From the recent release of Canada's 2016 Budget to a ramp-up in Province-led initiatives aimed at better controlling the Ontario real estate industry, the last few weeks have seen a flurry of announcements that impact buyers and sellers. If you're thinking of buying or selling a Toronto loft this year - particularly if you're an investor - here's what you need to know.
As our partners over at Condos.ca reported earlier today, Tarion, the Provincial entity who adminsters the Tarion home warranty plan for buyers of new Toronto lofts, condos and homes, has sent a notice to Urbancorp threatening to revoke their membership.
Urbancorp has one of the worst track records of any developer working in Toronto for sub-par construction and finishes and terrible customer service, leaving buyers hanging for far too long on things like deposit returns when projects get cancelled or action on home warranty claims with Tarion.
There are a number of new Urbancorp projects in development including the West Queen West Condos, pictured here. If you've already purchased a pre-con unit from Urbancorp and have concerns, there’s further information for buyers of Urbancorp properties on the Tarion website and they’re welcoming calls at 1-877-982-7466.
If you're thinking of buying a pre-construction loft, please, call us before setting foot in a sales office. It doesn't cost you any more to bring in your own representation who is there to negotiate the contract clauses and capping of fees on your behalf. Plus, we can warn you or any horror stories and shady developers in advance.
You due your diligence and hire a home inspector before firming up on that dream Toronto loft for sale, only to move in and find out months later you have a $5k electrical issue. Or a 10k plumbing issue. Home inspectors can't catch everything and they should state in their report any areas they were unable to inspect due to inaccessibility or inclimate weather. But there are far too many horror stories of inexperienced inspectors failing to miss obvious issues that cost the homebuyer thousands, even tens of thousands after moving in.
BC and Alberta currently regulates the home inspection industry, requiring inspectors to be licensed and accredited through one of the approved associations. But in Ontario - as in the other provinces outside of BC and Alberta - practically anyone can call themselves a home inspector and set up a business without having any formal training. But that's likely changing.
If the Province puts into play the recommendations from the latest panel report, Ontario home inspectors may soon need to meet a minimum amount of training from accredited institutions and, hopefully, have to get (and keep) a government-issued license to practice in the Province.
One of the biggest concerns in terms of the stability of the Toronto real estate market is the percentage of foreign homeowners / buyers and whether or not it's gotten to a saturation point that's dangerous in terms of overall economics should foreign buyers all pull out over a short period of time.
The problem is, we just don't know. Any guesses to date on how many of Toronto's lofts, condos and houses are foreign-owned is just that - a guess. Unlike countries like the US, UK and Australia, Canada hasn't collected citizenship data at time of purchase. But that's about to change.
In the Federal Government's recently released Budget 2016, they've alloted $500,000 to StatsCan to start tracking this data. Back-tracking of data is likely not viable but as some point soon, this information will be required to close on a real estate sale.
While this doesn't impact Toronto loft buyers directly, over the long-term, this is one of many steps that need to be taken to help moderate the Toronto real estate market so that more Torontonians are not priced out of their own city. It's the first step in potentially taxing foreign buyers at time of re-sale for example, as they do in the UK.
If one message was loud and clear in Budget 2016 it's that the Fed's, through the CRA, are cracking down hard on tax evasion. Although real estate flippers were not called out specifically in the budget document, it's clear from interviews and media coverage over the last few years that the CRA is firm on chasing up back taxes from flippers and so with this injection of funding, it's not a leap to assume that real estate transactions are going to be under the microscope, big time.
If you're in the business of flipping lofts for sale in Toronto (either buying older lofts & renovating or fliping pre-construction units), take note that it's not just taxes based on a capital gains calculation that you're responsible for paying - you may be taxed on your profits as busines income as the CRA considers buying real estate with the intent of selling it on for profit as an "adventure in the nature of trade".
What's not clear is what the timeline is on this. It used to be that people didn't worry if they held onto property for a minimum of a year but we've heard of cases where buyers with a history of quick sales were taxed on properties they had for over a year. Check out this story in the Globe and Mail.
So, don't assume because you've held onto a pre-con purchase for 1 year post opening as rental for example that you'll get away without paying taxes. You may but you may not. Our advice is to hire a tax specialist who is an expert in real estate tax law before you buy an investment property.
What we were hoping to see - and what was expected based on Trudeau's campaign promises - was an opening up of the rules around Canada's Home Buyers' Plan that allows first time buyers to withdraw up to $25,000 tax free from their RRSP to put towards a down payment.
The amount withdrawn then has to be repaid over a number of years but it's great because it allows many young buyers to get in the market now and start earning equity rather than wait and save. Because it's nearly impossible for first time buyers to out-earn / out-save the market right now.
But we hoped that this option would be opened up to more than just first time buyers to include people who suddenly find themselves with a lower household income (e.g. divorcees) or people who have to move to a more expensive real estate market for work.
But no changes to the HBP. Yet. Hopefully, next year's budget will see the rules loosen to allow more buyers desparately trying to save for a home be able to access their RRSPs.
Feature image: Parliament Hill © Tsai Project, licensed under CC 2.0 from flickr. West Queen West Condos artist’s rendering © Urbancorp.