Effects of Government Policies on Canadian Real Estate Companies

Government policies have a significant impact on real estate companies by influencing market dynamics, taxation, and housing supply. Key effects include:

• Taxation Changes and Incentives: The deferral of the capital gains tax increase until 2026 maintains the current tax burden on property sales for now, preserving profitability for real estate companies. The government maintains the Principal Residence Exemption, allowing profits from primary home sales to remain tax-free, which supports market activity. Additionally, the introduction of a $250,000 annual capital gains threshold and increased lifetime capital gains exemption for small business and farming properties reduce tax liabilities for eligible investors and entrepreneurs, potentially encouraging investment in real estate-related businesses.

• Restrictions on Foreign Ownership: The prohibition on the purchase of residential property by non-citizens in certain metropolitan and agglomeration areas limits foreign investment in smaller residential properties (up to three dwelling units). This policy can reduce demand from non-resident buyers, impacting pricing and sales volumes in affected areas, while allowing non-citizens to purchase larger multi-unit buildings or properties outside these zones.

• Housing Supply and Construction Incentives: Federal housing plans aim to increase housing supply by incentivizing zoning reforms, accelerating permitting, and supporting apartment construction loans. These measures encourage real estate companies to engage in new developments, potentially increasing inventory and moderating prices. The ambitious goal to double housing construction to 500,000 units annually requires collaboration between public and private sectors, directly affecting real estate developers and builders.

• Government Real Property Management: Policies governing government real property management emphasize efficient use, risk management, and transparency. While primarily focused on government assets, these directives can influence market conditions by affecting government real estate transactions and partnerships with private companies.

• Market Outlook Adjustments: Revised forecasts by real estate associations indicate a nearly flat sales volume and a slight decrease in average home prices, reflecting the combined effects of economic conditions and policy impacts. Regional variations persist, with some provinces expecting price declines and others moderate growth, influencing company strategies regionally.

Overall, government policies shape taxation, ownership eligibility, housing supply, and market expectations, directly affecting the operations, investment decisions, and profitability of real estate companies.