Tag Archives: resale housing
Toronto and Canada Housing Forecasts Getting Rosier
Each month, our local home builders’ association receives several market intelligence reports from the Canadian Home Builders’ Association. This month’s newsletter contained a number of items that I thought would be of interest to new-home buyers in the GTA.
Economic Update
Dr. Peter Andersen, CHBA’s consulting economist, notes that this year will be much busier than expected for construction activity of all types. Housing starts have surged and residential construction has picked-up again. Non-residential construction, always a second-half cyclical performer, is in a solid expansion. A strong office leasing market and a declining office vacancy rate are signaling the onset of an office tower construction cycle.
Housing starts averaged 248,000 at annual rates in the first quarter – an increase of 17% from the same period a year earlier. This is far above the 2005 housing starts total of 225,481 units and also the annual cyclical peak of 233,431 units set in 2004.
The March starts figures were striking – 252,300 at seasonally adjusted annual rates. The first-quarter surge reflected both single-detached and multiple-unit starts. Housing start forecasts for 2006 are being revised upwards as a result of the monthly performance through the first three months of the year.
The resale market is always a good indicator for new-home demand. It is still hot and shows no sign yet of affordability stress. First-quarter sales were at an all-time record high, after adjusting for seasonality. Sales of existing homes and condos in March continued at close to record levels. This is also good news for renovation demand as the stimulus to renovation from resale housing activity, which works with a lag, shows no sign of slowing down. The national average resale price in March in major markets was up by 11.5% year over year.
RBC affordability index
High home prices and utility costs in the last three months of 2005 pushed home affordability to its highest level in 10 years, according to the Royal Bank of Canada.
RBC’s affordability index measures the proportion of pre-tax household income it takes to service the costs of owning a home. Despite the fact that incomes continue to rise, this increase does not match the hikes in mortgage rates, house prices and utility costs.
Income growth in Canada is starting to accelerate, wages are rising, but the increase in house prices has been faster. Add to it higher interest rates and overall size of rising mortgages, so affordability is going down.
Vancouver and Calgary were hit the hardest as housing prices soared in the last quarter of 2005. Affordability is expected to get worse in the first half of this year, but should level off by year’s end.
Labour shortage
The construction industry is concerned after hundreds of construction workers from Portugal and other countries have been deported as the new Conservative government moved away from Liberal government promises of an amnesty plan.
Promises of an amnesty gave hope to underground workers who came forward to file refugee claims as a result. Their attempts to stay in the country legally ended up getting many of them deported. Canada’s current immigration system is tailored to educated immigrants, and blue-collar workers often do not qualify.
“This is insanity,” says immigration lawyer Lorne Waldman. “We have an immigration system that is supposed to supply workers for jobs, but these blue-collar workers who are needed cannot qualify to get in.”
There is a major labour shortage in the construction industry – an industry that accounts for 9.5% of Canada’s total gross domestic product and 7.5% of Ontario’s alone. It is estimated that there are between 10,000 and 15,000 illegal immigrants working in southern Ontario’s construction and hospitality industries, and 200,000 undocumented workers across the country. Deportations are therefore a major threat to the construction industry.
The Canadian Home Builders’ Association wrote a letter to Immigration Minister Monte Solberg, supporting the work foreign workers do in the homebuilding industry and urging him to resolve the labour shortage.
Solberg says the government is working with the provinces to ensure labour needs are met. “We understand the process doesn’t work well for a lot of people. We’re trying to fix that. The ideal situation is for people to go through the process.” He ruled out an amnesty, he said, because he doesn’t want to encourage people to come to Canada illegally.
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Contact the Jeffrey Team for more information – 416-388-1960
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HST will not affect resale homes
Bill Johnston
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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Contact the Jeffrey Team for more information - 416−388−1960
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More balanced market conditions expected
Tom Lebour – Toronto Star
The Greater Toronto Area resale housing market has been very active in recent months. Sales in February, March and April all set monthly records. Last month, 9,470 homes changed hands and while not a record setting month, it is within one% of May 2009′s 9,589 sales.
While last month’s figure surpassed May 2008′s 9,411 transactions, it was well off the 11,146 sales that took place in May 2007, which remains the strongest of all months on record.
Zeroing in on the specifics of last month’s numbers, there were 3,887 sales in the 416 and 5,583 transactions in the 905 region. Activity in the 416 area actually increased by nearly 3% from May 2009 when there were 3,777 sales. There was, however, a decline of nearly 4% in the 905 region compared to May 2009′s 5,812 transactions.
The 2,894 condominium purchases that took place comprised nearly 31% of all sales in May, while at this time a year ago condominium apartments comprised 29% of the month’s transactions. The condominium lifestyle is being embraced by growing numbers of homebuyers, likely due to the affordability and convenience it offers.
Although sales activity fell marginally short of last May’s result, prices have shown remarkably strong appreciation. Currently, the average price of a home in the GTA is $446,593, which represents an almost 13% increase over the May 2009 average price of $395,609. Price increases in both regions were comparable last month. In the 416, the average price of $493,265 rose nearly 14% from $432,478 a year ago. In the 905, the average price of $414,099 increased more than 11% from last April’s $371,649 average.
The strong sales and price growth we have seen in recent months was anticipated, given that many of this spring’s homebuyers have undertaken purchases before additional costs associated with rising interest rates and the July 1 implementation of the harmonized sales tax occur.
While the pace of activity has been brisk, with homes currently remaining on the market for an average of 22 days compared to an average of 35 days last May, the gap between sales and listings has begun to increase. There are now 25,414 homes available for sale throughout the GTA in contrast to 21,524 a year ago.
This pattern indicates that we will likely experience more balanced market conditions for the remainder of this year. If you’re planning on buying or selling a home in the coming months though, you need not be discouraged. Regardless of potential market conditions on the horizon, you can continue to achieve a favourable transaction by working with a local realtor. They can advise you on market conditions as every market is different, identify opportunities that suit your needs, and negotiate a favourable agreement on your behalf.
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Contact the Jeffrey Team for more information - 416-388-1960
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