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The federal government announced back in May that all assignments will be subject to a 13% HST tax in Ontario.

This tax has also been applied, but we used to have specific workarounds – but as of May 7th, those workarounds no longer apply.

What does this mean for you?

You pay HST on the deposits plus an additional 13% on the increase in home value once the assignment is complete.

For example, if you purchased your home for $600,000 but then sell it for $800,000, you’ll need to pay an additional 13% on the $200,000 profit you made.

So, how can I help you save?

There are some key deductions you can make along the way to reduce the amount of HST you owe.

Since May, our clients have saved between 15% & 20% following these guidelines.

You can SAVE MONEY by claiming HST on your closing expenses, such as:

  • realtor’s commission
  • lawyer fees
  • other assignment-related expenses, such as staging or upgrades you’ve done on the property.

You see, the CRA will be after your money pretty quickly if you’re not careful. They’ll charge HST on what we pay for goods sold, which means it’s important to deduct that from everything else throughout the process, so there isn’t too much left over when all is said and done!

In this case, we will deduct the HST tax from what you pay them upfront to cover the cost of goods sold, which will partly offset the deductions throughout it all.

The Bank of Canada has increased its benchmark rate by 0.75%, marking a fifth consecutive hike in its latest effort to get surging price growth under control.

The central bank’s move is its first three-quarter-basis-point jump of 2022, bringing its trendsetting policy rate to 3.25% – a full three percentage points above the rock-bottom level it occupied from the beginning of the COVID-19 pandemic to March of this year.

Still, the increase was also a smaller hike than that contained in the Bank’s previous announcement, with that July 13 decision seeing an unexpected 1% jump to combat inflation that has been spiking ever upwards in recent months.

The Bank’s announcement means that the benchmark rate is now above the so-called neutral rate, the level at which economic growth is neither boosted nor constrained, which is currently between 2% and 3%.

The Bank of Canada has increased its benchmark rate by 0.75%, marking a fifth consecutive hike in its latest effort to get surging price growth under control.

The central bank’s move is its first three-quarter-basis-point jump of 2022, bringing its trendsetting policy rate to 3.25% – a full three percentage points above the rock-bottom level it occupied from the beginning of the COVID-19 pandemic to March of this year.

Still, the increase was also a smaller hike than that contained in the Bank’s previous announcement, with that July 13 decision seeing an unexpected 1% jump to combat inflation that has been spiking ever upwards in recent months.

The Bank’s announcement means that the benchmark rate is now above the so-called neutral rate, the level at which economic growth is neither boosted nor constrained, which is currently between 2% and 3%.

With a housing market that’s pricing out many in the Greater Toronto Area and stricter mortgage rules in Canada, private lending is becoming more popular among those looking to secure loans to buy a home — but experts warn there are risks involved.

The value and number of mortgages funded by alternative and private lenders have increased in the past five years, according to the Financial Services Regulatory Authority of Ontario (FSRA), an independent regulatory agency created to improve consumer and pension plan beneficiary protections in Ontario and regulates sectors, including mortgage brokers, loan and trust companies and credit unions.

The agency says the value of mortgages by private and alternative lenders has increased from $13 billion in 2019 to $22.4 billion in 2021 and the number of mortgages rose from 30,435 in 2019 to 36,568 in 2021.

In 2019, t​he ​total value of mortgages brokered ​by licensed brokers in Ontario ​was $139.5​ billion, which means that private lenders accounted for 9.3 per cent of mortgages in the province.​ ​That share of the market rose to 11.6 in 2021, as the overall value of mortgages brokered in Ontario increased to $193 billion that year.​

Zahra Marani, managing partner for real estate and private lending with Marani Law LLP, says her law firm has seen private lending become an increasingly popular option, especially among clients who are looking to refinance a mortgage.

“I’m seeing people who certainly would have been at the bank not so long ago who just have no choice but to turn to private lending,” Marani said.

“Not only are we seeing an increase in the need for private funds, we’re also seeing an increase in the rates that are being agreed upon by the borrowers and lenders and the brokers, because it’s costing more to borrow at the banks.”

