Toronto Real Estate Blog

By Julian Beltrame – Canadian Press

The federal government can take at least a little of the credit for the return of the Canadian shopper that is helping lead the country out of recession.

New retail sales for May rose a surprisingly robust 1.2%, Statistics Canada reported, in yet another clear signal that the economic free fall of the winter months is braking quickly.

The eye-catching detail in the report was the 1% hike in the building and outdoor home-supplies stores sector – double the previous month’s rate – and a 1.1% gain in home centre and hardware store sales.

CIBC World Markets economist Krishen Rangasamy said Ottawa’s $3-billion home renovation program, which pays back up to $1,350.

“That definitely is having an effect,” he said. “Since this home renovation tax relief became available, you’ve seen sales in that particular category increase in all months except for one (March).”

In the June economic update, Ottawa reported Revenue Canada had received more than 700,000 inquiries from Canadians about the tax credit.

More generally, the sales report points to an economy that is slowing coming out of one of the worst downturns since the Second World War.

Economists have recently tracked the relative resiliency of the Canadian domestic economy – as opposed to the carnage in the export sector and manufacturing – that has helped keep Canada from falling as sharply or deeply as the U.S.

A recent Bank of Montreal report credited the difference in the two economies to the relative low level of job losses that have occurred in Canada compared with the U.S. Using comparable criteria, the paper argues that Canada’s jobless rate of 8.6% is actually 2.4% better than that in America.

With Canadian banks relatively healthy and better household solvency rates, Canadian consumers have been consistently outpacing their U.S. counterparts in purchases of homes, autos and other goods for most of the past year.

“It takes a willingness of borrowers to borrow and lenders to lend to turn improved affordability of big-ticket items into drivers of consumer spending and economic recovery, which is why Canada is racing ahead of the United States,” wrote economist Michael Gregory.

The Bank of Canada is also saying that the Canadian economy is poised for a rebound, forecasting on Tuesday that output will grow by a full 3% in 2010.

Although the May retail numbers are ancient history in terms of what is occurring in the economy now, economists said it will have the effect of moderating the expected gross domestic product contraction during the month to an expected 0.5%.

TD Bank economist Pascal Gauthier agreed the data is another indicator of recovery, but cautioned retail sales remain 5.8% lower than peak levels of last September.

“Recovery indeed, but the climb back up to pre-recession levels can reasonably be expected to be relatively long and gradual,” he said.

Still, economists noted there were no weaknesses in the report. Not only was the value of sales up to $34 billion, but the volume of sales also increased by 0.7%.

Statistics Canada said seven of eight sectors reported growth, led by a 2.4% increase in the automotive sector and a 3.4% hike in sales at new-car dealerships. The exception was in clothing and accessories stores.

The gains spread coast to coast, with the exception of Prince Edward Island.

“The big picture is that optimism is coming back,” said CIBC’s Rangasamy. “Consumers have to feel optimistic before starting to shop again and we’ve seen a come back, not only in this report, but in housing sales as well.”

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New ad campaign highlights ways you can put your tax dollars back into your home

The Honourable Lisa Raitt, Minister of Natural Resources, announces the official launch of a new national advertising campaign for the Home Renovation Tax Credit (HRTC) on behalf of the Honourable Jean-Pierre Blackburn, Minister of National Revenue and Minister of State (Agriculture and Agri-Food).

“The Home Renovation Tax Credit is one of the key incentives introduced by the Conservative Government as part of its Economic Action Plan to provide a timely stimulus to the Canadian economy,” said Minister Raitt. “We want to ensure that Canadian homeowners know about this credit and take full advantage of it. This is why we are launching this national advertising campaign.”

The advertising campaign includes advertising through television, select magazines, Internet, and digital screens. It is also complemented by a national partnership program, with point-of-sale HRTC displays in large national retail establishments where home renovation products are sold. By mid-August, these establishments and their affiliates should have HRTC information displays with envelopes that people will be able to use to keep their receipts and related documents to claim the credit.

The HRTC is a time-limited, non-refundable tax credit of up to $1,350 that can be claimed for eligible expenditures made for renovations and alterations of an enduring nature made to a dwelling eligible to be a principal residence which may include a house, condominium, cottage, and the land that forms part of it. Canadian homeowners who are thinking about renovating their kitchen, replacing their furnace or installing new windows or a new fence, for example, could really benefit from this credit.

“The government realizes that home renovations increase the long-term value of a home and create economic activity by increasing the demand for labour, building materials, and other goods,” said Minister Raitt. “The HRTC alone provides about $3 billion in tax relief and is part of the $62 billion in stimulus delivered through the Economic Action Plan. For an estimated 4.6 million Canadian families, this means that they will be able to put their tax dollars back into their homes.”

