Province Expands Land Transfer Tax Rebate!

From the Toronto Real Estate Board.....

December 13, 2007 -- The provincial government has announced that it is expanding the PROVINCIAL land transfer tax rebate for first-time buyers to include re-sale housing, something which REALTORS® have lobbied for.

Details

• First-time buyers of BOTH re-sale, and newly constructed homes, will be eligible for a rebate of the provincial land transfer tax of up to $2,000.
• Effective for first-time buyers who enter into Agreements of Purchase and Sale AFTER December 13, 2007.
• This change is being implemented by provincial legislation introduced on December 13, 2007. The Ministry of Finance has indicated that, until the legislation is passed, first-time buyers of re-sale properties eligible for the rebate can submit their applications for the refund and they will be processed once the legislation has passed. It is not known when the legislation will be passed. Buyers can consult with their lawyers if they have concerns.
• The provincial land transfer tax rebate applies in all Ontario municipalities. In Toronto, the provincial rebate is in addition to City rebates of the Toronto Land Transfer Tax.

More Information

Further information is available by calling:

Ministry of Finance
Land Transfer Tax Section
905-433-6361

Or

Ministry of Finance
General Inquiry
1-800-263-7965

Latest GST Reduction and Real Estate

The GST has recently been reduced again (announced October 30, 2007) and going from 6% down to 5%. As before, GST only applies to sales of newly constructed homes and substantially renovated homes. GST does not apply to the purchase price of resale homes (in general), but it still applies to Realtor commissions.
The new, reduced rate becomes effective January 1, 2008.
Please review this with your lawyer and/or tax adviser for full details, because as usual, there's always "fine print".

Improvements - Getting Bang for Your Buck

I often get asked about which home improvements would bring the best improvement in a home's resale value and I always go to the best place in Canada for their opinion. Canada's national housing agency, Canada Mortgage and Housing Corporation (CMHC) has a website loaded with great information on things like this. In particular, this link, will take you to their page showing you what you can expect for a return on your renovation dollar. (FYI - bathrooms and kitchens are still #1!)

Thinking of a Furnace Maintenance Contract? Think again!

So you bought a house with an older furnace, and just to be on the safe side, you get a service/maintenance contract for peace of mind. Eventually you buy a new furnace and it comes with it's own warranties etc. and therefore, no longer need that maintenance agreement. Did you realize that you might not be able to get out of that agreement?

There's another worthwhile column by Ellen Roseman in today's Toronto Star that's definitely made me think twice about ever considering a service contract for my furnace. Or, at the very least, I would be very careful about who it's with *and* the specific criteria.

In some cases, even moving to another home isn't enough to void the agreement.
I'm not suggesting that we don't need regular/preventative maintenance on things like a furnace - warranties often indicate that it's required to keep the warranty in effect. But I'm able to manage the reminders etc. myself in my calendar - I don't need them to call me and I'd rather pay the fee for the actual service calls than continually shell out "insurance" money.

As my Dad always use to remind me "Money-in-pocket will always be in style".

Thinking about a reverse mortgage?

There was an interesting article in today's Toronto Sun about reverse mortgage. Click here to read the complete article.

They've been around for a long time in several other countries including England and are just now starting to raise their profile here.

My thoughts on them? At this point, I would consider one only as a last resort. There are high set-up fees and the interest rates are higher than mortgage rates. I would talk to my lender *and* my lawyer for other possible alternatives before going down this path.

Details on Toronto's New Land Transfer Tax

I've had a number of clients already asking me for more details about the recently approved Land Transfer Tax for Toronto residents. Here are the details, courtesy for the City of Toronto's website.

The summary points:

• takes effect February 1, 2008
• If your agreement is prior to December 31, 2007, you receive a full rebate, regardless of closing date
• If you purchase after December 31, 2007 and close before February 1, 2008, you receive a full rebate
• If you purchase after December 31, 2007 and close on or after February 1, 2008, you pay the full tax.
• A rebate of up to $3,725 will apply to first-time purchasers for new and existing homes under $400,000.