For prospective homebuyers, there are two ways to get a mortgage: the traditional financial institutions, like banks and credit unions; and private or alternative mortgages, which are offered by investment corporations or mortgage finance companies.

So why are people turning to the latter?

Antoinette Leung, head of the FSRA’s Financial Institutions and Mortgage Brokerage Conduct, says the demand for private mortgages has increased in large part due to the current housing market.

Leung says more stringent underwriting guidelines by federally regulated financial institutions, as well as self-employed individuals who may not have a steady income, have also been a factor in turning people away from traditional mortgages to private lending options.

“These are quite well established lenders with sophisticated processes [who] have experience with underwriting all the way down to individuals who may have extra money to invest,” Leung said.

Bank of Canada hikes rate to 2.5%. Here’s what it means for you

 

“So, you really have a range and we’re seeing an increase over the last few years.”

The reason? An alternative mortgage lender has different lending criteria than big banks and could provide a way to get a loan when an individual doesn’t meet the requirements for a conventional mortgage.

But going with a private lender comes with risk as well. Experts say the rates can be higher, and customers need to do more due diligence about who they’re borrowing from.

A CBC News investigation this week revealed Paradise Developments Inc. — a licensed developer building homes in GTA communities — has been trying to prevent a number of individuals and companies from collecting deposits for homes in its developments.

The unlicensed and unregistered companies identified were also claiming they could offer 30-year private mortgages with interest rates as low as 2.75 per cent and low down payments — something Marani, the real estate lawyer, says “has red flags all over.”

Consumers should beware of fees, penalties
The FSRA found consumer protection concerns in private mortgage examinations, in particular with those who may be more financially vulnerable and could be taken advantage of in these transactions.

The agency says mortgage agents should know the financial needs, circumstances, goals and expectations of their clients — both borrowers and private lenders.

Leung says consumers should beware of fees and penalties when entering into a private mortgage agreement.

Marcel Ghazouli, a licensed mortgage broker with Premiere Mortgage Centre, says he’s also noticing more clients borrow from private lenders often at sharply higher interest rates than would be available through a bank.

“It has picked up as of late as rates have been increasing and also due to the after effects of the pandemic, whether that’s life changes related to work, health [or] family issues,” Ghazouli said.

Ghazouli says private lending, which is typically short-term loans that can be anywhere from a year to 18 months, are designed to “bridge the gap between one scenario and the next,” such as moving from a private lender back to a more traditional institution, such as a bank.

“What many people don’t realize is that these private mortgages don’t automatically renew once they’re up for renewal,” he said.

“The lender can impose a renewal fee. So that’s something that should be asked and clarified during the process so that they know what they’re up against.”

Qualification for mortgages ‘a concern’

In July, the Toronto Regional Real Estate Board (TRREB) revealed overall sales fell 47 per cent from the same time last year.

“Over the last couple of months, we’ve seen historic increases in mortgage rates and we’ve [also] seen rates increase quite dramatically,” said TRREB president Kevin Crigger in an interview with CBC Toronto.

The board said sales in July, which amounted to 4,912, were almost half the 9,339 homes sold the same time last year.

Crigger said while he personally hasn’t seen a large amount of clients turning to private lenders, “qualification definitely is a concern for some and people are qualifying for less,” as the mortgage stress test continues to increase along with interest rates.

Toronto is known for many things as Canada’s biggest and most bustling city. Some of these are positive, like its diverse culture, rich history, and fan favourite sports teams. Others, not so much, like the incredibly high cost of living that Torontonians get to enjoy.

Though the title for most expensive of all is often traded with Vancouver, there is no question that these two cities simply cost the most to live in among all in the country. However, in the case of Toronto, there are at least a few million more residents in the area, making these high prices an issue for many more people.

The cost of living in a given area is a reality that essentially everyone must think about on a daily basis. For those already in the city, the amount of money they need to get by naturally is a major consideration, while for the thousands of new residents that come to the city a year, the cost of living is a major factor that determines whether or not their move is going to work out.

