Tag Archives: purchasing a new home
President of the Toronto Real Estate Board
Toronto Star Column
As of July 1st, the new Harmonized Sales Tax (HST) will be in effect and Ontario consumers will be hard-pressed to avoid this so called “tax on everything”. While that less than flattering nick name for the HST may be pretty close to the truth, it’s not completely accurate, especially when it comes to real estate, where the HST applies differently depending on the type of real estate, whether it is resale housing, newly constructed housing, or business properties.
Anyone who has ever purchased a home or has considered purchasing a home knows that budgeting for taxes is an important part of determining what they can afford. Whether it is the on-going cost of property taxes, or the upfront cost of land transfer taxes, the cost of taxes on housing can add up.
With that in mind, one of the most important things to know about the HST is that, fortunately, it will not increase the tax burden on the purchase price for homebuyers who purchase resale housing. That’s because resale housing, which was never subject to Provincial Sales Tax (PST) or the federal Goods and Services Tax, will continue to be exempt from both taxes once they are combined under the HST.
The same is not true for newly constructed homes, which will be hit with additional tax under the HST. Newly constructed housing has always been subject to the GST, meaning thousands of dollars of tax for home buyers choosing this option. Now, with the HST, new housing will also be subject to PST, meaning thousands of dollars in added costs for home buyers of new housing.
There is a silver lining for new housing: the provincial government provides a rebate of 75% of the PST on the first $400,000 of a newly constructed home, or a maximum of $24,000. For example, someone purchasing a new home priced at $500,000 would face $40,000 in additional tax from the provincial portion of the HST, which would be reduced to $16,000 with the rebate. Obviously, the rebate softens the blow, but an extra $16,000 of tax for a newly constructed home is nothing to laugh at.
Fortunately, home buyers choosing to purchase a resale home don’t have to worry about paying HST on the price of their home. That’s money that they can keep in their pocket, or use to keep their mortgage costs down.
There is also encouraging news when it comes to real estate for businesses. Although the costs of purchasing or renting a commercial property are subject to HST, businesses are allowed to claim tax credits to offset these costs. Even better, when purchasing a commercial property, the business can claim the tax credits immediately so that no upfront costs are incurred for the HST, and cash flow is not impacted.
It won’t be long before the HST is a reality in Ontario and taxes on a long list of goods and services will increase. Although it would be nice if HST didn’t apply to any real estate transactions, luckily, there is some encouraging news, especially for homebuyers of resale housing, who won’t see the purchase price of their home increase due to HST, and businesses buying or renting commercial properties, who will be able to offset their HST costs.
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Michael Collins-Williams – Special to QMI Agency
No doubt, many of today’s home buyers think of just two options when it comes to purchasing a new home —it’s either a high-rise condo in Toronto or the more traditional low density suburban home. But as our communities evolve — more and more consumers are recognizing the benefits in buying a home in a mid-rise building. This third option for home buyers is anticipated to flourish in the years ahead.
Across the Greater Toronto Area, decades of low density development has not always made the most efficient use of existing infrastructure. Most of us are all too familiar with ever increasing traffic congestion, longer commutes and rising housing costs. Despite these issues, our relative prosperity ensures that the GTA will remain the destination of choice in Canada for tens of thousands of new immigrants for the foreseeable future. If we are going to preserve the high quality of life we’ve all become accustomed to, new patterns of growth planning and transportation planning are inevitably going to evolve.
One of the key factors supporting mid-rise condo development is the increasing environmental awareness of governments, businesses and citizens which is directing us to utilize our resources more efficiently. In the coming years, this will translate to an increased focus on the renewal of community infrastructure, as well as the protection and enhancement of our assets. Recent changes in the policies of the provincial government, such as the Growth Plan for the Greater Golden Horseshoe and the Greenbelt Plan are some of the driving forces behind intensification of new development today. Mid-rise buildings will become much more common as the building type of choice both for developers constructing them and new home buyers looking for affordable options that aren’t located in the concrete jungle of downtown Toronto.
As well, Canadians can reduce their impact on the environment through mid-rise condo living. Individual suites are typically smaller than single family homes which is an effective way to reduce both the carbon footprint and the monthly operating costs for homeowners. Glenn Miller, vice-president of the Canadian Urban Institute, suggests “the mid-rise building form has the potential to be the most energy efficient of all building forms.” This type of housing is a perfect opportunity to help the environment and your pocketbook. The buildings themselves are typically located on main streets close to shops and services, which reduces auto-dependency and promotes a healthy active pedestrian lifestyle. Miller notes that “mid-rises are built to a human scale that contributes to street life”. This provides a perfect smart growth alternative to larger scale apartment blocks without compromising the character of traditional neighbourhoods.
The graying of society with many baby boomers approaching retirement age is a second major driving force behind mid-rise condo development. This growing segment of society will increasingly be looking to downsize and live in an easy, maintenance-free lifestyle that doesn’t involve a lot of stairs. Unlike towering skyscrapers, mid-rise buildings in the four to eight floor range have the ability to integrate themselves within the existing urban fabric. These boutique style condo buildings are perfectly suited to provide a new supply of housing to a growing portion of the housing market in an aging society.