Interestingly, I read in the paper recently that the City of Hamilton was also looking to implement something similar but it turns out that these extra taxing powers were only given to Toronto in the "City of Toronto Act" by the province.

So, at this time, it doesn't look like the surrounding municipalities or regions will be implementing anything like this anytime soon. I originally surmised that it wouldn't take long for the surrounding area governments to level the playing field and make their own similar tax grabs but it doesn't appear as though they have the power to do so at this time. And I haven't read so much as a tiny hint that that's about to change anytime soon.

How will it affect the real estate market?

That's anyone's guess. So I'll take a stab at it, too.
In the short term, I think that we'll see a flurry of home sales through the end of this year within the Toronto area. Then, in January, we'll see Toronto buyers looking for short closings to dodge the tax.

Then, in the longer term, that's a tougher call. Toronto has lower property taxes than most, if not all of its immediate neighbours. Toronto homes along the border may take a little longer to sell than homes just outside the border because of this tax. But since it's a one-time tax at the point of purchase, I don't think it's going to be a decision-breaker for many buyers.

I think it will be similar to the GST on new homes. Certain buyers prefer a *new* home and are willing to pay the GST in order to have it. I think the same thing will apply for Toronto homes. Ultimately buyers will be willing to take that extra tax-hit to live in Toronto.

New Land Transfer Tax - coming to you!

Well the spend-a-holics at Toronto City Hall have voted in the new, additional Land Transfer Tax that will (initially) double the amount of Land Transfer Tax that you currently pay to buy a home in the city. Why I say "initially" is because getting it implemented is far more difficult to do than getting an increase in subsequent years. And as house prices go up every year, so will their revenue.

This is the thin edge of the wedge.

I also think it's just a matter of time before other local regions decide to implement a similar tax since "big brother" has paved the way. They can do it feeling that they're simply levelling the playing field.

While I'm not opposed to raising taxes when it's truly needed (and with the federal and provincial governments currently rolling in cash, I don't think it is), I'm more opposed to a tax which targets a specific industry/vertical such as real estate transactions.

And it's not going to help them when the real estate market cools down and transactions decrease, which will lower their revenue, too. It's a short-sighted, partial solution.

Housing Crash Coming?

As the U.S. housing market continues to decline and the related, U.S. subprime lending scenario continues to unravel, an increasing number of my clients and customers have been asking me if we can expect to see the same thing happen here; convinced that since we're neighbours, it's inevitable. And the recent drops in the stock market have only served to further the doom and gloom aspects (and media hype).

Do I believe it? Not really. Why?
Well, this article in today's Toronto Star can explain it much better than I can and I pretty much agree with everything he says.

In short, Canadian subprime lending did not occur on anywhere near a level (proportionally speaking) that it did south of the border. In addition, the housing market here never exploded the way it did down there. Sure it's been a very strong market here but nowhere near what happened in the U.S.

From the signs I've been seeing around the GTA and within my own business, I think the Fall real estate market is going to show a continuing strength and balanced supply and demand.

Summer Update

So now we're in the usual place in the calendar where the real estate cycle is supposed to be in the doldrums. July/August are usually the slowest months of the year in the real estate (along with December). As a matter of fact, even our office reduces our weekly meeting & caravan to every other week for the same reason. Many agents actually take the summer off for this same reason.

While the TREB announcements still indicate that market activity is higher than before, it's important to realize that this general kind of statement doesn't mean it's happening in every single corner of their domain. Some areas are always hotter than others, whether it's specific geography (I.e. downtown Toronto) or a particular type of home (detached or condo or bungalow).

People read in the media about how a particular home sold for well above the asking price and then assume they can make a similar score for their own home. Heck, I wish I could make the same thing happen for my own home, too! But the reality is otherwise. Those kinds of things are the exception, not the rule. In any given month, over 40% of the listed homes do not sell.

Why is that? There are a number of reasons including the three "L"s = Looks, List Price and Location. Whether you're in an up market or down market, you still have the single greatest control over how quickly your home sells - price. You set the price. Sure you want to get the highest possible price. But it's usually a trade-off of price versus how long it takes to sell. The more realistic the price, the more buyer-attention it gets, and the greater chance of receiving at least one offer.

