Weekly stats update courtesy of the VREB.
|Wk 1||Wk 2||Wk 3||Wk 4|
|Sales to New Listings||50%||50%||
|Months of Inventory||
Sales still almost 20% below the levels of last year. I think at these inventory levels we will likely trail last year significantly for the whole year. Nice to see that inventory has finally bottomed out though.
How can we tell whether the falling sales are because of a weakening market or because of constrained inventory? By watching the early indicators of sales/list and days on market. If the market was slowing, then days on market will rise and sales/list will fall sooner than we can see anything in the months of inventory. So far no sign of a demand driven downturn that I can see.
Continuing on the suite discussion, I am going to submit a request for a technical interpretation to the CRA. Those are free but may not give us the info we want given they will not provide specific feedback if they think the example may be in relation to an actual case.
So far the weight of evidence has all pointed towards capital gains being due on suites, however given the thousands of suites in Victoria and lack of awareness of the capital gains issue, further investigation is necessary to make this really definitive. As the CRA says, when renting out part of your house you can retain the complete principal residence exemption to capital gains if:
- the part you use for rental purposes is small in relation to the whole property;
- you do not make any structural changes to the property to make it more suitable for rental purposes; and
- you do not deduct any CCA on the part you are using for rental purposes.
The last is clear, no one deducts CCA on suites anyway. Structural changes are debatable to no end and depends whether you are asking an engineer or someone else to define structural. The first is the source of most of the remaining confusion. What is small? Is a typical Victoria suite at 30-40% of the house classified as small or not?
So I’ll be submitting a request for interpretation this week to ask them to determine if for a typical Victoria self-contained suite in a single family dwelling, the CRA would classify the rental use as ancillary (in which case the whole house still qualifies as a principal residence) or not (CG’s tax due). If that doesn’t work the next step is a ruling but at $100/hour let’s exhaust the other options first 🙂