Money123: How renters can get ahead

Building wealth outside the housing market

The age-old home ownership versus renting debate tends to highlight the relative security that comes with buying a home, insulating the owner against surprises in the rental market while building up equity in the property.

It’s a frustration felt by Toronto’s Graham Isador, who is happy to be renting what he considers a relatively affordable apartment in one of Canada’s most expensive housing markets.

“I’ve been grateful to be able to stay in this apartment, but I’ve also contributed a significant amount of money into the equity of this house, which isn’t something that’s going towards my future,” he tells Global News.

But experts who spoke to Global News say the costs – and opportunities – that come with owning or renting a home might not be so clear-cut.

The upsides to renting are more obvious to Canadians who are “diligent” savers, experts say, but the right investment strategies could see a renter catch up to or even surpass their homeowning peers, financially.

Read more on what renters ought to consider to build their wealth outside the ownership market.

Home ownership – only for the rich?

Despite some efforts in the 2024 federal budget to level the playing field for younger generations and would-be homebuyers, a growing number of Canadians are abandoning hopes for homeownership.

Some 72 per cent of non-homeowners responding to an Ipsos poll conducted exclusively for Global News say they’ve “given up” on ever buying a home. Four in five respondents, meanwhile, said home ownership is reserved only for the rich today.

Darrell Bricker, CEO of Ipsos Global Public Affairs, says this latest polling reveals how “incredibly stressed” the idea of home ownership is making Canadians.

“You can see why the anxiety is so high, because an increasing number of people believe they need to own a home, but fewer and fewer people believe that they can,” he told Global News.

The recent easing in inflation has also yet to translate to a more affordable life for many Canadians, the polling showed.

Read more to find out how many Canadians are cutting back on purchases, switching grocery stores and even dipping into their retirement savings to make ends meet.

The tax deadline is almost here! (Sorry.)

The deadline for individuals to file their income tax return this year is Tuesday, April 30, which means you still have time to get your finances in order before the big date.

If you miss the deadline, you might be subject to some penalties if you owe money to the Canada Revenue Agency.

A poll released by CIBC Friday also shows that one in 10 Canadians plans to reinvest their tax refund this year. That’s a lower amount than in 2023, and it comes as more respondents said they’re putting that money towards paying down debt and covering essentials.

The Ipsos polling for Global News also released Friday showed that 21 per cent were putting a pause on their savings plans amid the higher cost of living.

Luka Marjanovic, managing director and head of CIBC Investor’s Edge, says more Canadians should consider investing their tax refund despite the competing priorities.

“There are more demands on money these days, but Canadians getting a lump sum this spring should consider the opportunity to put those funds to work for them as part of a broader investment plan—particularly given that higher inflation means the value of parked cash erodes more quickly,” Marjanovic said in a press release Friday.

Read more on what experts say you should do to maximize your tax refund.

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– THE QUESTION –

“My parents are planning to leave me a plot of land, where I plan to build a home. They don’t live on the land right now so it’s not their primary residence, do capital gains taxes apply here? Does it make a difference if we do this as a living inheritance or if I buy it for $1, etc.?”

— A Money123 reader 

“When someone owns capital property like real estate or non-registered securities, the eventual sale gives rise to tax implications. When you die, you are deemed to sell your assets. Your parents can leave the land to each other on a tax-deferred basis, but on the second death, capital gains tax would apply. Vacant land cannot qualify as their principal residence, and they probably have a principal residence where they live that is more valuable to be tax-free.

Unfortunately, selling the land to you for a dollar – or giving it to you for free – does not avoid the tax. A transfer of an asset to a non-arm’s-length party like your child is deemed to take place at the fair market value regardless of the price paid. So, they would trigger tax today to transfer it to you.

There may be an advantage to transferring it sooner given the federal budget proposal to tax an individual’s capital gains for the year over $250,000 at a higher tax rate. Especially if you could envision building a home on it in the medium term that would then qualify as your principal residence.”

–  Jason Heath, managing director, Objective Financial Partners

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