I like to tell my sellers "I would rather you receive 10 offers and turn them all down, than to not receive a single offer at all".

Protest Toronto's Proposed Extra Land Transfer Tax!

You've probably already heard that Toronto mayor David Miller and his money-hungry members of city council are chomping at the bit to use their newly received taxing powers in the city and one of the biggest bites is a plan to essentially double the existing Land Transfer Tax on the sale of homes.

It seems that they find it too difficult and too much effort to find ways to SAVE money and that the easier way (for starters) is to simply tax the home buyers.

If you think that just because you don't live within the city of Toronto that this doesn't affect you, you're only half right. It might not affect you immediately. But what it does is create a fairly significant tax disparity between the city and the surrounding areas *for the time being*.

Assume it gets passed. Now that the bar has been set, the surrounding municipalities will be encouraged to do likewise for their own areas - a huge new source of cash for each of them and all they're doing is "leveling the playing field"; not driving away homeowners.

With the current average home price hovering around $365,000, isn't buying a home in the GTA isn't already expensive enough?

For the average priced home ($365,000), the current Land Transfer Tax is $3,950.
With the proposed new Toronto tax, that would rise to $7,900!!!!

Once this tax is in, they just sit back and watch house prices rise and then receive an ever-increasing amount in their own pockets because it's a percent of the transaction amount.

Voice your objections at http://nohomebuyingtax.com/

The GTA Market Still has Legs!

The market for resale homes covering the area in and around the GTA shows no signs of slowing down. There was an article in today's Star that says Royal LePage Real Estate Services is forecasting a strong market for the second half of this year right across the country.

In particular, the market in Sasketchewan has been particularly hot as many people are returning to live in the Regina and Saskatoon areas from the over-heated neighbour, Alberta.

June in the GTA - still Smokin'!!

Here's an excerpt from an announcement from the Toronto Real Estate Board.....

Home resales up 24 per cent in first half of June

June 19, 2007 -- During the first fifteen days of June, resale home transactions jumped 24 per cent compared to the same timeframe a year ago, Toronto Real Estate Board President Dorothy Mason announced today. The first half of the month yielded a remarkable 5,074 sales, an increase of 1,000 transactions from last year's mid-June figures. This total was also 12 per cent higher than the 4,522 sales recorded in the first half of May, which ended as the most active month ever. “We are going through one of the strongest spring markets ever,” Mrs. Mason said. “There is a lot of momentum carrying over from that and it bodes well as we move into summer.”
In Scarborough Centre / Woburn (E09), sales of detached homes doubled as 38 per cent more overall transactions took place compared to mid-June a year ago. Alderwood / Mimico (W06) in Toronto's west end saw an overall increase in activity of 50 per cent compared to figures from last year.
Toronto's Annex neighbourhood (C02) saw the number of transactions to mid-June increase by 61 per cent compared to 2006.
Outside the city, brisk sales of town homes and detached homes in central Vaughan (N08) led the way as overall transactions increased 53 per cent over the same timeframe a year ago.
The average price of a resale home at mid-month was $384,576, an increase of seven per cent over the $358,648 recorded during the first half of June 2006. Inventory stood at 23,725 listings, reflecting a good amount of choice and helping to keep price increases under control. “We have strong local and national economies, great value in the marketplace and solid returns on investment,” TREB's President said. “It's an excellent time to be in the market, and savvy consumers are taking advantage of these great conditions.”

If you're an existing homeowner, here's why it's a great time to upgrade.

Let's do the math with Karen's current house and dream house.

• Assume that using average stats, homes in the GTA are increasing by an average of 6% per year.
• Karen's current home is worth $300,000
• Karen's dream home is currently worth $450,000; a difference of $150,000 (FYI, the average upgrade-buyer moves up 50% on the price of their current home)
• She decides to put it off one year.
• At 6% annual increase, her current house is now worth $318,000 and her dream house is worth $477,000; a difference of $159,000
• Karen's dream house has pulled further ahead by $9,000 which means to buy it 1 year later, Karen would need to pay an additional $57.58 per month on her mortgage than if she bought it this year.
• Let's say she lives there for 5 years. That works out to paying an additional $3,454.80 on the dream house simply because she chose to wait 1 year.
• If Karen had moved this year, she would have
• a) earned an additional $9,000 in equity on her investment (instead of paying it to someone else!)
• b) also saved $690.96 in extra mortgage costs in that first year alone. (or, to look at it another way, it would have roughly paid for the cost of a premium cable TV package!)

