Each week, The Glenn Team provide highlights from the weekly CP office meeting to provide a balanced overview of the Toronto and GTA markets and relevant issues affecting real estate markets. Meetings are overseen by Chestnut Park's CEO and Broker of Record, Chris Kapches, LLB, who provides weekly analysis and commentary. Additional input is provided by the CP Toronto office Realtors who give a day to day, real life perspective of the local markets.

MARKET UPDATE

As our latest CP market report was just published, there isn't much to discuss related to market stats that was covered there or in last week's meeting. For more information on where the GTA markets are at, go to that post or subscribe to our neighbourhood house price reports. 

WORD ON THE STREET

A poll of the agents in the CP Toronto office revealed that the type of property as well as it's price range has a significant impact on the market's interest in it. For example, listings over the $2M price point in central districts have had little interest in the past week, whereas condo apartment listings in both eastern and central districts under $1M have had intense, fetching multiple offers. Clearly the more affordable condo apartments continue to be the market's hottest prospect currently. Though volume is up in the 905 area code, the 416 continues to come in at 25% of those numbers, with condo apartment inventory all but gone. 

TAX TALK

As agents in the Toronto office have found more foreign buyers coming back to the Toronto market, Chris felt it important to review who is affected by the recent foreign buyer's tax. Some of the most relevant points are listed below. For the full breakdown, click here

Doesn't apply to Canadian citizens or permanent residents, unless those parties are buying property with a foreign national. 

Who Does the Tax Apply To?

• Foreign Entities: Foreign nationals and not Canadian Citizens or Permanent Residents. 
• Foreign corporations: ie. corporations NOT incorporated in Canada or incorporated in Canada but controlled by foreign national or other foreign corporation (unless corporations shares are listed on the TSX.
• Foreign corporation controlled directly or indirectly by a foreign national for the purposes of the associated corporation rules under Canada's Income Tax Act. 

What Types of Properties are Affected?

• Single Family Detached, Semi-Detached, Condo Apartments, Duplexes, Triplexes and Multiplexes up to 6 units; over 6 units, no tax applies
• Each condo unit is considered a single-family residence so the tax applies to each one

How is the Tax Calculated?

• Any property is taxed at a rate of 15% including any Land Transfer Tax associated with the property, ie. if the property is located in Toronto, you would pay tax on both provincial and municipal land transfer tax. 
• If ANY buyers are a foreign entity, 100% of the property will be taxed, ie. you can’t purchase a property with a Canadian citizen or permanent resident and avoid the tax. 

Who is Exempt from the Tax?

• Anyone confirmed under the Ontario Immigrant Nominee Program. If you can establish you’re a bonafide immigrant in theprogram or a student or WILL be a permanent resident in the next 4 years
• If you’re a refugee
• If you're a foreign national with a spouse who is already a Canadian citizen, permanent resident or a Nominee or a Refugee. 

 

STRESSED OUT!

Going into 2018, it is expected that the government will introduce new mortgage stress test rules. Under the new rules, people seeking a new mortgage will have to qualify at the bank posted rate, which would currently amount to about 5.25% for a 5 year rate; that's about 2% more than most lenders would currently require and amounts to about 6 rate hikes from the BoC. David Smith, a mortgage broker with Hanley Mortgage Brokers thinks this policy will effectively take buyers with the greatest stake in entering the real estate market out of the game. It will also likely negative influence anybody looking to make their next jump up to a larger property if they are already close to their mortgage maximum. In Toronto, this means any first time home buyers, likely entering the condo market, which is already under heavy stress for inventory.

Is this good policy or just the governments attempt at chastising banks and lenders? We love to know your thoughts. Either get in touch directly or leave a comment below! 

Each week, we are bringing you highlights from the weekly CP meeting. We present analysis of the Toronto and GTA markets from the perspective of Chestnut Park's CEO and Broker of Record, Chris Kapches, LLB and the CP Toronto office staff.

