New Rules Regarding the Principal Residence Exemption

Tax season is upon us.  Canadian tax residents must file tax returns for 2016 income with the Canada Revenue Agency (CRA) before the end of April 2017.  Who is a Canadian tax resident?  In principle, anyone for whom Canada is a home base is regarded as a tax resident.

In reporting income, Canadian tax residents also have to report any capital gains earned during the year, HOWEVER, unlike other income (such as income from employment, interest payments, rent, etc.) only ½ of capital gains are treated as income.  In effect, therefore, the tax rate on capital gains is only ½ the tax rate on regular income.   Moreover, there are a few types of capital gain that are entirely exempt from taxation.  For most taxpayers the most important exemption from capital gains tax is for the capital gain earned on the sale of a family home known as the “principal residence exemption”.

Some of the key issues surrounding the principal residence exemption as follows:

  • Q: Does a taxpayer have to report the capital gain on the sale of a principal residence?
    Yes, the new policy requires the gain to be reported when tax returns are filed with CRA.   This is a new requirement.  The gain is only reportable for the taxation year in which the property is sold.  If the property has, throughout the period it was owned by the taxpayer, been a principal residence then no tax is payable.
  • Q: Who can claim the exemption?
    The exemption is only available to Canadian tax residents who must declare world-wide income and capital gains when filing tax returns.
  • Q: What type of property can be a principal residence?
    Only “capital property” can be a principal residence.  Property bought to “flip” is not “capital property”; it is inventory in a trading business where the profit from the sale of such property is treated as ordinary income, not even a capital gain.  100% of such gains are taxable.  Only properties that were “ordinarily inhabited” by the taxpayer are eligible for the exemption.
  • Q: Can different family members each own a “principal residence”?
    There is only one residence that can be claimed by a family unit as a principal residence.  Of course, adult children living apart from their parents are regarded as having their own family unit and are thereby entitled to claim an exemption for their own principal residence.
  • Q: Are there penalties for failing to report?
    If the sale is not reported in the tax return then CRA can, without any time limitation, audit the taxpayer at any time in the future. Moreover, taxpayers who have failed to designate the home as their principal residence could be subject to a late designation penalty of up to $8,000. It is expected that the new policy will give CRA auditors new audit leads and give rise to many more homeowner audits and re-assessments in the future.

In summary, anyone who sold their principal residences in in 2016 would be well-advised to report the sale and any associated capital gains in their tax returns for the 2016 fiscal year.  Any questions concerning this new policy should be directed to experienced tax advisors.


Written by Peter Scarrow, former immigration lawyer, currently is the Director of Asian Business at Macdonald Real Estate Group.

Squamish, Whistler and Sunshine Coast Real Estate Market Statistics – March 2017

Here are the latest real estate market statistics from Macdonald Realty on Squamish, Whistler, and Sunshine Coast listings and sales in March 2017.

Squamish

In March 2017, there were 30 sales of detached homes and 118 active listings in Squamish. The benchmark sale price was $836,100 with an average days on market of 66.

The Condo market had 17 sales and 22 active listings at the end of the month.  The benchmark sale price was $377,900 with an average days on market of 25.

Townhome sales were 18, active listings were 53. The benchmark sale price was $740,700, and the average days on market were 47.

It’s a seller’s market for all product types.

MarketHotSheet_March2017_Squamish

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Greater Vancouver Real Estate Market Statistics – March 2017

Here are the latest real estate market statistics from Macdonald Realty on the Greater Vancouver listings and sales in March 2017.

Vancouver

In the Vancouver Westside, there were 95 sales of detached homes and 595 active listings at the end of March. The benchmark sale price was $3,461,700, with an average days on market of 35. The hottest market for sales was Dunbar with 23 sales.

In comparison, the condo market had 455 sales, 656 active listings and a benchmark sale price of $692,400 with an average of 24 days on market. The hottest market for sales was Downtown VW, 109 sales.

Townhome sales were 57, active listings were 111. The benchmark sale price was $1,079,100 with an average days on market of 57. Fairview VW with 13 sales was the hottest market in March.

It’s a buyer’s market for single family homes.

MarketHotSheet_March2017_VanWest

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North Delta, Surrey, Langley and Fraser Valley Real Estate Market Statistics – March 2017

Here are the latest real estate market statistics from Macdonald Realty on North Delta, Surrey, White Rock, Langley, and Fraser Valley listings and sales in March 2017.

