Depending on where you live in Canada, purchasing real estate in recent years hasn’t exactly been a cakewalk. Tight supply and rampant buyer demand (and alleged speculative investing) have pushed home prices to what some experts argue are unsustainable levels in the nation’s hottest markets.
However, following a slew of new policy changes introduced over the last year — such as Metro Vancouver’s foreign buyer tax and the Ontario Fair Housing Plan — those red-hot conditions have changed, with real estate boards from both markets reporting slower sales in the months following.
That’s made a dent in the national numbers, reveals the latest analysis from the Canadian Real Estate Association: with a 11 per cent drop in sales from last September. This is despite the typically busier autumn market, which is often the last chance for buyers to make a serious go of it before the snow — and holiday season — sets in. Seasonally adjusted activity was up slightly month over month at 2.1 per cent.
Too soon to call for market stability: CREA
While this could indicate market conditions are starting to settle after what has been a turbulent spring and summer market, it’s too soon to call it a trend, say CREA’s analysts.
“National sales appear to be stabilizing. While encouraging, it’s too early to tell if this is the beginning of a longer-term trend,” stated CREA President Andrew Peck.
Calmer sales activity hasn’t translated to greater affordability, though: home prices continued their ascent, with benchmark prices rising in 13 of MLS’s tracked markets. It’s the first time in seven years that all markets have seen simultaneous growth, with the national average price coming to $487,000.
However, prices are increasing at a slower pace than at the market’s peak, and that’s mainly due to the lost steam in the detached house segment since March. One- and two-storey single family homes appreciated by 7.9 and 7.2 per cent respectively, compared to the sizzling condo market, which saw 19.8 per cent appreciation, and townhouses at 13.5 per cent.
I thought it might be of use to prepare a brief review of where we stand with regards to Bill Morneau’ s infamous July 18, 2017 tax proposals.
As you are aware, attempting a profound degree of subterfuge, Mr. Morneau announced some “minor” tax changes aimed at bringing “fairness” to the taxation of Canadian Controlled Private Corporations (CCPC). What he in fact brought forward was the most fundamental change to corporate taxation since the introduction of the current Income Tax Act in 1972. This was coupled by a paltry 75-day consultation period, most of which coincided with summer vacations and harvest.
Despite his attempted strategic deception, a robust group of stakeholders representing a wide cross section of the Canadian economy mobilized to challenge these proposals and carry the message to Canadians that what was being proposed was fundamentally at odds with any rational conception of fairness, but instead a punitive attack on small business, professionals and family farms. The government was inundated with over 21,000 submissions. Last week we saw what I believe will be the first of several stages of government retreat from these proposals.
Few of the proposals will end in legislation
It is my contention that given the profound opposition that these proposals have engendered, both within the Federal Liberal caucus and from many sectors of the Canadian economy that little, if any of the proposals will actually find their way into legislation. Even the revised proposals create such layers of byzantine complexity that they are largely unworkable, elevate the roll of a CRA auditor well beyond their current capability and increase compliance costs exponentially for most Canadian economic enterprises.
If I may I would like to review the proposals and revised positions:
I) Surplus Stripping
The initial proposals called for an expansion of the ill-conceived section 84.1 of the Act. This is the infamous section that resulted in it being more advantageous from a tax perspective to sell your business to your next door neighbour rather than to your children. The proposals had called for restrictions on sale beyond simply spouse or children to include extended family members. It also placed the power of determination of defining “arm’s length” to a CRA auditor. The proposals also introduced a new omnibus anti-avoidance measure, section 246(1) that would have eliminated the ability to implement a common post mortem strategy, commonly referred to as “pipeline.” It would have made redemption strategies the only acceptable means of undertaking post mortem tax planning, threatened retroactivity and potentially exposed business owners (and their estates) to taxation rates in excess of 70%.
Mr. Morneau fully retreated from this proposal on Thursday of last week. There has been guidance provided by the Department of Finance that section 84.1 will now be substantively reformed to remove or reduce impediments to inter-family succession.
Whether this will be restricted to farm and fishing corporations, or be a general provision applying to all CCPC’s remains to be seen. I am hopeful that the Department of Finance will actually survey the tax planning community for guidance on what is prudent an efficient.
The conclusions regarding the retreat from the earlier proposals are as follows:
The cancellation of s. 246(1) restores traditional planning including “pipeline” and maintains that estate freezes are still relevant and prudent planning option.
Attacks on potential Capital Dividend Account (CDA) credits have been terminated. The use of corporately owned life insurance is still a preferred planning method.