NO NEW TREB DATA

As we've yet to get TREB's weekly or mid-month stats for September there isn't much to discuss in terms of stats. Anecdotally however, last week saw both bully and multiple offer situations from at least a few realtors in the office. The National Bank of Canada seems to agree. It came out with a report said that The ratio of Toronto house listings compared with monthly sales has moved back into long-term balance, limiting the potential for significant further price corrections in the region. The report (published early September) goes on to indicate that the ratio of listings to sales were finally in balance and had been for some time, comapred to the April market highs which clearly favoured sellers. This report gives more credence to what CP agents seems to be experiencing. More information on that report here. Once the mid-month data comes in, we'll have a better indication of exactly where the market is. Chris feels we have enough data to indicate that we've hit the bottom of the market lows. 

HOUSING SHORTAGE

The Toronto Star reported that Mayor Tory and the Minister of Housing announced that it's moving forward on creating 2000 market-rent and affordable rental housing units. Based around surplus lands (in the West-Donlands) that the province intends to sell, developers anticipate paying less for these lands due to the developments being used for affordable housing and the city intends to waive the tax levies associated with the property, which would amount to just under $28M. Of the first phase of development (approx. 600 units), 30% will be allocated for affordable housing; renting at 80% or below the average rental price in the city (about $1,600). The reality however is that the current waiting list for affordable housing is around 181,000, and critics like Kenneth Hale, director of legal service with the Advocacy Centre for Tenants Ontario, said that most families may not even be able to afford those units. Chris feels this isn't money well spent. We'd be curious as to your thoughts!

RESIDENTIAL TENANCIES ACT CHANGES

New guidelines to the Residential Tenancies Act continue to roll out. Among them are changes to how landlords deal with termination notice to tenants and how that might affect buyers of these properties. For any existing landlord, or purchasor of a property with an existing tenant, temination of occupancy is required after 60 days of being served an N12 (Notice of Termination) form; where the termination date can't precede the last day of a fixed term tenancy. However, the guideline states, After being given the notice, the tenant is allowed to terminate the tenancy at an earlier date by giving give the landlord ten days written notice. Effectively, this means that a propsective buyer may forfeit their last month's rent if provisions in the agreement of purchase and sale have not provided for it's payment on closing day. Fortunately, we've drafted such a clause at CP so clients can feel better about those situations. 

For more clarification on any of the above information, please get in touch! theglennteam@chestnutpark.com or 416-925-9191.

Creativity is alive and well in Toronto. As house prices have continued to increase in Toronto and the GTA we've seen first time home buyers get more creative in finding ways to make it affordable to buy their first home. Often the down payment required and not the monthly payments are the stumbling block for first time buyers.

Many first time home buyers are getting cash gifts from their parents to put towards the down payment for their first house. Parents are giving their kids their inheritance now instead of waiting. This allows them to establish a foothold in the market and helps them begin to build up equity in a property that can later to be used to leverage a second home in the future.

Other first time buyers are purchasing a home with a basement apartment with the intent of renting it. This option could be used in addition to receiving a gift or as a way to create more income and help pay for the mortgage. This can also apply to rooms within the house, if you're a people person and don't mind sharing space. Any home buyers considering this option should be aware of fire codes and the legalities of such an undertaking. It also wise to read up on the responsibilities of a landlord as defined in the Residential Tenancies Act. 

Another creative idea is to look for duplexes or triplexes with friends in a similar financial position. If the house is set up properly, one person or family can live on the first floor and the others on the second floor and if available, third floor. Of course the basement is always an option depending on it's state and the apartment strategy could work in this case as well. This way, the residents can share the down payment in order to get into the market.

Finally, financial vehicles, such as RRSPs can be a good source of a down payment as a loan to yourself. Of course you have to pay this back in order to avoid paying income tax, but the idea is that your income will increase over time, so that you will be able to pay the loan back at a later date.

Necessity is the mother of invention and we're seeing plenty of inventive ideas. If you've got some ideas for getting creative in this tight Toronto Real Estate market, we'd love to hear yours.

Susan Glenn