TORONTO – The federal government has announced measures intended to stabilize the real estate sector amid concerns that pockets of risk have emerged in some housing markets, particularly those in Toronto and Vancouver.
Finance Minister Bill Morneau said the federal government will close a loophole so that only people who were living in their home as a principal residence before the home was sold are eligible to claim a capital gains exemption.
WATCH: Ottawa is preparing to close a tax loophole that’s been used by foreign buyers in overheated housing markets
The federal government will also bring in a more rigorous mortgage rate stress test for all insured borrowers in an effort to make sure borrowers can sustain interest rate hikes or income losses, Morneau said.
“Exceptionally strong activity in certain markets, particularly in Toronto and in Vancouver, mean that people are concerned about the state of the housing market,” Morneau told a news conference Monday in Toronto.
WATCH: Morneau explains what concrete steps government is taking to crack down on foreign home buyers
“Across the country, many middle-class families looking to buy their first home see prices climbing often out of their reach. Some are taking on high levels of debt in a rush to buy before it’s too late.”
The changes come as concerns mount that housing costs in Toronto and Vancouver have become increasingly unaffordable for many Canadians while foreign investors purchase homes and turn them around for a quick profit.
A report released last week by Swiss bank UBS singled out Vancouver as being at greatest risk of a housing bubble in the world.
Chris Ballard, Ontario’s housing minister, called the federal efforts “an interesting move.”
WATCH: Ottawa to close capital gains tax loophole for foreign home buyers
“We’re very concerned about affordable housing in Ontario,” he said at the Ontario legislature shortly after Morneau’s announcement.
“I would like to see some solutions brought to the table sooner rather than later, but at the same time what we realized early on is Ontario really doesn’t have, and the federal government really doesn’t have, the data that we need to make the best decisions,” he added.
“There are all sorts of questions that just have never been asked about foreign buyers.”