The HRTC can be claimed on the 2009 income tax and benefit return for eligible expenditures that total more than $1,000, and up to $10,000, which are made between January 28, 2009 and January 31, 2010. To claim the HRTC, Canadians should ensure they keep supporting documents such as receipts to support their claim.

The HRTC has already raised a lot of interest among Canadians, and the Canada Revenue Agency has responded to more than 700,000 inquiries about the credit so far through its Web site and telephone lines. For more information about the Home Renovation Tax Credit, go to www.actionplan.gc.ca or www.cra.gc.ca/hrtc, or call 1-877-959-1-CRA (in French 1-888-959-1-ARC).

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Mark Weisleder – Toronto Star

Multiple offers. Bidding wars. These typically take place in a seller’s market, when there are more buyers than available properties. Yet we are seeing bidding wars even today, when the market is more balanced. It is very important that buyers are properly prepared for this extremely stressful process.

Comment: Except that we do not have a balanced market right now. I have no idea why anyone says that, there is nothing to support that. We have low listings and high sales, classic definition of a sellers market. Bidding wars all over the place, houses selling the day they are listed. More signs of a sellers market. Buyers being pressured to jump, no time to think, barely able to see two houses before one sells. All signs of a sellers market. Do not let anyone tell you otherwise.

In my view, one of the main problems with the multiple offer process in today’s real estate market is that there are very few rules for how the bidding will be conducted. The process is essentially unfair to buyers. This is not like a silent auction where you get to see what everyone else is bidding and then make a decision as to whether you want to make a higher bid. The seller does not even have to accept the highest bid. For example, a seller may prefer a lower offer, that has no conditions attached to it, to a higher offer that has conditions about financing or home inspections.

Comment: Here I do agree, there are a lot of problems with the way we do this. We need a lot more transparency to make the system work better. Maybe not with prices, but there should be some sort of system to record the agents involved so we all know what we are up against. And even once the deal is done, release the other bids. Not during the process, but after the seller has chosen one, the next day we should all be able to see what everyone offered. A system like this is sure to keep everyone honest.

The seller cannot give out the personal information of the bidders or the amounts being bid and only has the obligation to tell all buyers in the process the actual number of bids received. Sellers can require that all buyers fax in their offers to the seller’s real estate salesperson. Many buyers prefer to present their offers in person.

There are also unscrupulous sellers who falsely claim that they have received other offers in order to fool an unsuspecting buyer to bid higher. It is very hard for a buyer to check this out after the fact, without commencing an expensive lawsuit.

Comment: This really does not happen, more of an urban myth. If you are ever in doubt, ask for the name(s) of the other agent(s) involved. Give them a call and confirm they are bidding on the property. Very easy to confirm, so there should never be any talk of fake offers. If you do not take the time to double-check, then you forfeit your right to complain. And if you lose a bidding war, it is more likely due to underbidding, not because of anyone playing games. And if you think you paid too much, you were the one in control of your own offer, no one forced you to pay that amount.

If you are competing on a property, I recommend that you take the following steps:

Research the general area that you are looking at moving to in advance, so that you can obtain general information about schools, parks, demographics and crime rate.

Walk the streets that interest you and start talking to the neighbours, to get a sense if this is the kind of friendly area that you would like to move your family.

Visit with your lender or mortgage broker in advance to obtain a clear understanding as to what you can afford to spend in order to buy a property, without having to dramatically change your standard of living. It is wrong to sacrifice everything just to afford a more expensive home. You want a home that will create happy memories for a lifetime.

Comment: All of the above should be done regardless of multiple offers.

Work with a professional buyer salesperson. You need to know in advance the real market value of any property that becomes available. Many sellers deliberately list their property for a price that is 5% to 10% below market value, in order to generate interest from many buyers to drive up the price. You cannot be fooled by this tactic. You also need an objective third party to guide you through the negotiating process.

Always make your purchase conditional on a home inspection. In most cases, sellers will permit a buyer to conduct a home inspection in advance of submitting an offer, so that they can make their offer unconditional. The problem here is that a buyer may in fact pay for the cost of a home inspection report, but not have the seller accept his or her offer, as the seller can still choose any offer that he receives.

Comment: In multiple offer situations, it is almost always the offer with no conditions that is accepted. While I would never ever recommend a client remove any offers, they have to in order to win the bidding war. I hate that it is so, but that is simply the way it works these days. Put that condition out and you lose the house, period. And no seller will allow you to conduct a home inspection before you make an offer, trust me.