North Delta

In the North Delta market, the benchmark sale price was $820,000 for detached homes. At the end of March, there were 123 active listings and 60 sales.

The condo market had 11 sales and 12 active listings. The benchmark sale price was $215,700.

Townhomes featured 9 sales, 13 active listings and a $497,800 benchmark sale price.

It’s a seller’s market in North Delta.

MarketHotSheet_March2017_NDelta

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Greater Victoria, Parksville and Nanaimo Real Estate Market Statistics – March 2017

Here are the latest real estate market statistics from Macdonald Realty on Greater Victoria, Parksville/Qualicum, and Nanaimo listings and sales in March 2017.

Greater Victoria

In March 2017, there were 396 sales of single family homes and 418 active listings in the Greater Victoria. The benchmark sale price was $652,700 with an average days on market of 25. The hottest market for sales was Saanich East with 80 sales. There were also 21 sales and 117 active listings at the end of the month for waterfront homes.

In comparison, the Condo market had 294 sales, 265 active listings at the end of the month.  The benchmark sale price was $399,900 with an average days on market of 16. The hottest market for sales was Victoria, 103 sales.

Townhome sales were 76, active listings were 71 and the benchmark sale price was $513,300. The average days on market were 20, and the hottest markets were Victoria and Langford with 14 sales each.

It’s a seller’s market in Victoria.

MarketHotSheet_March2017_Victoria

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Macdonald Realty Website Recognized for Excellence

2017WQC_blueVANCOUVER, B.C. – (April 3, 2017) – Macdonald Realty has been awarded the Website Quality Certification (WQC) from Leading Real Estate Companies of the World, a global community of more than 550 high quality independent real estate firms in over 60 countries. The certification was presented in recognition of excellence in website design, content and functionality.

Macdonald Realty’s website, macrealty.com, received high marks in a variety of critical areas relating to website performance, including usability, design, content, interactivity, customer service and mobile responsiveness. The evaluation was conducted by Virtual Results, LLC, a real estate internet and social marketing firm selected by Leading Real Estate Companies of the World to review the websites of participating members.

The specific measurements for the WQC are updated each year to reflect the most current online marketing strategies, as well as evolving consumer preferences. Companies must be re-certified every two years to maintain the certification.

“The 140 companies that earned the WQC this year have created websites that engage consumers with thoughtful design, rich local content and up-to-date information on homes in the local market and around the world. We are pleased to recognize them for giving consumers a superior online experience and supporting that with exceptional customer support,” said Leading Real Estate Companies of the World President/CEO Pam O’Connor.

“We’re very excited to be one of the first Canadian real estate websites to earn the WQC designation. This lets our clients know they can search listings across BC, save and favourite properties, and connect with nearly 1000 real estate professionals using the latest technology in a secure environment,” said Rosey Hudson, Marketing Director of Macdonald Realty.  “For our internal website team this is recognition of the hard work that went into launching our new macrealty.com website last May, and a subsequent 300 agent websites in the latter half of 2016.  Macdonald Realty has made a significant investment in our online presence and are excited to roll out even more tools for our agents and clients in the next year.”

As a member of LeadingRE, Macdonald Realty provides a quality real estate experience, global marketing reach and access to top real estate professionals in markets spanning 6 continents.

For more information about Macdonald Realty, please visit macrealty.com.

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About Macdonald Real Estate Group:
Based in Vancouver, Canada, Macdonald Real Estate Group (MREG) has an annual sales volume of over $8 billion and over $2 billion in assets under management.  With 20 offices and nearly 1,000 staff and REALTORS®, MREG offers a full range of real estate services, including residential and commercial brokerage, property and strata management, project marketing, and the Canadian Real Estate Investment Centre in Shanghai, China.  Macdonald Realty is the residential division of Macdonald Real Estate Group. For more information, visit www.macrealty.com.

Macdonald Realty nominated for Top Luxury Brokerage Award

VANCOUVER, B.C. – (March 28, 2017) –   Macdonald Realty was nominated for the Luxury Portfolio International® Top Luxury Brokerage Award, presented for overall engagement in Luxury Portfolio; embracement of tools, meetings, events, advertising and brand usage; and outstanding marketing strategy in the discerning market of affluent buyers and sellers.  They were nominated with Slifer, Smith & Frampton Real Estate of Colorado and, the winner, Houlihan Lawrence Real Estate of New York. The award was presented during the Leading Real Estate Companies of the World™ Conference Week, a series of events that drew an impressive audience of 2,000 real estate professionals from 25 countries.  The conference took place at Fontainebleau Miami Beach earlier this month.

