Mayor John Tory says a new tax on the owners of the estimated 65,000 vacant homes in Toronto is just one of the options on the table as the city works to address a growing housing affordability crisis.
The average price of a detached home in the City of Toronto hit $1,573,622 in February, up more than 29.8 per cent from the same month in 2016, and real estate officials say that more double-digit increases will lie ahead in 2017.
The pace of price acceleration has prompted some economists to warn of a looming housing bubble and has led to increased pressure on politicians at all three levels of government to introduce measures to cool the market.
On Thursday, Tory chaired a roundtable with a number of stakeholders to discuss ways to address the affordability crisis. Speaking with reporters following that session, Tory said that there is “no magic wand” to address the problem but he conceded that a tax on vacant homes, similar to one that was recently introduced in Vancouver, is one tool that staff are currently examining as something that it is within Toronto’s “legislative domain.”
The Vancouver tax, which went into effect in January, charges owners of homes that are vacant for more than six months of the year one per cent of the assessed value of the property. That means that the owner of a $1 million home that is left vacant would be charged $10,000 a year.
“I look at housing as a palace to live for people who live in this city and if a tax we might put on vacant homes, and we are not there yet, incentivizes just a few of those 65,000 people to put those houses back into the supply then we will have made a difference,” Tory said. “That is what I look at as my responsibility; not to look after the investment of those who choose real estate for that purpose. They will be OK.”
Tory said the estimated number of vacant homes in Toronto is based on data from the last census conducted by Statistics Canada.
He said that staff are currently parsing the data to ensure that those homes are in fact “genuinely vacant” by looking at information from Toronto Water and Toronto Hydro, among other sources.
From there, he said a report will be completed in “due course” on how the city could go about taxing the owners of vacant properties.
Tory said the idea is not dissimilar to a recent change the city made to eliminate a provincially-mandated tax rebate for the owners of vacant commercial properties.
“I have heard from people about two or three houses on streets that sit empty for a long time. You don’t know exactly why they are empty. We are going to explore the data we do have and see what that suggests and go from there to see what you could do to provide a disincentive for people to keep those properties vacant,” he said.
Housing affordability at lowest level since 1990
Tory’s roundtable was held on the same day as the release of a new report from RBC, which indicated that housing affordability in Toronto has declined to a level which has not been seen since 1990.
Tory said the experts he met with, which included representatives from the real estate and development industries, didn’t believe that some “calamity was going to occur” imminently but he said there was a general consensus that the rapid pace of price acceleration can’t go on indefinitely and that some sort of correction could be forthcoming in the years ahead.
At the same time, Tory said that the best way to address the affordability crisis will "ultimately be through addressing supply" issues, particularly with regards to single-family homes and affordable rentals.
He said that the city can do its part by making sure that the approval process for building and other permits can “keep up with a supercharged market,” something he suggested the municipality is tackling by hiring additional planning staff.
He added that civic leaders should also be doing more to attract investment in “purpose-built rentals” in the city, though he did not offer any details on how that could be incentivized.
“Almost all of the rental apartment availability that has happened in the last few years has been in fact condos. The number of purpose built rental units is literally like 1,000, which if you think about it in the context of a city this big is quite insignificant,” he said.
Finance Minister Charles Sousa has previously said that there will be measures intended at addressing the housing affordability crisis in his upcoming budget.
Sousa has also not ruled out introducing a foreign buyers tax, similar to one that was introduced in Vancouver last year.
Tory said that a foreign buyers tax was discussed at the roundtable but he said that he is not convinced that it will address the underlying problems that exist in the marketplace.
“If there is some good news in this for people who are anxious about housing prices, and I am anxious about them too, it is that part of this is caused by the fact that we have such a good place to live,” he said, noting Toronto’s strong economy and recent improvement in employment numbers.
What areCondo reserve numbers?: The number determines the health of the building which is important for buyers to know. The financials will be detailed in the status certificate which should be reviewed by a lawyer to understand the financial health of the building.
