Tax Changes Needed in Canadian Commercial RE Market – Report
March 8th, 2010 at 9:23OTTAWA, Canada – A recent study prepared by the Altus Group for the Canadian Real Estate Association, claims that federal tax policy creates disincentives to commercial real estate sale and redevelopment in Canada.
According to the report “many income property owners are reluctant to sell and reinvest because of the capital gains tax and recaptured capital cost allowance.”
In other words commercial property owners are reluctant to sell their properties for redevelopment because the tax man would not leave them with enough money to reinvest in other projects. So projects that might otherwise be undertaken are needlessly delayed.
Increased commercial real estate activity is seen as an important way to stimulate the economy and create much needed jobs. Industry reports indicate that commercial real estate transactions declined by 51 percent in 2008, and dropped even further in the first half of 2009.
The report also points out that commercial real estate transactions generate significant spin-off activity. According to the study, almost $300,000 in related spending is created with each multi-unit residential transaction.
CREA is recommending tax deferral on income property reinvestment to give a kick-start to commercial real estate sales. This would also create a significant number of jobs in the renovation, redevelopment and other construction sectors.
Tags: Canada real estate, Canada tax, commercial real estate, taxes