Taking everyone by surprise!

Well the stats for May are in and this real estate market continues to take everyone by surprise. May 2007 set an all-time, all-month record for resale homes in the GTA with over 11,000 transactions.

To give you an idea of the strength of this market, no previous single-month sales total ever topped 10,000, never mind 11,000. The s0-called real estate gurus keep saying that the market has reached its peak and that it's downhill from there. Well, they've been saying that at least since early 2005! 2006 was supposed to be lower sales than '05. Nope. Ditto for 2007. And likewise, it continues to defy the experts and continues to climb.

Note that this isn't considered to be an over-heated market with heavy participation in the market by speculators. The month to month increase in the average price of a home continues to remain fairly consistent with annual growth working out to between 4-6% which is pretty much the historical norm.

Sure there are still geographic areas that are hotter than others - it's not consistent across the GTA. And some areas have their own hot/cold cycles, too. Bidding wars are still out there in the areas of very high demand, but to be honest, some of the bidding wars can be induced by deliberately pricing homes below the local market value to spur a bidding war. It can be a risky proposition that can also backfire because there's no predicting when a particular area might fall out of favour/interest for awhile.

We're heading into what's been the traditionally slower time of year through the summer when most buyers and sellers are either moving into their new places or preparing their current ones for the next up-cycle in the Fall. It should be interesting to see if June does slow down as expected.

No sign of a real estate market slowdown

So here were are just past the mid-point in May and the real estate market is showing no signs of slowing down, even per the normal Spring-to-Summer slowdown.

The Toronto Real Estate Board president Dorothy Mason announced that May sales to the mid-point of the month set an all-time, mid-month record of 5,003 sales. That's a whopping 11 percent increase of the mid-month total of May 2006.

Great News! Mortgage Insurance reduction!

The provincial government has recently enacted legislation that will benefit anyone buying a home. The previous rule stated that you needed to provide a minimum of 25% of the purchase price to avoid having to pay mortgage insurance.

And now, that threshold has been lowered to 20% in Ontario.

What does it mean?
Well, now someone with $60,000 for a down payment can buy a $300,000 home without having to pay for mortgage insurance, which would have added an extra 2.5% to the purchase price.
Previously, you would have required $75,000 to buy that same house without the mortgage insurance!

You can read more details about it in the The Star. Click here for the full article.

Psst, can you spare a million?

If it seems like there are more homes in the GTA hitting the $1 million-plus price tag, it's true. Theresa Boyle's article at The Star gives you an explanation of what happens when buyers are priced out of the really high-end neighbourhoods but still want to buy a new home.

In short, the strength of the current resale real estate market in the GTA is partly due to the momentum carried over from the strength it had at the end of last year. And low, stable interest rates are also a contributing factor.

Boomers Are Making the Move

From this article in the Toronto Star, the Baby Boomers are leading the way into homes that are very specific to their own needs and wants. That doesn't necessarily mean "down-sizing".

Buyers switching from size to style

According to this article in the Toronto Star, the era of super-sized houses may be coming to an end.

Personally, I tend to disagree with this. I think there will always be a market for this style of home, especially with the old centralized-city model rapidly disappearing in favour of urban centres and local malls and big-box retailers.

People will always want a choice. Some want big, some want small, some want to be downtown, some can't wait to get away from it. The choices have never been greater.

Live maps of the GTA

Here are some interesting maps of the GTA, that are periodically updated.

Murder map of GTA


Marijuana Grow-Houses in the GTA

Several past articles on title fraud and mortgage fraud

September 10, 2006 10:58:43 AM - Here's another column on real estate and title fraud in the Sun.