Should you buy now? Choosing a time to buy is solely a personal decision. At this point in time, demand is stronger than supply which is driving up pricing. Buyers have to understand that they will be paying a premium for any property right now and have to be okay with it.
When to buy? There is no specific time to buy. It’s up to the buyers. When the ideal property comes up, buyers need to jump and pay a premium for it in this market.
Condo fees – what are they and how to budget for them?: Condo fees are typically a concern for buyers. The common question is if they will go up. All fees do go up, however there are some tips and tricks to predict how much they will go up.
Q: Market value vs what people are paying?
A: There is no market value. The new market value is how much a buyer is willing to pay for a property.
Q: Mortgage rules?
A: Talk to your bank first to know what you can afford as the rules are always changing.
Q: Maintenance fees and taxes?
A: Factor in your monthly carrying costs
A: Most of the time utilities are not part of your maintenance fees.
Q: Closing costs, which include land transfer taxes?
A: Understand all your closing costs on top of your land transfer tax.
Q: Financials of the building (status certificate)?
A: Great document to give you an idea of the financial health of the building.
Q: Upcoming developments in the area?
A: Understand what is happening in the area. A new condo might affect your current view!
Q: Tax implications?
A: They are different if you’re an end user or an investor
Q: Inclusions and Exclusions in the unit?
A: Make sure you understand what is included. Is that chandelier you love staying or going?
Q: Condo rules including pet restrictions, outdoor space.
A: Make sure you can bring your beloved pet and know your limitations on your balcony. BBQ’s are not always allowed.
Source: BT Toronto, Erica Smith and Lorena Magallanes
Toronto’s affordability problem is sparking more problem than anticipated as the real estate market is leading to an abnormal increase in national prices. In February, Toronto, Hamilton and Vancouver home prices drove the national index to a record high for the month of February. According to a recent release from Teranet-National Bank, Toronto took the lead with a 1.9% increase in February home prices which is just a indication that the city is headed for another hot year. The national index soared 1.0%, a gain which is the largest February increase ever recorded by the Teranet-National Bank National Composite House Price Index. Hamilton and Vancouver also had an increase of 1.4% while in Ottawa-Gatineau, there was a 0.9% rise. However, home prices plummeted in seven other Canadian real estate markets. The rising home price in Toronto is however becoming a worrisome situation says Marc Pinsonneault, National Bank senior economist in a release. Currently in Toronto, most of the home sales are on apartments which make up 26% of all sale transaction while the sale of other home types has become a major problem thanks to their high price tags. This uncontrolled situation has led Ontario’s Finance Minister Charles Sousa to ponder on the idea of implementing a similar foreign buyers’ tax like Vancouver to help address the affordability problem. The Toronto Real Estate Board’s figures show that the Greater Toronto Area average home price has exceeded $1.5 million while the average home prices for detached homes in nearby areas have gone above $1 million. It has now become evident that the Canadian real estate market is headed in contrasting directions. While homes prices continue to remain high in markets like Toronto, Hamilton and Victoria, other markets are recording moderate or low home prices. In February, home prices in Halifax, Calgary and Montreal dropped by 1.9%, 1.3% and 0.2% respectively.
Packing and moving all of your family’s belongings from your current home into a new one is thrilling and stressful all at the same time. Instead of being overwhelmed by cardboard boxes and furniture on the big day, take some time to prepare in advance and reduce your stress levels. If done correctly, moving can be an excellent opportunity to look back on the years that passed, purge idle items, start fresh and most importantly, get the whole family pumped for the move to a new home.
We have expert tips to help you stay organized, pack well and above all, stay calm. Hint: giving yourself ample time is key.
Pick up all supplies before you begin sorting through your home. You’ll need several boxes or bins, garbage bags (the bigger the better), packing peanuts or bubble wrap, tape and markers to label everything. Remember clear plastic bags are great for bedding and linens so you can see what is inside.