Macdonald Realty's Luxury Home Marketing Team of Alyssa Mori and Rosey Hudson at the Luxury Portfolio Summit in Miami Beach.

Macdonald Realty’s Luxury Home Marketing Team of Alyssa Mori and Rosey Hudson at the Luxury Portfolio Summit in Miami Beach.

Affiliates of Luxury Portfolio market high-end homes to affluent consumers worldwide through the network’s strategic marketing program, including the award-winning website Luxuryportfolio.com, which marketed over 50,000 luxury homes to over three million high-net-worth visitors last year and featured a total inventory of available properties exceeding $54 billion.

Macdonald Realty is the largest British Columbia representative of LeadingRE (www.LeadingRE.com). With a global membership that spans six continents, LeadingRE connects more than 550 firms and 130,000 sales associates who produce over 1.2 million real estate transactions each year. As a member of LeadingRE, Macdonald Realty provides a quality real estate experience, global marketing reach and access to top real estate professionals in virtually any market worldwide.

Since 1944, Macdonald Realty has been helping British Columbians make some of the biggest decisions of their lifetime during real estate transactions. Beyond their dedicated team of nearly 1,000 residential real estate professionals operating in 20 offices across BC, they are also Western Canada’s largest integrated real estate firm who’s services include residential sales; commercial sales and leasing; project marketing; property and strata management; mortgage services; and luxury home marketing.

For more information about Macdonald Realty, please visit macrealty.com

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About Macdonald Real Estate Group:
Based in Vancouver, Canada, Macdonald Real Estate Group (MREG) has an annual sales volume of over $8 billion and over $2 billion in assets under management.  With 20 offices and nearly 1,000 staff and REALTORS®, MREG offers a full range of real estate services, including residential and commercial brokerage, property and strata management, project marketing, and the Canadian Real Estate Investment Centre in Shanghai, China.  Macdonald Realty is the residential division of Macdonald Real Estate Group. For more information, visit www.macrealty.com.

Macdonald Realty: A Giant Tree from a Tiny Acorn

Vision and hard work – that sums up how Lynn Hsu grew a real estate company from one office to 20 offices and 1,000-plus employees, making it Western Canada’s largest full-service brokerage firm

  • luxury-home-listed-by-macdonald-realty
    Luxury home listed by Macdonald Realty

  • lynn-hsu-and-dan-scarrow-of-macdonald-realty
    Macdonald Realty's leaders: Lynn Hsu, owner and CEO, and Dan Scarrow, managing broker

  • the-wade-in-victoria-marketed-by-macdonald-realty-platinum-project-marketing
    The Wade in Victoria, marketed by Macdonald Realty's new-home marketing division Platinum Project Marketing

As seen in… Profiles of Excellence 2017

Originally from Taiwan, Hsu immigrated to Canada in the late 1970s – alone, with no family or friends, no job prospects and speaking little English. Today, she has turned Macdonald Realty into Western Canada’s largest full-service brokerage firm.

From the moment Hsu purchased that single boutique residential firm, she had a vision.

“The real estate industry has two distinct businesses – one creation, the other servicing. On the servicing side, almost all the companies in BC were a single-purpose company, i.e. residential or commercial brokerage, property management or project marketing firms,” says Hsu. “I wanted to create a company that could provide our clients all-encompassing real estate solutions under one roof –from guiding a home buyer through the biggest investment of their lives, helping an investor manage and add value to their properties, to assembling ground intelligence to assist developers to create the right products for the marketplace.”

Today, the company’s interests encompass residential sales, commercial sales and leasing, property management, strata management, development and project management, project marketing and mortgage brokering and lending. It now includes the Macdonald Commercial and Macdonald Realty Platinum Project Marketing divisions.

Dan Scarrow, vice-president, says it’s Hsu’s ability to hire the right people that also helped propel her to the top of the industry. “Lynn has always understood how important it is to empower employees. She is a leader who inspires people through a shared vision and she has created an environment where people feel valued and fulfilled,” says Scarrow. “Her strongest point is that she has never wavered from her commitment to serve and protect our customers.”

Hsu believes that a business model based on a fundamental principle of upholding the highest standard of excellence, coupled with a strong conviction that every problem has a creative solution, would allow Macdonald Realty to grow organically. “When you have the belief and knowledge that you are doing your best to adhere to your core values, problems, rather than deflating you, energize you to action,” adds Hsu.

