Money123: Breaking into homeownership, WestJet’s consolidation, higher rates and housing

How to break into the housing market

The ideal starter home varies from person to person and market to market, but the reality for most prospective first-time buyers is that breaking into homeownership is often an unaffordable goal.

A report released from real estate outlet Point2 this week shows that starter homes in 36 of Canada’s 50 biggest markets are not affordable for the average renter, based on typical incomes needed to afford a property worth half the city’s benchmark price.

For this month’s entry into the Home School series, Global News took a look at the state of starter homes in Canada in hopes of charting a path to homeownership for prospective buyers.

While the typical market might see a condominium as the most affordable entry point for a household, real estate agents who spoke to Global News said the limited space available in the condo market and the opportunities to grow equity and stay in a home longer might make other kinds of properties more viable than buyers might think.

Shopping on the city outskirts, or for fixer-uppers or pre-built properties, can provide a path to homeownership some might not have considered. But some of these paths come with their own risks.

Read more here.

WestJet’s consolidation and your airfare

Sunwing Airlines and Swoop will both be folded into WestJet in the years to come as the Calgary-based airline winds down its disparate operations.

Experts say this is a natural progression for WestJet in the wake of settling on a new contract with its pilots and in the midst of fierce competition with other airlines above the skies of Canada.

But what does it mean for you, and the cost to fly?

“The main issue is probably going to be that there will be fewer options, obviously fewer flights on fewer brands and probably a higher price,” says Frederic Dimanche, tourism and hospitality professor at Toronto Metropolitan University.

While the changes are largely internal, Dimanche says bringing together three disparate airline operations under a single banner means operating the flights under the WestJet cost structure — not the low-price model that Swoop offered, for example.

Other experts who spoke to Global News say breaking down the walls between three separate airlines will help WestJet to streamline its operations and respond more quickly to disruptions, improving service for passengers.

Here’s what to know.

How interest rates are affecting Canada’s housing market

Interest rates are rising again after the Bank of Canada lifted its conditional pause earlier this month.

Steady rates in the first half of the year helped the country’s housing market rebound from a year-long correction.

But will the recent higher cost of borrowing trigger another correction? Desjardins argues in a report this week that despite a return to higher rates, the housing market has a bit of “staying power.”

Read more on their analysis here.

Meanwhile, higher rates seem to be hitting first-time buyers particularly hard. This week, Royal LePage published results of a survey that showed one in four new homeowners were getting outside help to make their monthly payments.

It also found many first-time buyers are compromising on the type of home they buy in order to break into the market.

Read more of those findings here.

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– THE QUESTION –

“My girlfriend and I are buying a house together that closes in August. I’ve maxed out my FHSA for the year at $8,000 but have about $5,000 more on hand. Can I send my girlfriend that money to deposit if she opens her own FHSA? Are there tax concerns to know about –or is it even worth it for the one month?”

— A Money123 reader 

“When spouses or common-law partners give money to one another, there can be tax implications. For example, if a high-income spouse gives money to a low-income spouse to invest, the investment income may be attributed back to the first spouse. This is a concept called spousal attribution. This only applies to taxable investment income though. Tax-sheltered or tax-free accounts like RRSPs and TFSAs are exempt. Likewise with the new FHSA.

So, there should be no tax issue with giving your girlfriend $5,000 to put into her FHSA assuming she has not contributed more than $3,000 to an FHSA this year, given the $8,000 maximum contribution. The timing is also OK, as according to the CRA, “you must not have acquired the qualifying home more than 30 days before making the withdrawal.” So, contributing and taking a withdrawal shortly before your closing date should be fine.

Your girlfriend will be able to claim an FHSA deduction that reduces her taxable income for 2023 and can generate a tax refund. You should probably leave the contribution in cash rather than investing it in the FHSA given the short time horizon.”

– Jason Heath, managing director, Objective Financial Partners

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