As soon as you have your moving date, start packing. Don’t fall into the trap of assuming you still have lots of time. Packing will always take longer than you anticipated and starting early means you have time to properly pack and label everything to avoid misplaced or damaged items.
Take care of administrative items as early as possible. Book your moving company or rent your moving van early to ensure availability. For homeowners moving into a condominium community, speak with the property management staff about booking an elevator.
Keep the items to toss or donate separate and labeled. Make arrangements for a charity and/or junk removal company to pick up the items if needed at least a week before your moving day.
Moving is the ultimate time to purge, and storage areas of your home are the best place to begin your packing process because it’s the items you use the least. Items you forgot you had, haven’t used in years or are damaged should be the first to go.
Next tackle infrequently used rooms and finally pack the everyday items in your kitchen, bedroom and bathroom. Keep the purging spirit alive during this process; say goodbye to chipped dishes, mismatched cushions or anything else that won’t have a place in your new home.
Make the moving process fun for kids by including them. Have them sort their own rooms and toys, give them markers and crayons to decorate and label their boxes and have prizes on hand for a job well done. In fact, keep a few prizes on hand for yourself as well.
A great trick to help avoid the scramble of unpacking when you arrive at your new home is to pack a suitcase with a few outfits, toiletries and other daily essentials. One suitcase for everyone in the family means you can unpack stress-free and at your own pace knowing everyone has the essentials on hand for a few days.
There’s no denying that moving is overwhelming, but proper preparation can make a world of difference. Don’t forget that moving from one home to another should be a fun, emotional and memorable journey. Give yourself time to reminisce, tell stories and look through those photo albums that have been sitting on the shelves for years.
The idea of a tax on foreign homebuyers has reared its head in Ontario once again.
After British Columbia last year announced it would tax foreign buyers an extra 15% on residential real estate in Metro Vancouver, Ontario Finance Minister Charles Sousa said he would look “very closely” at doing the same.
A few months later, however, Ontario Premier Kathleen Wynne said Ontario would not “go down the road that British Columbia has gone down.”
But now Sousa has again raised the idea of a tax on foreign home purchases as a possible option for the government.
While it might have some intuitive appeal, it misses the bigger point, that Toronto needs more housing.
It’s true Toronto home prices have skyrocketed in recent years, but if policymakers want to address housing issues, there are more important factors they should focus on than a tax on foreign homebuyers.
Specifically, they should take a hard look at why the supply of new homes is not keeping up with growth in demand.
Namely, regulatory red tape that holds back the construction of new housing.
Instead of trying to micromanage the housing market by taxing certain categories of buyers, Queen’s Park and city halls across the Greater Toronto Area (GTA) should focus on reducing these barriers to new homebuilding.
The Fraser Institute recently measured how long it takes to obtain a typical building permit, the costs and fees associated with obtaining that permit, how often rezoning is required, and how much local councils and residents oppose new homes across the GTA. Some highlights:
Permit timelines range from 14 to 24 months, costs and fees in Oakville are triple what they are in Hamilton, and local opposition to new homes presents a strong deterrent to builders in Toronto.
The consequences? Fewer new housing units are built, while the GTA remains a magnet for new residents and investment.
Having more potential buyers and renters bidding on a dwindling pool of listings inevitably pushes prices up.
So what can be done?
Reducing some of these barriers would make it easier and more financially attractive to construct new housing units, which would, over time, reduce housing prices.
Despite musings from Queen’s Park, taxing foreign homebuyers won’t do anything about the red tape interfering with the construction of new houses, townhomes and apartments.
What’s more, it could lead to a host of unintended consequences.
For example, if the tax is limited to the GTA, it might simply nudge buyers towards cities further down the 401 or 400 highways — or to Canada’s other major urban centres, presenting a new set of challenges.