Mid-rise condos provide opportunities to enhance our communities while reducing our impact on the environment. Mid-rises blend into and improve neighbourhoods as Miller further suggests that “it’s a building form that adds to the quality of life in cities through quality urban form.
Mid-rise buildings can be viewed as an ideal scenario to provide an affordable supply of new housing for potential home buyers and slightly increase densities without disrupting established communities. There is almost an overwhelming amount of choice in today’s rapidly evolving real estate market. However, considering all the environmental, economic and lifestyle benefits that mid-rise living has to offer, a home in a mid-rise project is a choice worthy of consideration for anyone in the market for a new home.
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With no home to sell, lots of choice and low interest rates, first-time buyers are the most dominant purchasers, says one industry expert.
Lisa Van de Ven, National Post
For first-time buyers Jessica Maiato and Robert Puntillo, it made perfect sense.
Buy a new condo in the middle of a recession, they figured, and you’re likely to get the best deals and maybe a few bonuses that you wouldn’t see if you purchased in boom times. Which is exactly what happened when the couple went into the sales office for Liberty Development’s Metro Place master-planned community at Sheppard Avenue and Allen Road.
“They’re offering a lot of upgrade features as standard. So in reality, my condo’s going to look exactly the way I want it, without me having to spend extra money to get it to that point,” says Ms. Maiato, 23, who purchased a one-bedroom-plus-den unit with Mr. Puntillo, 27, in the site’s third building. “I find that the recession has really helped because people are just giving a little bit more so people will actually buy, making it more affordable for us.”
Ms. Maiato and Mr. Puntillo aren’t the only buyers to take advantage of the current economy. While real estate sales in the GTA aren’t booming the way they once did, certain markets are slowly on the rise.
Of those, first-time buyers are the most dominant — with no home to sell, they can take advantage of current interest rates as well as value-adding incentives and price cuts, without worrying about resale values. But more than that, says real estate consultant Barry Lyon, it’s a demographic that has something a lot of other buyers might lack at the moment: optimism.
“I think one thing is they have no previous recession experience. They’re just youthfully optimistic,” says Mr. Lyon of N. Barry Lyon Consultants Ltd. “And they’re just looking for reasons to buy. They tend to be looking for encouragement from the builders in terms of incentives; anything that makes it easier for them to buy, in the down payment structure, in the pricing, anything of that order.”
Developers are giving them exactly that, too. Recognizing that the first-time buyer demographic as an important segment of the current market, they’re introducing more accessible deposit structures, more affordable pricing and incentives designed to bring young buyers to their buildings.
Some – including Liberty Development at Metro Place – also host information sessions to teach neophyte buyers all they need to know about purchasing a new home. “They come in there and you need to inform them,” says Shawn Richardson, Liberty’s sales and marketing manager. “You really have to bring them through the whole process.”
Recognizing the needs of this younger market, many developers are also reconfiguring suite designs to introduce new units more suited to this demographic. That means more one-bedroom and one-bedroom-plus-den units rather than larger suites that were more popular not too long ago.
“A lot of buildings have gone through redesigns. Today, more and more, we see in the newspaper a new release or new designs; those are generally directed toward first-time homebuyers,” says Dan Flomen of TFN Realty, who represents the first-time-buyer-friendly Holiday Towers in Etobicoke by FRAM Building Group and Avari Group.
While younger buyers may be the most dominant at the moment, developers are also seeing life at the other end of the continuum. The more cautious empty nester purchasers, they say, are starting to make tenuous steps into the market as well.
“The empty nester market has never been as buoyant as the first-time homebuyers,” says David Hirsh, president of Brandy Lane Homes, developer of Mountain Trails in Collingwood. “But certainly they’re back out, they’re having a good look around and making some buying decisions. We have experienced a pretty reasonable uptick in traffic and business.”
Since mid-April, the developer says, Mountain Trails — targeted toward the empty nester market –has been seeing a rise in business. Unlike first-time buyers, though, empty nesters aren’t likely to buy impetuously. According to Mr. Hirsh, his buyers are coming back anywhere between two and four times before finalizing their decision. But they are coming back, and, just like the first-time homebuyers, see value in buying in the current economy with its reduced pricing and value-adding incentives.
“I think that that market does want to make the move now,” Mr. Hirsh says. “They recognize that we as builders and developers are pricing our product to the market.”
Unlike the first-time buyers, though, it’s a group that has seen recessions before, says Sue Webb Smith, marketing director for the housing division of Geranium Homes. In a way, that experience has helped them acclimatize to the current climate faster, as they become cautiously optimistic that they’ll see their way through this recession the same as they’ve seen their way through others.
So, while empty nester sales slowed some at the beginning of the year at Geranium’s Stouffville townhouse site Cardinal Point — where bungalow-with-loft designs are popular with that market –Ms. Webb Smith has seen the buyers returning and (again, usually after several visits) they’re making the decision to purchase at the site. Many have been thinking of selling their larger homes to make a move-down purchase for a while, she adds — long before the economy hit its current slump. With the decision finally made, they want to go ahead and do exactly that.
“It’s as though the confidence is returning to that part of the market,” Ms. Webb Smith says.
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