And yes, even for real estate investors the cost of living is a major consideration. Now, if you’re considering investing in real estate in the city of Toronto in 2022, you probably aren’t the type of person who is struggling to make ends meet. However, you are likely hoping your investment performs well and makes you some money in the long run.

The cost of living in a given area can be a major economic driver and will influence local real estate markets in a large way. Understanding this figure can be important for real estate investors looking to conduct due diligence on their property purchases or those who rent properties they own.

In this article, we will explore just what exactly it costs to live in Toronto today, why prices may be going up or down, and ways you can help yourself to afford life in the big city.

What does it cost to live in Toronto?
The amount that a person spends to live in a given area is naturally going to vary from person to person. Each person lives according to their own lifestyle and means, and some may spend far more than others. For this reason, it can be difficult to determine exact figures for the cost of living, though various sources have created estimates based on their own data.

It is also important to know that the cost of living changes all the time, and it isn’t always going up. As prices fluctuate, it can cost more or less to live somewhere on a month-to-month basis. For this reason, data that is even a few months old may not be completely accurate, though it likely doesn’t move so fast as to make it unreasonable to use old data for a ballpark estimate.

With that out of the way let’s look at a few sources of what it costs to live in Toronto.

 

Renting
In the city of Toronto, it is estimated that about half of the population rents the home they live in, meaning rent prices are a major consideration when looking at cost of living. In general, home expenses for renters are some of the largest regular costs they must contend with.

The Toronto Regional Real Estate board tracks rent prices in the GTA on a quarterly basis, with the most recent data release available dating from Q2 of 2022. At that time, the average monthly cost for a one-bedroom apartment was $2269, up from $1887 in Q2 2021.

Rents in Toronto proper were very much on par with the regional average ($2279) while Innisfil reported the highest average monthly rent in the GTA at $2850 for a one-bedroom (though data indicates only 7 such apartments being rented in this period, compared to Toronto’s over 6000).

Recently, Statistics Canada released its most recent census data which reports on average incomes across Canada, though these incomes date from 2020, so they may have increased slightly since. At the time, the average after-tax median income in Toronto was $85,000.

To rent the average one-bedroom apartment for a year would cost about $27,350 or around 32% of this average salary The conventional measure for affordable housing is that it should not cost more than 30% of your income. Based on these figures it is clear that many Torontonians are well into unaffordable territory.

Owning a home
Owning a home may help you to escape the high cost of rent, though you trade that for even higher mortgage carrying costs. This is due in large part to the absolutely massive home prices in Toronto.. At their peak in 2022, home prices hit an average price of above $1.3 million in the GTA.

In recent months, however, prices have begun to fall in many areas, and the current average being reported by TREB is $1,074,754, almost $300,000 less than just months ago. While it may seem that this means the cost of a home has decreased in Toronto, this isn’t exactly true.

The actual price of a home is not the factor that will affect a homeowner most on their monthly bottom line. While home prices have fallen, this has been largely in response to increased interest rates, which actually eroded affordability further for Torontonians. Your home may be cheaper now, but the cost of paying your mortgage will actually have increased.

Down payment costs
Before you can buy a home you need to first surpass the barrier of a large down payment. Remember: On a home greater than 1 million dollars (as many in Toronto are), the minimum allowable down payment is 20%, or about $200,000.

Looking at the median income from before, and assuming a resident could save 10% of their yearly income (on top of the already high rent prices, and ignoring the effects of inflation) it would take them over 20 years to even have enough for a down payment.

Unfortunately, the median income earner in Toronto would likely have a hard time even being approved for a mortgage Toronto given their high prices. According to a recent report from Ratehub.com, a buyer of an average home in the city would need to make over $200,000 a year in order to service a mortgage.

Mortgage costs
Once you buy the home, you need to consider the carrying cost of a mortgage. Assuming a home of $1 million with 20% down and a fixed mortgage at about 5.5%, your monthly payments would cost over $4800 a month. This is before you consider all other costs of owning a home such as utilities, repairs, furniture, and more. With interest rates still rising, mortgage costs may continue increasing even further in the near future.

