Did the foreign buyer tax affect the Canadian real estate market?

With the combination of mortgage regulations, along with the newly-introduced foreign buyer tax, it begs the question: Has it changed our real estate market?

Clues from statistics released by the Canadian Real Estate Association indicate that the answer is “yes”.

The number of existing homes changing hands throughout the country declined 6.2 per cent in May compared to April, according to the Canadian Real Estate Association’s latest market data.

In the Greater Toronto Area, by far the country’s biggest market, transactions tumbled by 25.3 per cent over that same period denting national figures.

Gregory Klump, CREA’s chief economist, ties the drop directly to Ontario’s Fair Housing Plan, which the Ontario Grits unveiled on April 20th. (1)

Evidence in Waterloo Region can also be seen as more homes being listed are returning to the traditional “first-come-first-serve” approach rather than the ubiquitous process of “holding offers” as seen over the last 6 months.

So yes, the market is balancing out, for now. Buyers new to the market can rejoice, and those selling and buying can breath a sigh of relief, as the pressure is reduced somewhat. As for those who were hoping to cash out with their sell, it’s still a viable opportunity. Homes are still highly desired in this area as Waterloo Region sees ongoing technology growth and infrastructure investment.

(1) http://news.buzzbuzzhome.com/2017/06/ontarios-foreign-homebuyer-tax-crea.html

How the Wealthy Barber can help you save for a home

When it comes to finances, regardless of your age, you’ll need to think about it sometime. Whether you just secured your first serious job, you’re about to up-size to a larger home, or before retirement, the best time to think about your finances, is now.

If the thought of picking up an economics book, or reading the finance section of the newspaper stresses you out, then consider The Wealthy Barber or The Wealthy Barber Returns.

The Wealthy Barber
The Wealthy Barber

Easy to read, to the point, and realistic, it’s a great way to get into thinking seriously about where you want to go and how you’ll get there financially. As you read, you’ll find you’re on the right track, that there are moments of dread when you think back to a bad financial decision, or you’ll close the book, adamant to change your ways for the better.

What else? He’ll recommend that you buy a home that you can well afford, rather than the most expensive home that you can afford.

Good tip.

 

Home Renovations — Building Value with Equity

In a healthy real estate market, with steadily increasing appreciation rates, purchasing a home can be a great investment! But buying property isn’t the only way to benefit — you might want to consider taking advantage of the equity you’ve built since purchasing your home.

But before you grab the cheque book and credit card, and start logging on to Houzz.ca and Instagram for inspiration, remember that your home’s equity and the return on investment from each project is not realized until you actually sell your home. So what to do? Renovate S.M.A.R.T.:

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Stay on track
When you have your budget lined up, stick to it! The middle of a kitchen reno is not the time to go over budget by falling in love with Italian sourced marble rather than domestic quartz. Remodelling projects inevitably have some bumps and delays, so staying on track, with some financial wiggle room for delays, will help you keep your sanity and keep your finances on track.

Make sensible choices
Your budget, no matter how big it is, is limited. Prioritize the bones of your home, including HVAC, roofing, structural issues, and the correction of problems such as mold or moisture problems before you decide to add a patio in the yard, or change the flooring in the main floor because you think it’s outdated. This will not only help you maintain your home better, it will also add buyer confidence when you decide to sell.

Always check your finances and see your REALTOR®
See your financial advisor or mortgage broker to find out what your options are for secured credit lines, home equity lines of credit, and more. Not only will they be able to help acquaint you to the products available to you, they will also help you come up with a budget that is compatible with your financial goals.

Alongside your financial planner, make sure you ask your REALTOR® for a valuation of your home’s value, which is changing all the time in this dynamic market. Your REALTOR® will also have their finger on the pulse when it comes to understanding the impact of renovations and remodelling decisions that will either help or hinder the sale of your home. Getting your real estate agent’s input on these decisions is a great way for your to balance your desires with saleability and market value.

Research, research, research.
Whether you choose to use a company that is well-known in the trade, or a smaller one-man-show, do your research. Get references, read online reviews, and even ask for their HST number, official business name or full name, WSIB number, and insurance number. This way, you can keep track of who you are paying and may also use this information to confirm that they are a registered business that is legitimately covered by insurance. You might also want to check that they have the intention to submit the HST that you are paying as part of your work order invoice by confirming the registration of their business with the Canada Revenue Agency.

Try small projects before large ones
A full kitchen gut isn’t always necessary and fresh paint, new knobs, and updated quality flooring can go a long way. What else can help you make an impact? Replace builder-grade and outdated lighting with new custom options. Increasing your curb appeal is also a great place to add value, such as adding perennials, or simply replacing old hardware on your entrance door.

If you’re intent on making an impact with your remodelling project, you’ll see a higher return on kitchens and bathrooms. You can also stretch your dollar more if you sway more toward classic finishes rather than more trendy colours, such as bright red or sunshine yellow when it comes to more permanent features such as tile or appliances.

Uncommon Tips for Making Your Home Show Better

Most people know the basics of preparing a home for a viewing or an open house: make sure everything is clean and tidy, mow the lawn, sweep the walkway, etc.

But there are a number of lesser known tips — tips you often don’t hear about — that can make your home even more attractive and desirable to potential buyers.

home

In the kitchen, for example, it’s obvious that the stove, sink, and countertops should be spotless. But did you know that grinding a lemon will help eliminate any lingering smells? Want to go a step further? You should also arrange the contents of your cabinets and refrigerator to face forward.

In the bathrooms, make sure the toilet lids are closed. Hang matching towel sets.