Additionally, if the tax applies to people moving to Canada for work, it could become a barrier to attracting high-skilled workers to the GTA.
Policymakers are right to be concerned about housing affordability, but a jarring shift in policy could change market expectations, leading to unpredictable consequences.
The province and municipalities should better ensure that regulations allow for timely construction of new housing to meet pent-up demand.
Introducing a tax on foreign homebuyers, while potentially politically expedient, ultimately misses the point and could make things worse.
Source: The Sun, Steve Lafleur and Josef Filipowicz
Canadian home prices rose in February as prices continued to climb in the hot Toronto market, data showed on Tuesday in a report that was unlikely to alleviate concerns from some quarters that the city is facing a real estate bubble. The Teranet-National Bank Composite House Price Index, which measures changes for repeat sales of single-family homes, showed prices rose 1.0 per cent from January.
It was the largest February increase on record for the index going back 18 years as prices in Toronto jumped 1.9 per cent. In nearby Hamilton, where home values have been boosted as buyers are forced out of Toronto, prices were up 1.4 per cent.
It was the 13th month in a row that prices have risen in Toronto. While Canada’s housing market has been largely robust in the years since the global financial crisis, some economists have begun to call the Toronto market a bubble.
The lofty prices in Toronto despite tighter mortgage lending rules will likely pressure policymakers to take further steps to rein in the market, a Reuters poll showed last month.
Vancouver also helped drive the national index higher, with prices rising 1.4 per cent, though they were still down 1.1 per cent from the peak seen in September last year. Activity in Vancouver cooled last year as the provincial government implemented a tax on foreign buyers in the city.
Prices across Canada were up 13.4 per cent compared to a year ago, the biggest 12-month increase since November 2006. Toronto led the pack with a record 23.0 per cent surge.
It was the latest data to suggest the Canadian housing market was defying expectations of a slowdown, coming on the heels of surprisingly strong housing starts figures released last week.
Ontario’s finance minister said Friday that while he is considering a tax on foreign home buyers for Toronto and beyond, it’s not the biggest factor when looking at ways to cool the housing market.
As an influx of people move to the province, in particular the Greater Toronto and Hamilton Area, the growing demand for housing – also fuelled in part by low interest rates – is outstripping the current supply, Charles Sousa said.
“I still want to fulfil what I said I would do a year ago: obtain the evidence, obtain the information, get the data necessary to then make an informed decision as to what is happening,” he said after a cabinet meeting.
“Some are arguing that the foreign degree of engagement is the last piece, that it’s not the largest amount that’s creating the boom in our homes, in our housing market. A lot of speculators within the domestic market are also playing a role, but the biggest part of course is demand.”
The Toronto Real Estate Board is urging Sousa not to implement a foreign-buyers’ tax, arguing it would do little to address the problem of rising house prices.
“The fact that most foreign buyers are looking to purchase a home for their family, for personal use, or to provide a tight rental market with much needed supply is something to be encouraged, as these actions are essential to Ontario’s economic success,” president Larry Cerqua said Friday in a statement.
“Imposing a tax on foreign buyers will not have the desired effect of cooling the housing market and could create adverse effects on the national, provincial and GTA economies.”
Last year, Sousa said Ontario would not be following the lead of British Columbia, which implemented a 15 per cent tax on foreign nationals buying homes in the Vancouver area. Instead, the provincial Liberal government doubled the rebate on its land transfer tax for first-time homebuyers to $4,000 and raised the same tax on homes that sell for more than $2 million.
But house prices have continued to soar, with February data from TREB showing that the price of a detached, single-family home rose 29.8 per cent from a year ago. The average price of a detached home in Toronto is now more than $1.5 million.
Sousa said he “absolutely” wants to encourage greater housing supply and he is talking with mayors in the Toronto and surrounding regions about how to do that.
“We do have a lot of room for supply, but it’s still slower than the demand, which is increasing evermore,” he said. “Interest rates are part of the issue. They’re low and so affordability within those interest rates are providing for some of that demand.”
