For the 2022 tax year, the federal government announced an annual 1% tax on real estate owned by any non-resident, non-Canadian, and considered vacant or underused. In some situations, this also applies to Canadian owners. The Underused Housing Tax Act (UHT) requires individuals impacted by this tax to file an annual return, subject to certain exemptions, and pay a 1% tax on the property’s value. Even if an affected owner is exempt from paying the UHT for a calendar year, they must still file a return for the residential property. The filing deadline for the 2022 tax year is April 30, 2023. Although the government suggested only non-residents would be affected by the UHT, the scope of the final legislation is broader. We recommend your clients speak with a tax professional if you or they believe it applies to them. Also, please keep in mind that some provinces/territories and municipalities impose similar vacancy taxes, and you should review these rules to better understand how they could impact your clients. Who does this tax apply to? The UHT imposes a tax on every taxpayer who, on December 31 of a calendar year, is an owner of a residential property in Canada. Residential property owners can be categorized into two classifications — excluded owners and affected owners. Excluded owners: The Underused Housing Tax rules do not apply to “excluded owners”. These owners, including Canadian citizens and permanent residents, have no UHT reporting or tax obligations. A complete list of conditions classifying an excluded owner can be found on the Government of Canada’s UHT page . Affected owners: All affected owners (mostly non-Canadian owners but includes some Canadian owners) are required to file a return for each residential property they own, even if they are not liable to pay any tax, due to qualifying for an exemption. A complete list of conditions classifying you as an affected owner can be found on the government’s UHT page . This classification is further broken down into two groups: Owners required to file an annual UHT return but not pay the UHT due to qualifying for an exemption. The list of exemptions can be found on the government’s UHT page . Owners required to file an annual UHT return and they pay 1% tax. What exemptions exist? Ownership of a residential property may be exempt from the Underused Housing Tax for a calendar year depending on: the type of owner you are the availability of the residential property the location and use of the residential property the occupant of the residential property Detailed information on each of these exemptions can be found on the government’s UHT page . As an affected owner why should I file a UHT return if I have no tax payable? All affected owners must file a separate Underused Housing Tax return for each residential property they own in Canada for the calendar year. Not filing for the UHT by April 30, 2023 could result in a penalty of $5,000 – $10,000 per return, even if no tax is owing due to an exemption. For more information, please review Canada Revenue Agency’s (CRA) new UHT page , which includes the new UHT return, technical guidance and other information. Please note: on March 27, 2023 the government announced UHT penalties and interest for the 2022 calendar year will be waived for any late-filed returns and for any late-payments, provided the return is filed or the UHT is paid by October 31, 2023. The article above is for information purposes and is not legal or financial advice or a substitute for legal counsel. Source: By What You Need to Know About Canada’s Underused Housing Tax - CREA

While most of the 2023 housing story has been playing out as expected—specifically the rebound in demand and prices—there’s one striking element that has been harder to grasp. That is the historic drop-off in monthly new listings over the last year—down 46% between February 2022 and March 2023. Sales have only just bounced back to average levels over the last two months, but because those buyers are chasing so few listings, we’re back in a seller’s market. I’ve seen a few listings near me accepting offers on a particular day, although certainly not the majority. This practice could become less frequent this summer with the Bank of Canada hiking rates again in June (and likely in July). My understanding from speaking with REALTORS® is that we’ve been on the borderline of one vs. potential multiple offers, unlike during the pandemic, where the seller was getting upwards of 10 offers. It’s possible that a decent pre-emptive offer is the bird in the hand a seller is willing to accept at this point. As of May, we’re teetering between these two options. As analysts, we use our data as a “view from orbit” to identify the “what,” but being around the kitchen table, so to speak, is often where you find the perspective to get to the “why?”. We know demand for housing in Canada is off the charts and that will not change. The big question that needs an answer to understand the resale market in 2023 is: why are there so few new listings each month? Firstly, existing owners supply (or don’t supply) the market. Nearing the end of 2022 and in early 2023 I had suggested the 2023 spring market would be a good opportunity for existing owners to move around as they did before the pandemic, exploring different options, taking their time, negotiating with sellers, home inspections, writing conditional offers, etc. While that wasn’t wrong, it also wasn’t whole story. We’re still in a “buy first” market so when sales bounced higher in April , I assumed we would see an associated bump in new supply as those buyers then put their current homes up for sale. We would then watch the market churn away through the summer and fall with more buying and selling up and down the property ladder. There was a bit of a bump in new supply in May but not nearly what would be expected if the market were churning away like it was in 2021. What gives? Well, it took longer than I would care to admit for this to click, but I think it has to do with how fast interest rates have risen. While we read every day about people whose mortgage payments have skyrocketed over the last year, there are a substantial number of existing owners out there with ultra-low fixed rates that are good until 2025 and 2026. They are going to hold onto those rates for dear life in the hopes of riding out the worst of the current inflation crisis. Moving now would upset a sweet deal. May saw a bounce off the bottom for new supply, suggesting some of the buyers in April were sellers in May. But the bigger picture is that much of that move-up, downsize, or “moving for whatever reason” activity will likely be stretched out over the next few years because people don’t want to mess with their once-in-a-lifetime fixed mortgage rates. In some ways, the opposite of what happened during the early days of the COVID-19 pandemic. Source: By Why Have New Monthly Real Estate Listings Fallen So Much in the Last 12 Months? - CREA