Quote:
Originally Posted by supafamous
Capital gain taxes are applied on investments, primary homes are NOT supposed to be investments, they only started to become like investments because such b/c of a lack of supply but that doesn't mean we should penalize people for it. Homes are supposed to be HOMES. If the price of water increases due to scarcity and we see people speculating on water we wouldn't apply a cap gain tax to it, we'd find ways to get more water or we'd find ways for people to use less water. Housing is one of the very few essential things where it seems we're willing to suspend the basics of supply and demand to explain the price of it.
The cap gain taxes punishes heavily when it comes to social mobility whether or not housing prices go up quickly or slowly (and housing prices can and do go up slowly, they generally do not go down). Example:
I'm Joe Blow who lives in Squamish in my condo which I bought in 2012 for $500k which is now worth $600k (hypothetical low increase of just 20% over 10 years). I've met the love of my life but she lives in Abbotsford. Also I found my dream job (same pay though) out there too so I'm gonna move over there as I can't commute this far every day and she's not moving. Turns out housing costs exactly the same and an equivalent condo costs $600k in Abbotsford.
So now I'm on the hook for:
Property Transfer Tax: $10K (a tax that was made up to try to slow real estate price increases)
Real estate commission: $20K
Capital gains: ~$15-30k depending on income.
WTF mate? I'm out 10% of the value of my home just to move to be with the woman I love and work my dream job? It's fortunate that he's met the love of his life so he's willing to lose a bunch of money over this but if it was just for a job there's a good chance Joe Blow passes on the job b/c he can't afford to lose this money over a house.
That's just the lowest end scenario - a below inflation rate increase in the value of his home. Use a slightly higher rate of increase like 5% YoY and this guy is losing his hat over a move.
Blowing a hole in social mobility is just not an acceptable outcome here. We punish the wrong kind of people - the rich can eat that cost just fine, the working/middle class will take it in the teeth.
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I agree that principle homes should not be an investment, but I am suggesting a way to combat runaway prices and reduce the stupidity that is feeding into FOMO and creating artificial demand.
In your scenario, yes, too bad so sad. An alternative is to rent out his current place and rent another place. Might still take a bit of a loss there depending on rental income delta, but moving to be with someone comes at a cost.
You think of the new purchase price being $600K + ~50K cost. However, I think of it as a $500K + $50K cost for the new place, because be bought in at 500K originally and now only have to put in another $50-60K. He's still better off than than if he was a first time home owner and having to pay the full $600K for the Abbotsford place. Different way of viewing things I guess, as it's a matter of perspective.
Now, my argument is that if prices were more reasonable and fundamentally sound, then perhaps he will not be as stretched out and can actually afford that moving cost without needing to be rich. What a foreign idea, I know.