Moving on to the bedrooms, check that nothing is lying around. Even a shirt draped neatly over a chair can appear messy to some people.

In the kids’ rooms, the toys should be “staged”, not just flung around. For example, set up a train set like an appealing store display. Don’t just have bits and pieces scattered on the floor.

If possible, move half the contents of all closets into storage. This makes a big difference in how spacious they’ll appear.

Turn on everything: all the lights (even the one above the stove), the fireplace, the lights in the basement.

Finally, here’s another uncommon tip. House plants look their best — brighter, more upright and alive — approximately four hours after you water them.

All these tips take just minutes to implement, but they can make a big difference in how your home shows. Studies prove that a well prepped home will often sell faster, and for a higher price, so it’s worth the effort.

First-time home buyers making it work

With the new mortgage rules and home prices rising faster than ever in Kitchener-Waterloo and beyond, first-time home buyers are feeling the pinch. With the risk of being priced out of the market, there is the additional challenge of not only carrying a larger mortgage but also coming up with the minimum 5% deposit, or ideally 20% deposit that would exclude the need for CMHC mortgage insurance fees in most cases.

But recent studies show that rising prices won’t stop buyers who are determined to start building equity as soon as they are able. In fact, half of Canadians aged 18 to 34 own homes and rent out a room or basement to help cover housing costs.

first-time-buyers

While it may be an inconvenient to share your home, getting closer to being mortgage free, and having the extra income generation may be worth the temporary sacrifice. According to a study based on 2000 participants, 12 per cent of Canadian homeowners currently rent or plan to rent out part of their home, with that amount rising to 20 per cent for 18- to 34-year-old homeowners.

 

Move-Up and Luxury Home Buyers- Kitchener-Waterloo Real Estate Trends 2016

Kitchener-Waterloo was characterized by strong real estate market throughout 2016 with house prices increasing by an average of 10% over home prices in 2015. A series of broken sales records combined with low inventory has had a rippling effect on everyone.

Move-up buyers in particular have enjoyed the maximization of their equity. Owners who have sold their homes in 2016 are benefiting from the substantial activity at the lower end of the market, which has allowed them to move into larger, new homes, often in the luxury $1 million+ range. While there has been some multiple-offer activity in the luxury home market, competition is remarkably less than that found below $500,000.

Luxury Home

However, there are only a few weeks left in 2016 for buyers of luxury homes to enjoy the original land transfer rates. New mortgage policy has updated or “modernized” land transfer rates to reflect the prices of luxury homes, with purchases of homes over $2 million seeing a .5% rate increase to help accommodate the doubling of the First-Time Home Buyer land transfer rebate announced in November 2016.

“Modernized” Ontario Land Transfer Tax Rates
Home Purchase Price      
       Tax Rate
Up to $55,000                                 0.5%
$55,000 to $250,000                      1.0%
$250,000 to $400,000                    1.5%
$400,000 to $2-million                    2.0%
$2-million and over                         2.5%

 

First-time Home Buyers to get Double the Land Transfer Tax Rebate

Yesterday afternoon Finance Minister Charles Sousa announced an increase to the land transfer tax (LTT) rebate for first-time buyers. The rebate is being doubled from $2,000 to $4,000. The announcement came as part of Ontario’s Fall Economic Statement and is specifically aimed to help first-time buyers enter the housing market. Buyers can start claiming the rebate effective January 1, 2017.

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Although home prices continue to rise, every little bit helps to allow buyers a chance to get into the market and begin to build equity and wealth. With the new change, first-time home buyers who are permanent residents will not pay land transfer tax on the first $368,000. In many cases in Kitchener-Waterloo and area, the rebate will translate to these buyers not paying land transfer tax on the purchase of their first home at all.

 

New Mortgage Rules and You

Since 2008, we’ve seen the progression of changes implemented by the government to tighten eligibility rules for new insurable loans. By October 17th 2016, we’ll be looking at another wave of changes, most notably with the application of a “stress test”. Home buyers are now required to qualify for both their negotiated mortgage rate as well as the Bank of Canada’s five year rate. The result? Purchasing power will be affected and many home buyers will be adjusting their expectations and plans.

If you’re a first-time home buyer and you’re not sure that you can meet the new mortgage criteria, you should make it a priority to speak to your financial advisor or mortgage broker to advise you on your options.

Even if you you’re confident in your buying power because you already intended to buy well below your agreed pre-approval rate, you can benefit through the clarity of discussing these changes. If you’re a home buyer in this group, you may also see less competition, as the parties that have been working at the top end of the budget take a step back to regroup.

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Some new rules also apply to sellers: If you’re selling your principle residence, you will now need to report this change on your income taxes to the CRA, but your home will still be exempt from being taxed on this profit in most cases. This is a great topic to discuss with your accountant or income tax preparer.

As Sellers, you will find that our local market in Waterloo Region is healthy and attractive to home buyers, particularly those who are financially stable, and understand the advantages of reducing their debt ceiling. Further, our buyer base is growing geographically as we continue to attract out-of-towners who find the Region to be a great place to live.

Overall, while the new regulations will restrict purchasing power from what which we have previously been exposed, it’s important to understand that regardless of these changes, it’s always wise to reduce other consumer debt, save more for a larger down payment, or lower your budget for your new home, which increases your financial stability, and risk reduction.

After all, home ownership should be a smart, informed, and a financially comfortable decision that allows you to invest in your life.

If you’re looking for more guidance on buying or selling a home in Waterloo Region, reach out and we can help you get familiar with the process, whether it’s the first time or the fourth time. Contact Us.