2 years.
Tax-Free First Home Savings Account (FHSA)
The FHSA was introduced by the Government of Canada on November 9th, 2022. This registered account will help Canadian First-Time Home Buyers (FTHB) save towards a down payment, tax-free. Any eligible FTHB, between the age of 18 to 71, can open an FHSA. The lifetime contribution limit is $40,000 with a maximum annual contribution of $8,000. FTHBs can use the FHSA together with the Home Buyer’s Plan, but unlike the Home Buyer’s Plan, the funds they take out of the FHSA do not need to be paid back.
You can think of an FHSA as a combination of a Registered Retirement Savings Plan (RRSP) and a Tax-Free Savings Account (TFSA) for FTHBs. Same as RRSP, the contributions to FHSA would be tax-deductible. Similar to a TFSA account, any qualifying withdrawals to purchase a first home would be non-taxable. Account owners have the ability to hold a broad range of investments, including mutual funds, publicly traded securities, government, and corporate bonds, and guaranteed investment certificates.
Any savings not used to purchase a qualifying home can either be:
Transferred into an RRSP or Registered Retirement Income Fund (RRIF); or
Withdrawn from the account with applicable taxes
Contact me for more details or if you have any questions!
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