Home flipping is on the rise in Canada despite federal measures put in place to curb such activity, says a new report.
The Sept. 8 Bank of Canada (BoC) report, “Indicators of Financial Vulnerabilities,” found that 2.5 percent of all resale home transactions in the country were flips that occurred within 12 months of purchase, which is similar to pre-pandemic levels.
Calgary and Vancouver led the country’s major markets in flips, comprising five and four percent, respectively, of those markets’ resales, said the report, which was first covered by Blacklock’s Reporter.
A parliamentary amendment to the Income Tax Act came into effect earlier this year, which aimed to target house flipping by increasing the capital gains taxes on homes sold within a year. While the amendment was introduced to stem housing flipping, which gradually drives up home values in a country, it appears not to have quelled the practice.
Home sales in the country have decelerated amid 10 central bank hikes to its overnight lending rate since March 2022, but have shown buoyancy of late.
This was reflected in the BoC report, which demonstrated mortgage originations decreased significantly between the first quarter of 2022 and late in the first quarter of 2023, when they began increasing and have since maintained pace.
Mortgage loan-to-values (LTVs) between 65 and 80 percent comprise a growing share of the mortgage market, the report said.
Unlike at the outset of the COVID-19 crisis, when home values rapidly plummeted, recent rate hikes haven’t decreased prices anything like they did three years ago. Following a nadir in March 2023, home prices have since started increasing, BoC data showed.
The average home price was $1,082,496 last month, up slightly from $1,079,048 in August 2022.