Property tax
One piece of good news about the city of Toronto is it does have some of the lowest property taxes in the province. Even given the high cost of homes, residents in Toronto pay less property tax than much cheaper homes in other municipalities. The cost is still not negligible, however, at about 0.6% of the value of your home, or around $6000 a year for the average home.

Other expenses
We’ve spent some time looking at the cost of housing in the city of Toronto. Though this is the largest part of most people’s spending, it is only one component of a household’s average monthly costs. Here are some more costs to consider.

Utilities
For most people their home is much more than just a shelter. We must pay for the various utilities that keep our homes comfortable and keep us connected, such as water, gas, electricity, internet, and mobile phones. These costs will vary a lot between homes and lifestyles, but the estimated monthly costs for utilities can add up in the range of $200 – $500 monthly.

While things like internet costs can vary based on individual plans, the rates for utilities like water, gas, and electricity will be the same across most houses in a given area, so your main option for reducing costs will be simply to conserve your usage.

Essential purchases
Then there are also the essentials of everyday life, such as clothing and food costs. Numbeo.com estimates that an average household in Toronto may spend up to another 30% of their monthly income on food and clothing costs.

Unfortunately, things like grocery costs have been on the rise in recent months, however, residents can save money by reducing food waste, opting for low-cost options, and taking advantage of sales and points programs.

Transportation
Finally, another major component of life in the city is transportation. Luckily, those who live within big cities have much better public transit options than in many other areas. Say what you like about the TTC, but you must admit that it is far better than the alternative of no transit at all, such is the case with many rural and remote areas.

With public transit, residens can get around the whole city quite easily via subways stretching from Union Station in Downtown Toronto to the far edges of the city, as well as an extensive system of bus routes. Though the routes in the TTC system cover the city quite comprehensively, everyday riders will inevitably be forced at some point to contend with delays and other headaches that come with public systems.

With a yearly plan, riders can get a discount on their monthly pass and access the TTC network for $143 a month. Without a yearly plan, a monthly transit pass regularly costs $156, and discounts are available for seniors, youth, and post-secondary students. While this can likely be much cheaper than a car based on how much you travel, it may also be much more inconvenient based on your lifestyle.

If you choose to own a car in the city you open yourself up to a whole new range of expenses. The cost of each household’s personal vehicle will vary on a number of different factors including the car you buy, financing costs, your insurance rates, your maintenance needs, and how much you drive. All transportation costs factored in this can easily cost a driver more than $500 a month.

How much do I need to make to live in Toronto?
If you are hoping to live in the City of Toronto or the GTA, figuring out if you have enough money will be a major deciding factor. As mentioned before, the most recent census reports an average median income of $85,000, meaning at least half of the city is at or below this line.

Now, naturally the more you can make the better, and those who are only earning minimum wage will find it much harder to get by than higher earners. Though it may seem intimidating, there are a number of benefits that can make a life in the city comfortable despite the costs.

One such factor would be a large number of housing options, allowing you to split your bills with various roommates (though you will still need to contend with low vacancies). Another benefit is a large number of jobs in the city, many of which are relatively well paying. And finally, options like public transit can help you to reduce expenses that may be harder to reduce in smaller cities and towns.

For those hoping to buy a home, you have a much harder task ahead of you. Saving a large enough down payment will likely be your largest difficulty in buying a home in Toronto, but in order to maintain your mortgage estimates indicate you would need to make a combined household income of over $200,000 or more. Again, similar benefits apply when buying in the city – lots of job options, and many different housing types and areas. If you plan on buying a family home and you work in the city, it may be worth considering becoming a commuter to enjoy less crowded, and less expensive, areas in the region.

Are prices going up in Toronto?
Across the board, the cost of living has generally been increasing in Toronto, like in most of Canada. The way we know this is due to the inflation rate.

Many people think that the rate of inflation is an abstract measure, but in reality, it is based on a well understood formula known as the Consumer Price Index (CPI). The CPI tracks a set basket of everyday costs that reflect the average cost of living. These include things we have mentioned here: food prices, clothing, housing, utilities, transportation, and more.