Bidding wars are driving up housing prices far beyond Toronto, in communities such as Guelph, Hamilton, Kitchener and Stratford, Sousa said, adding he has to consider what a rise in interest rates would do to those buyers.
“We don’t want them to assume exorbitant amounts in debt if there’s a change in interest rates, for example,” he said. “So whatever we do, I’m more concerned about the unintended consequences of those decisions because I’ve got to be mindful of market forces that still will prevail.”
When you purchase a pre-construction condominium you will be given two different dates, the interim occupancy date and the closing date. Interim occupancy is unique to pre-construction condos, and the process may be foreign to some, especially first-time homebuyers. Here is your comprehensive guide on what to expect.
Interim occupancy is the period of time between the day you occupy your unit (move in) and the day you take ownership (close). One of the reasons for interim occupancy is to allow the builder to focus on the sold suites and some of the common elements before the building is registered.
Interim occupancy takes place as soon as the city deems the building is safe and ready for homeowners to move in. Typically this can last between three to eighteen months, depending on the project. During this time the building is still under construction, but homeowners are required to occupy. Keep in mind that whether you choose to actually live in your suite at this time is up to you, however, all purchasers must pay a monthly fee during this time. It’s important to note that the occupancy fees are not credited to the final purchase price. They are equivalent to rent payments, as homeowners do not legally own their suites yet. Because of this, mortgages cannot be secured and renting your suite is not permitted.
The final closing occurs once the developer is ready to register the condominium and transfer ownership to the individual unit purchasers. At this point interim occupancy ends, the building is registered and homeowners can secure a mortgage, rent or sell their suite. The property management company will also take over at this time.
What is my Occupancy Fee Paying for?
The monthly fees charged by the builder during interim occupancy include interest on the unpaid balance of your suite, contribution fees for common elements (not unlike maintenance fees) and estimated property taxes. For more details, refer to Section 80(4) of the Condo Act.
During the interim occupancy period, the builder has a number of regulations that must be adhered to. These include providing the services that the condo corporation will take over once the building is registered, such as garbage disposal and (where applicable) concierge as well as maintaining the property and suites to the same manner as the condo corporation (HVAC, fire alarms, etc.). To view the full list of the builder rights and responsibilities, check out section 80(6) of the Condo Act.
It’s a wild time now within the Toronto housing market — supply and demand is out of whack, prices are soaring out of reach, and competition is so fierce dreams are over before they even begin.
What’s more, the credit checks and new intake of a mortgage payment is more than enough to push prospective first-time home buyers into a frenzy.
Are you anxiously perched on the sidelines, nervous to jump into the biggest purchase of your life? We thought so. Cover your bases with these helpful tips:
1. Know your budget
Who knows how much you’re able to afford better than yourself? Forget those formulas that bankers use and do some number crunching. It will make you feel more confident in actually knowing how much you can really afford. Determine your budget based on your income, expenses, savings, debts, and assets. Don’t forget to factor in your lifestyle. Be honest with yourself. Acknowledging this might help with tweaking some everyday choices in order to afford that dream house.
But don’t get discouraged if your dream home requires some budget inflation. You might be better suited for a condo as being your starter home. Keep in mind that if you do overbuy on your very first home, it will be harder in the long run. It’s best to begin with smaller payments that you would make on a starter home. An upgrade is always a possibility down the road, and will probably have less stress attached.
2. Don’t forget about those extra costs
Excitement can get the best of us, and suddenly we forget about those extra fees. For example, closing costs can range from 1.5 per cent to 3.5 per cent of the total cost of the home. Not to mention other payment expectations like a home inspection fee, legal fees, property insurance and property tax, just to name a few. Make sure to always confirm those tiny (but important) details up front and centre.