Hsu went on to explain: “Professionalism and integrity mean a great deal to me and my entire team. They are our company’s core values.”

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Macdonald Realty’s Rosey Hudson Presented at Global Luxury Real Estate Conference

VANCOUVER, B.C. – (March 23, 2017) – Rosey Hudson, Marketing Director with Macdonald Realty presented at the Luxury Portfolio SUMMIT on February 28th at the Fontainebleau Miami Beach. This invitation-only event was hosted by Luxury Portfolio International®, the luxury face of Leading Real Estate Companies of the World.

Rosey Hudson, Marketing Director, Macdonald Realty

Rosey Hudson, Marketing Director, Macdonald Realty

The 2017 Luxury Portfolio SUMMIT kicked off by exploring the changing expectations of luxury consumers and what sales associates can do to better serve their clients and provide them with the “wow” that they are looking for. Participants engaged in a collaborative program focused on how the high-net-worth buy today, the five secret languages of communication, leveraging their Luxury Portfolio relationship, marketing strategies in a mobile and digital world, growing business with global buyers and attracting attention in a world of noise by learning public relations best practices.

Hudson spoke on best practices of Presenting Luxury Portfolio Successfully, sharing insights on how luxury real estate specialists can leverage the international exposure and marketing power of their Luxury Portfolio affiliation to increase local and global interest in luxury listings.

“Vancouver is a global gateway city and our luxury homes appeal to international buyers from Europe, America, Asia and the Middle East. Everyone in our market is aware that prestigious residences need to be marketed both locally and globally. Macdonald Realty is fortunate to be one of only 5 Canadian brokerages with access to Luxury Portfolio’s extensive international reach,” said Hudson.

Macdonald Realty is the largest Canadian Luxury Portfolio affiliate, along with Profusion Realty in Montreal, Harvey Kalles Real Estate in Toronto, CIR Realty in Calgary and The Whistler Real Estate Company in Whistler, BC.

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New Exemptions to the 15% Property Transfer Tax

EXEMPTION FROM THE 15% TAX

The original announcement that work permit holders would be exempt from the 15% additional property transfer tax was made on January 29, 2017.

On March 17, Premier Christy Clark finally introduced the details of the new exemption to the 15% property transfer tax applied to certain “foreign nationals” who purchase residential properties in the Greater Vancouver Regional District.  As we expected the devil is in the details.  There are a number of categories of work permit holders.  Just as we expected, it turns out that not all holders of work permits will be treated equally.  Most work permit holders will still have to pay the 15% tax.

The exemption from the tax will only apply to Provincial Nominees under the B.C. provincial nominee program (“PNP”).  They have to be “nominated” by B.C. so that other holders of work permits such as international students, executive transferees, or individuals nominated by other provinces will not qualify for the exemption.  Moreover:

  • The exemption only applies to provincial nominees who treat the property as a principal residence;
  • The exemption may be claimed only once. It the provincial nominee buys another GVRD property he must pay the 15% tax;
  • Evidence of provincial nominee status has to be provided at the time the documents are filed at the Land Title Office.

REFUNDS OF THE 15% TAX FOR CERTAIN INDIVIDUALS

The new rules also provide that the following buyers who have already paid the tax will be entitled to refunds:

  • Foreign nationals who held B.C. PNP certificates or were confirmed as provincial nominees and purchased GVRD residential property between August 2, 2016, and March 17, 2017;
  • Individuals who became permanent residents or Canadian citizens within one year of the date the property transfer was registered in the Land Title Office

Refunds for permanent residents and citizens can only be claimed:

  • in respect of only one property;
  • where the property has been used as a principal residence;
  • where the owner moved into the residence within 92 days of property registration; and
  • continued to live in the property for one full year after the date the property transfer was registered.

Clearly most work permit holders are still subject to the 15% tax.  It seems that the exemptions are designed primarily to accommodate the PNP holders working in B.C.’s growing high technology industry, the fear being that the high cost of housing may be an impediment to economic growth in this critically important sector.

Meanwhile, work permit “status” issues can be somewhat complex.  Foreign national buyers holding work permits and their realtor advisors who are uncertain about whether an exemption would apply should consider consulting their immigration and conveyancing lawyers before entering into a binding agreement to purchase GVRD residential property.


Written by Peter Scarrow, former immigration lawyer, currently is the Director of Asian Business at Macdonald Real Estate Group.