II) Capital Gains
The proposals, both directly and through the Taxation of Split Income (TOSI) proposed a radical curtailment of the ability to claim the Lifetime Capital Gains Exemption (LCGE). The LCGE would have been restricted to individuals over the age of 18. It also would have eliminated the ability to claim the LCGE where shares are owned by a trust. This is of course a common planning technique with both tax and non-tax rationale. The ability to income split, creditor protect corporately held assets and insurance and multiply the LCGE all require a family trust as a central element of any freeze transaction or other selected reorganization strategies.
Perhaps the only thing more important than wealth or power is stability. Things come and go all the time when a situation isn’t stable, and it’s hard to plan an uncertain future. Obtaining a career that provides stability is a must. The workforce is changing, and so are the kinds of jobs that are available. If you want to settle in to your desk and never need to find another one, you might need to change the attitude you bring to work with you. Soon enough, you’ll find yourself with a stable job and the tools you need to prepare for your financial future.
Let the numbers guide you
When deciding on a career path, look at projections. As technology continues to change the world, something big is going to happen. Certain jobs won’t exist anymore, and jobs we never had a need for previously are going to pop up. Some paths are more stable than others, and you want to pick one that’s still going to exist in ten years. While the positions themselves may change with time, simply being familiar with and experienced in the industry can keep you afloat.
Think about what you want, versus what you need
There’s objective stability, and there’s subjective stability. For example, there will always need to be customer service representatives. That is a career that won’t go away. But can you always be a customer service representative? Will it drive you crazy after a while? Will your patience wear thin? Stability needs to come from both sides. You have to find a career path with longevity, but it needs to be a career path that you’ll be happy with for the long haul. Consider your future self when making a decision.
Investing is like driving a car. Every now and then you feel lost, and need to make sure you’re headed in the right direction: your destination.
That’s why I wrote the book ‘RECALCULATING – Find Financial Success and Never Feel Lost Again’ which makes use of my years of experience counseling clients about their money and assets.
Indeed, when it comes to directions, a car’s GPS makes things easy if you get lost; it just says ‘recalculating’ and you’re off again, hence the title of the book. So while driving is something we all do, we often encounter obstacles: potholes, detours, flat tires, not to mention unexpected passengers.
Take a couple we’ll call Tim and Janet. They’re nearing 60: he’s a financial executive, and she’s been focused on raising their two children to adulthood; one of them they are helping with a down payment on a house and the other is still in university, and they pay the tuition. What’s more, Janet’s parents are in their mid-80s and their health is starting to fail. So, while this couple is on the cusp of their own retirement, they are still playing Mom and Dad, while also taking care of an elderly Mom and Dad.
And they feel lost.
During my almost 25 years as a professional Financial Advisor and Certified Financial Planner, I often meet people who aren’t where they thought they would be. That’s why they come see me. Some of them are off course and unsure of how to get back. They may be ahead of their plans, behind, or just not sure. Even people who are very successful in their careers are often stressed and much of that comes from a 24/7 financial news cycle that assumes we are more financially savvy than we really are.
Supporting financial hitchhikers
With Tim and Janet, the dilemma concerns ‘financial hitchhikers’ — passengers they didn’t plan on taking along for the ride on that journey known as financial planning. In this case, their kids aren’t really hitchhikers because they’re already in the car, so let’s call them First Class Passengers and the journey is built around them. Janet’s parents we can call Second Class Passengers who may need temporary assistance.
As we approach retirement, we hope financial strains will be a thing of the past and that we’ll be able to enjoy our senior years by focusing on the things that make us happiest. However, the reality for many of us in North America is quite different.
According to SeniorLiving, nine out of ten Americans who are 65 and older, receive Social Security and the average senior citizen, aged 65-74, has an income of just $36,320 [all figures $US]; a figure that drops to $25,417 for those aged 74 and over. As confirmed by the most recent U.S. Census Bureau, 9.3% of Americans aged 65 and older are living in poverty; an increase from 4.2 million to 4.6 million between 2015 and 2016.
With such worrying circumstances to contend with, many senior citizens will want to find out what kind of financial assistance is available to them in order to better plan for the years ahead.
Housing
Meeting mortgage payments or having enough money to cover rising rental costs can be one of the most pressing financial concerns for senior Americans. The U.S. Department for Housing and Urban Development (HUD) offers financial assistance and resources related to reverse mortgages, federal housing programs, affordable rents and units for the elderly.
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By Penelope Graham, Zoocasa