These payments might not only include loan costs, but other costs like property taxes and homeowner’s insurance. You may be required to buy private mortgage insurance (PMI) depending on the size of your down payment. Keep in mind that most lenders require PMI when a homebuyer makes a down payment of less than 20 per cent of the home’s purchase price.
3. Get pre-approval for your mortgage
Thanks to that number crunching, you know exactly how much you can afford for a down payment. Getting pre-approved for your mortgage gives you an edge over other people who might be interested in the same property. Mortgage experiences often have a bad reputation of being stressful and non-transparent, and require a lot of rate haggling, which ultimately overwhelms that feeling of accomplishment and excitement with your first house.
These days, individuals have more options: banks, credit unions, mortgage brokers, or new digitally led mortgage experiences, like MogoMortgage. MogoMortgage pairs market-leading interest rates (without the haggling), with an online process supported by salaried mortgage specialists, and an interactive dashboard designed to encourage and reward members for paying down their mortgage.
4. Use your brains, not your heart
Check those emotions at the front door. Thinking logically and realistically is most important. Don’t let realtors pressure you into signing right on the spot. A property might pass you by, but the wrong choices typically come with consequences that might be difficult to recover from. A good rule of thumb is to refuse to step into any house that is listed above your budget.
5. Don’t look back
You know that saying, “don’t fix what ain’t broke”? Well same goes for after you’ve made your home purchase. Once you find it — stop looking! Focus on making that house a home. Bring some Feng Shui into the space, light up a great candle, have your first pizza dinner sans furniture, and start making those memories.
Buying a condominium may be an affordable way for many first-time homebuyers in Canada's big cities to enter the real estate market.
But the condo market comes with its own set of costs that are different than buying a house.
Purchasing a condo should start with finding a realtor who specializes in the neighbourhoods you're interested in and knows the buildings, says Vancouver realtor Mike Stewart.
An experienced agent, he says, will be able to steer people away from problem buildings where a bargain price may be cheap for a reason.
"You never want to buy the best unit in the worst building because an individual property owner can do nothing effectively to change what's happening overall in a building," Stewart says.
"But the inverse is true. If you buy the worst unit in the best building, you can always fix your unit. But you can't fix the building."
Condos are generally cheaper than houses and in markets like Vancouver and Toronto, may be the only option for a first-time buyer.
There may not be the same maintenance chores with a condo that come with owning a house, but that doesn't mean there isn't a cost. Condo owners may not have to fix minor problems around the building themselves, but somebody does and they need to be paid.
Stewart says all buildings have issues, so what is important is that the condo's strata council, which manages the building, is transparent and proactive about dealing with the problems.
"Good maintenance and timely repairs maintain the value of the property, which is the value of everybody's investment," he said.
Monthly condo fees are generally related to the size of the unit. They may sometimes also be based on non-square-footage features that affect the value of a unit, such as what floor it is on.
For those buying a condo, they need to understand the monthly maintenance fees, what they cover and how much they are expected to increase.
Ottawa lawyer Leslie Kirk, who specializes in real estate, says it is important to review the condo documents so people understand the financial health of the building and ensure the strata council is meeting its required obligations.
An inadequate reserve fund could mean owners might have to cough up cash for a special assessment to pay for things like windows being replaced or major repairs to common elements of the building.
Those living in a house may be able to put something off until they have the money, but not so for condo owners.
"You don't necessarily get to choose when you're going to make a major repair in a condo," Kirk said.
Condos may also have rules about what people can and cannot do, such as restrictions on the size and number of pets, whether or not they can install hardwood floors or if they can put a barbecue on the balcony.
"There's also some condos now that ban smoking everywhere, including inside the units," Kirk said.
Ottawa real estate sales representative Tammy Laverty says choosing a condo is about what is best for you.
"If you have a big family and you want a big yard ... then a condo is probably not for you," she said.
"But maybe if you're a first-time homebuyer and buying a brand new home is overwhelming or you want to downsize or you're really busy, a condominium is probably going to be a really great choice for you."