U.S. Interest rates
Increase
Just today the FED in the U.S. have decided to increased
interest rates another 0.25% and for some reason the stock market decided to rally
along with oil, gold and other precious metals.
I guess this was due to the fact that the economy appears to be stronger
and inflation targets have been sustained hence rates have afford to increase Housing in the U.S. remains steady with
increases in home prices across many states.
We will see how this plays out in the next month or so, one would think
as interest rates approach the FED`s 1% target from their historical lows this
would drive a correction in equities and other securities that have increased substantially
over the past decade.
Toronto Housing
Market
Toronto on the other hand has seen record price increases in
the housing market. Over 21% price
increases year over year for the month of February. With the foreign tax imposed on real estate
in Vancouver it appears as Toronto prices will further increase in 2017. Vancouver on the other hand has experienced a
drop in sales volume and prices as well.
http://www.bnn.ca/real-estate/video/why-vancouver-home-prices-are-dropping~934970
As an accounting & advisory firm based in Toronto, we
have seen a variety of different investors and business owners in the
development sector profit from the real estate run up in the past 10
years. If you have driven into the city
recently you will probably notice you cannot see the ACC or Roger’s center’s
anymore as the skyline is flooded with several newly completed condos, and a
lot more new developments in progress.
Rent or Buy
There are many opinions on whether to rent or buy a home,
and the decision varies for everyone.
With affordability a major issue for many families in and around the
GTA, the cost of buying has greatly outweighed the cost or rent. As a chartered accountant, it`s not hard to
calculate whether to rent or buy in the city, it comes to affordability and
whether you are getting a fair price for the property you decide to call home. If you put down the traditional 20% down on
your principle residence and the house can be carried if you had to rent it out
then you are probably getting a good deal, otherwise you are overpaying. The problem in Toronto is that most people
are overpaying for real estate in 2017. We
also have noticed that a lot of the condo purchase`s downtown have been
position by affluent facilities’ as investment rental properties. This begs the question who is really buying
real estate downtown? If a large portion of condos are owned by investors
for speculative gains what is to happen to real estate prices when investors
want to exit their positions to realize their gains? Unless there is demand to compensate from affluent
baby boomers looking for exits as part of retirement, prices will have to come
down.
For those who rent, we have also seen a sharp increase in rents in the downtown core, because there is a higher demand to live in the city center where there can be greater job opportunities. But you will pay premium rates, we have seen rent starting as high as $2,000 a month for a 600 sq. foot one bedroom condo.
Single family
detached homes in Toronto
This is another discussion all together…..simply put there
is not enough supply in the GTA and this has led to bidding wars on homes that
used to cost $500,000 5 years ago being sold for $1.5 Million in 2016-17.
Canadian Government`s
Take on Real Estate
We have seen the Canadian government put a 15% tax on
foreign buyers in Vancouver, and they are now looking into the impact this
would have if they were to impose a similar tax in Toronto. For more on a potential foreign buyer tax in
Toronto please visit
CRA to review tax
returns in 2016 for unreported business income or capital gains
The Canada Revenue Agency has also made a recent change in personal tax filing requirements to have tax payers submit their principle residence election form as part of their T1 return starting for fiscal 2016. This was not a requirement in the past; you simply needed to have the election form on hand for your personal records only. This leads us to believe that the CRA wants to gather information on individuals that have sold homes in 2016 and assess which sells had intent to flip or profit from and treat these gains as either business income or capital gains.
What will 2017 have
in store for real estate in Toronto?
I think we are due for correction, but this is just my
opinion however no one really knows. We
are advising to be prudent when purchasing real estate as with any investment.