The CPI is a retroactive measure – it looks back at how prices have risen over a given period, meaning an increase in CPI indicates an actual rise in prices, not a hypothetical future increase.

Even as the Bank of Canada attempts to slow inflation, a lower inflation rate still represents an overall growth in prices. Inflation when kept under control, is not a huge issue – when growth is slower, however, people are able to adjust more easily and wages can keep up with inflation. When inflation is too high, it can quickly become too much to handle, thus recent efforts to slow its pace.

Why is rent increasing?
As mentioned before, the price of rent has been increasing for the last year or so as well. This is due in part to the increased costs of things like utilities and maintenance equipment that increase the costs of running a rental property.

On the other hand, the rise in rent can also be seen as a symptom of supply and demand. The supply of rental inventory in the city is very low, with less than 1% vacancy across much of the GTA. At the same time, the demand for homes is only increasing with the return of many post-secondary students, immigrants, and those wishing to live close to their jobs. There has also been an increase in the rental market from the many people being pushed out of homebuying by increased costs of buying.

Why are home prices falling?
The prices of homes in Toronto have actually been trending down in recent months. The largest cause of this downtrend is the rise of interest rates, which affects how much buyers are able to afford to borrow, putting downward pressure on the sky-high prices seen previously.

However, Toronto real estate has long held value very well. While the city has gone through down periods in the past, it has always turned around eventually, and the upward growth of prices in the city over the long term is a near certainty. Prices may be down temporarily, but they are unlikely to fall so low to be considered anywhere near cheap or even affordable.

Affordability tips for living in Toronto
For those concerned with the rising costs of living in the city, there are luckily some ways that you can help to make your lifestyle more affordable. Short of increasing your income, which is often out of one’s control, the best options are ways to reduce your overall expenses. here are some things to consider:

  • Use public transportation whenever possible if you aren’t already. The cost of gas, parking and car payments can take a serious dent out of your finances.
  • Reconsider your living arrangements. This could include living with roommates to help split bills, moving to a different neighbourhood if you are a remote worker or don’t mind the commute, or even leaving the city altogether if the high housing costs simply aren’t worth it anymore. Living as a single person will usually cost more than living with others.
  • If buying a home, consider looking into first-time home buyer incentives and rebates, such as the land transfer tax rebate that can save you thousands on your home purchase.
  • You may also want to consider alternate housing outside of the popular single-family home. Townhouses and condos are both abundant and much cheaper for example. Another option may be to co-buy with friends and family or live in a multigenerational living arrangement.
  • If you own a home, think about renting out a portion of your property to help offset the costs of your mortgage. This not only helps you to save money but also adds much-needed rental inventory to the marketplace.

Real estate investment trust shares have been under pressure this year due to rising interest rates, which could lead to more price declines. Nevertheless, publicly traded REITs still offer an enticing long-term investment opportunity, according to a Morningstar analyst.

According to Kevin Brown, Morningstar’s senior equities analyst for REITs, the U.S. Real Estate Index, which mostly includes REIT shares, has decreased this year because of the Federal Reserve raising interest rates to combat inflation.

Brown told ThinkAdvisor that the fundamentals for the REIT stocks he monitors have been generally selling at a 20% discount to their fair market value. Still, he believes rising inflation would continue to favor REIT cash flows in 2022, and wrote many companies are expecting record growth.

“I think that the movement out of the REITs because of rising interest rates has been sort of overdone, which is why we think all the names are trading at basically a 20% discount to our fair value estimate,” Brown noted in a recent interview. Fair market value, he noted, is the level Morningstar’s analysts forecast companies will reach in three to five years.

In comparison to the Morningstar U.S. Market Index, which fell by 7.5% through Friday’s close, the firm’s real estate index was down 3.7% during the previous 12 months. However, Brown pointed out that while the market index is unchanged over the preceding three months, the real estate index is down 3.5%.

While share prices may be down, he said the bulk of REITs are generating growth substantially above historical averages and REIT sector operations – including businesses with a focus on self-storage facilities, hotels, healthcare facilities, apartment buildings, single-family rental homes, malls, and shopping centers – are generally thriving.