September 9, 2006 11:15:26 AM - More news on the issue of real estate fraud and the Land Titles system in today's Star

September 8, 2006 3:24:12 PM - The provincial government is taking steps to combat real estate fraud. Read it in today's Toronto Star

Former Marijuana Grow Houses -inspections required

August 3, 2006 -- Marijuana Grow Houses - Under provincial legislation that became effective on August 1, 2006, municipal officials are required to inspect marijuana grow houses once they have been identified and shut down by police. Contact Steve for more details.

City Services - who does what?

Check out the new City Services on my website www.happyisthehome.com - left menu, under "Important Resources".

One stop shopping for all the points of contact and phone numbers into all of the cities and regional governments in the GTA.

July 6, 2007 - Mortgage Fraud

2006-07-06

Mortgage Fraud victim to test the law. A great reason to protect yourself with Title Insurance! Read it here.

July 5, 2006

2006-07-05

Average home prices are expected to rise by a national average of 0ver 9% this year (4.4% in Toronto). Read about it here

March 9, 2007

March 9, 20079:45:58 AM - A Registry for Grow-Ops?

I've always been an advocate for full disclosure in a real estate transaction. As one of the biggest purchases that most people are likely to make, I feel that you're entitled to know exactly what you're spending your money on; especially if the house was a former grow-op because there can be serious health-related issues, too. You can read more about the province's ideas on dealing with the problem in today's Toronto Star. Click here for the article.

June 30, 2006

2006-06-30

Property Tax Assessments Frozen
June 30, 2006 -- The provincial government has announced property tax reassessments by the Municipal Property Assessment Corporation (MPAC) will be cancelled for 2006 and 2007. This means that the current assessed values will be used for the purposes of calculating property taxes in 2007 and 2008

July 2, 2007

2006-07-02 Condo purchase - new or resale?

Check out the column in Sunday's Star by Ellen Roseman

From June 6, 2006

2006-06-06 With 9,434 sales recorded last month, May 2006 has proven to be the best month ever recorded in the 86 year history of the Toronto Real Estate Board, TREB President John Meehan announced today.

"The May figure is up over two per cent from May 2005, when 9,209 sales were recorded, and up almost two per cent over the previous best ever month, June 2004, when 9,275 sales were recorded.

The Toronto re-sale market is as healthy as it has ever been." The president noted that the average price came in at $365,537 last month, compared to April's $366,683. "The key is that 17,685 new listings came onto the system in May, which pushed total inventory levels to 26,220 active listings at month-end. Both figures are up considerably over their year ago levels (seven and five per cent, respectively), and this is keeping price inflation to a reasonable level."

Breaking down the total, 3,504 sales were reported in TREB’s 28 West districts and averaged $340,841; 1,739 sales were reported in the 14 Central districts and averaged $483,682; 1,898 sales were reported in the 23 North districts and averaged $390,999; and 2,293; sales were reported in TREB’s 21 East districts and averaged $292,600.

Migrating

I had been using my website for real estate related commentary and links to articles in the media but this is a much better way to do it and over the next while, I'll be moving the articles from my website over here. Consider it a work in progress.

Welcome

Welcome to my new, interactive site for commentary, observations and opinions about the real estate market in the GTA (Greater Toronto Area).

I'm a realtor who is licensed in Ontario and have a client base that stretches from Burlington in the west, to Courtice in the west and north to Stouffville and Ballantrae.

Since my business is referral driven, it takes me pretty much all across the GTA and I can say that the while many articles in the media will generalize about the GTA real estate market, I can certainly say from experience that it's much more pocket-based - in that there are pockets or areas with the GTA that can be very hot at some point, while some other areas are almost the exact opposite.

The great thing in general though, is that the real estate market in Toronto is definitely thriving on probably one of the largest up-cycles we've ever seen.

My intention with this blog is to use it as a place for some periodic commentary and observations about the real estate market. It's a much simpler medium to use for something like this than to update my website (www.happyisthehome.com) on a regular basis. Instead, I will have my website link here.

Please feel free to post your own comments and observations as you wish.

-steven