If you are at all suspicious as to whether there is in fact a competing offer, consider inserting a clause that states that your offer is being submitted on the basis that it is part of multiple offers and that if the seller does not receive another offer, you will have the option to either cancel or revise your offer. You can also include in your clause a requirement that the seller provides the name of the competing real estate brokerage that submitted the other offer. Buyers should consult their own real estate buyer salesperson or lawyer in preparing this clause to ensure complete protection.

Comment: A great idea – except that the listing agent has a legal obligation to reveal the number of offers being made. Thus you should hold onto your offer until you know for sure how many there will be. If you send it in thinking you are the only one, and others arise, then you will be given a chance to revise your offer. It might be better to stay low and use the later chance to revise upwards, rather than the other way around.

Buyers, being prepared for bidding wars will provide you with maximum protection, even as you participate in this very stressful process. Next week, I will discuss how sellers can set the stage for potential bidding wars on their own property.

Mark Weisleder is a lawyer, author and public speaker for the real estate industry who is a regular contributor to Real Estate News.

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Toronto and Vancouver led the charge, with June sales among the highest in history for both cities’ local real estate boards

The Canadian Press

Pent-up demand, along with low interest rates and greater affordability were behind the June rebound in residential housing sales in Canada and “a clear signal” that the sector has shifted into recovery mode, ReMax said Monday.

Canada’s largest markets, Toronto and Vancouver, led the charge, with June sales among the highest in history for both cities’ local real estate boards, ReMax said in a news release.

The company, part of a global network of real estate agents, said major markets began to recover in March, posting escalating sales in April, May and June.

Most centres are now forecasting year-end sales on par or ahead of 2008 levels, ReMax said.

Close to 11,000 properties changed hands in Toronto, up 27% over June 2008, setting a sales record for the month and just slightly off the all-time peak of 11,146 units.

Residential sales in Greater Vancouver increased 75.6% over the year-earlier period to 4,259 units, just short of the record 4,333 sales of June 2005, ReMax said.

Over all, average prices held steady or climbed in June, while the number of days houses remained on the market was down as inventory levels continue to tighten, especially at entry-level price points, it said.

ReMax attributed the recent surge in resale activity to three key factors: pent-up demand, low interest rates, and greater affordability.

“The combination — in conjunction with declining inventory levels — has created heated market conditions in hot pocket neighbourhoods, prompting a resurgence in multiple offers in June,” it said.

“Although the current pace may be unsustainable, all markers point to greater stability in the market, leading to healthier activity in the long run, with inventory levels a key variable influencing pent-up demand,” it said.

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CTV.ca News Staff

Canadian housing sales have surged in the early summer, suggesting that the national real estate market may be on the mend, says a new report from RE/MAX.

As a result of a sizzling month of sales in June, Canada’s two largest real estate markets — Toronto and Vancouver — came close to breaking their all-time sales records.

In Toronto, the nearly 11,000 properties sold last month marked a 27% sales increase over the previous June. And in Vancouver, where 4,259 units changed hands last month, sales were up 75.6% from 12 months ago.

Major year-over-year gains were also seen in Calgary (28%), Regina (24%), Edmonton (15.8%) and Ottawa (12.5%). Sales were also up 5.2% in the Halifax-Dartmouth area over the previous June and had inched up 0.8% in Newfoundland and Labrador.

According to RE/MAX, most of Canada’s major real estate markets had begun to recover from the recession as early as March, with sales picking further up in April and May, leading to the high levels of sales seen in June.

Michael Polzler, the executive vice-president of RE/MAX Ontario-Atlantic Canada, says the boom in sales is the result of affordable prices and mortgages, as well as pent-up demand among homebuyers.

It’s a trend that could also help the wider economy, he said, because it will spur homeowners to spend on home improvements.

“When people start buying houses, they have to buy all the things that go along with those houses,” Polzler told CTV’s Canada AM on Monday morning. “Often it means a new fridge, a new carpet, painting, fixing up this, fixing up that. Even when you buy a new house, there’s a lot of things to buy. So, it helps everybody connected.”

Looking forward to the rest of the year, RE/MAX is expecting to see a more stable real estate market, though sales may not continue at the current pace.

Polzler believes that many Canadians favour real estate as a form of investment, as opposed to putting their money in private business opportunities.

“Most Canadians are very uncomfortable and unsure about the stock market,” he said. “And when you see that through these difficult times, prices in real estate have come down a little bit in most places — and in many cases are back up — they feel a lot more control than they do in the stock market.”

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