On behalf of Quinn Ross of The Ross Firm Professional Corporation posted in Residential Real Estate on Thursday, October 6, 2016.

Hot on the heels of Vancouver's recent 15% property transfer tax on foreign buyers, Ottawa announced on Monday two new rules that will impact real estate transactions across the country starting October 17. Both are aimed at reducing risk in superheated housing markets - most notably in Vancouver and Toronto.

Closing The Loophole On Principal Residence Tax Exemptions

The first rule slaps restrictions on foreign nationals who buy Canadian property and then avoid paying capital gains by falsely declaring the home as a primary residence.

Once the new rule kicks in, those who buy homes without being a Canadian resident at the time of purchase will not be able to claim the principal residence tax exemption in that year. Only those who were Canadian residents at both the time of purchase and sale will be able to make use of the exemption.

Stricter Requirements For Mortgage Approvals

The second rule involves the application of a "stress test" that, up until now, has been imposed only on insured mortgages involving small down payments or borrowing terms of less than five years. But come October 17, all insured mortgages will be subject to the closer scrutiny.

The test measures an applicant's ability to shoulder their financial load not only at actual, offered rates, but at the five-year posted mortgage rates of Canada's Big Five banks - which, at present, averages 4.64 per cent, according to the Bank of Canada.

The change could significantly reduce the amount of home that Canadians will be approved to buy. It also means that those who don't pass the test will not qualify for lower, more attractive rates.

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