Since rents are high, REITs in many property sectors have transformed single- and low-double-digit net operating income growth into gains of 15% to 20%; occupancy is reportedly sitting at peak levels, and the businesses have done a good job controlling expenses. Second-quarter earnings reports have shown numbers that are significantly higher than expected.

REIT prices would likely underperform the rest of the market if interest rates kept rising, according to Brown, but this underperformance will correct itself and shares will eventually return to their long-term valuations.

But as with any investment, REITs have risks and rewards, with the advantages involving more than just the potential for long-term price increase. If banks stop lending or severely tighten lending rules, as they did during the 2008–2008 financial crisis, REITs could be exposed to another risk, according to Brown.

He added that “triple net” REITs, which commonly control buildings with corner retailers like drugstore chains and in which the tenant has responsibility for property upkeep, operations, and repairs, are ideal choices for investors looking for good dividends.

These days, the word real estate is often synonymous with structures. Homes, apartments, shops, factories and the like are all often thought of as real estate – but this is really only half the picture. Underneath every building in real estate is the land it rests on, which is itself a valuable asset and an opportunity for investors.

Though it may be a slightly different market with different players, there is just as much interest in buying vacant land in Ontario as there is in buying homes. The biggest appeal for vacant land comes down to its potential: a raw piece of land can be shaped into nearly anything the owner wishes.

For some, this means buying land to build their dream home. Others, like developers, will buy larger plots of land to build whole neighbourhoods or apartment buildings. A third use may be for commercial purposes, buying land for a new warehouse, factory, or shop for your company.

As the literal foundation upon which any building is constructed, the land is clearly important. That’s why it’s crucial when you plan on pursuing a construction or development project to ensure you understand how buying land works and how to choose the right land for you.

Why buy vacant land?
Vacant land can be as sound an investment as any other real estate purchase. Though we have a lot of it in Ontario, land is still a limited resource and will hold its value over the long term.

Vacant land won’t offer investors a lot of cash flow upfront, but there are near limitless options for improvements that can add value to the property. Buying vacant land may be an excellent option for those looking for an alternative to residential investments or someone looking to get into real estate developments.

The three types of vacant land in Ontario
Though empty plots of land may seem all the same to you, there are three distinct classifications of land in Ontario. These are vacant land, raw land, and crown land. These three classifications differ on a few points, such as the cost to buy, the cost to develop, how they are financed, and more.

The first is vacant land, which is land that usually exists within a municipality and has some existing utility services such as power, water, and septic, and is therefore prime for development. As a result, vacant land can be a bit more expensive than other plots.

The second type is raw land. As opposed to vacant land, raw land is almost entirely undeveloped and is usually found in more remote areas. There will be no utility connections, and there may not even be road access. Naturally, this offers great potential but also higher costs of development, and these pieces of land are a bit cheaper.

The final type of land in Ontario is Crown land, which is land owned and managed by the provincial government. In Ontario, 87% of our province is classified as Crown land. Crown land is primarily found in the North, with little Crown land existing south of Sudbury.

Crown land can be either purchased or rented from the government, but there are special processes in place that differ from your standard land purchase. We will cover this in more detail further on. Once you buy or rent crown land, there will also be restrictions on how you can use it.

Buying vacant land
Buying vacant or raw land is a lot like buying a residential property. You can find listings for land through online listing services. After, you may work with a real estate agent to make the purchase, and a bank can help you by financing the purchase. But, buying vacant land isn’t exactly the same as buying any residential property.

When buying land, it is important to consider what you plan to do with it and what properties will work for your purposes. For example, if you are planning on building a home, buying vacant land with existing road and utility access may be ideal, and you may want to purchase near a city of your choice.

Once you know what you are looking for, you can start looking for land listings in your area. Before you purchase anything, you must do some research on the property and local laws.

Unlike a home, it may not always be obvious what you are getting with land, and in terms of construction, there may be local regulations and zoning laws that will need to be accounted for. In some cases, it may actually be legally impossible to build the structure you want on a given piece of land, and you need to be aware of this before you buy.

Buying land often includes a land survey to determine boundaries, a geological survey, a soil test, and more. These are all crucial to determining the viability of your project.

Some real estate agents specializing in vacant and rural land purchases will be an invaluable help in this process, especially if you are inexperienced in the field or new to the area. Your agent may also be able to connect you with other people that will be essential to your land purchase, including land surveyors, real estate lawyers who specialize in vacant land, and developers or builders.

Buying or renting Crown land

Crown land has its own unique process for purchasing or renting that requires you to go through the Ministry of Natural Resources and Forestry. One crucial fact to know is that if you plan to build a residential home on Crown land, you will only be able to buy within the bounds of an existing municipality.

When you are approved to use Crown land, also as Occupational Authority, you will be granted one of the five following documents:

  • A land use permit allows the property to be used for specified activities for up to 10 years but does not offer any ownership or interest in the land. No extensive improvements or developments may be made to the land.
  • A license of occupation is similar to a land use permit but can last for up to 20 years and is transferable between parties (subject to ministry approval).
  • A lease provides exclusive use of the land for as long as the lease is active. With a lease, improvements and developments can be made on the land, and the lease can be used as loan collateral.
  • An easement is a limited lease generally designed for things like the construction of power lines, pipelines or roads. The ministry may sell any land with an easement, but the buyer will be subject to the easement holder’s rights.
  • A freehold letters patent grants the holder of the patent private ownership and use of the land. This is the least restrictive form of occupational authority and is only subject to conditions like road construction rights and mining rights. In addition, the rights granted by a freehold letters patent can be transferred through a sale.

The price of purchasing or renting crown land will be based upon the determined market value of the property. For more information or to apply for disposition of crown land, visit the Ontario government’s page on how to rent or buy Crown land.

Financing for vacant land
Vacant land is generally seen as a less secure loan for lenders due to the lack of any extensive structures that hold value and the fact that borrowers of vacant land aren’t at risk of losing their homes in the event of a default. As a result, a vacant land loan will usually require a higher down payment of 30% to 50%. These loans will also likely have larger interest rates.

Raw land will usually have worse loan conditions than vacant land due to its high cost of development, low potential for returns, and low potential resale value if the bank must execute a power of sale.

Due to their higher risk, you may need to consider multiple lenders before finding one willing to finance your property purchase. This may include alternative lenders and private landlords.

Some buyers who already own a home may choose to instead purchase land with funds from their existing home equity, such as with a HELOC. This will secure the money against your home and allow you to access better interest rates. Other options for financing may include personal loans or seller financing.

Does vacant land have property taxes?

Vacant land within a municipality and remote land will be required to pay some property taxes. Just because there are no structures on the land doesn’t mean that your property won’t benefit from other municipal services such as roads and utilities.

Generally, municipalities have different tax rates for various property types, so your tax rate will differ from your home’s property tax cost. In addition, because there is no home on the property, your tax payment will likely be based on a lower appraised value.

In more remote areas, the province will administer its own Provincial Land Tax that is calculated similarly to a municipal property tax. For more information, see: Do you pay property tax on vacant land in Ontario?

There are also some other taxes and fees to consider on vacant land. One cost to consider when buying vacant land is the cost of land transfer tax, which will need to be paid on all transfers. In addition, some things like HST and capital gains taxes may apply.

Building on vacant land
Once you buy land, you will probably want to build on it. This is a whole other process with many intricacies to consider. However, if you make sure to purchase suitable land to begin with, this will help make things go a lot smoother.

Building a home can take up to two years and will require the help of many different skilled professionals. Your first step should be to shop around for quotes from other builders in your area and try to find a reputable one who you would like to work with.

Conclusion
Vacant land, like any real estate, can be an excellent investment and offers opportunities like no other. With opportunity comes many important decisions that will need to be made to ensure you get the right property for you.

As the foundation where any home is built, choosing the right land in the right area will be one of the most important decisions in any development or construction project. You must conduct thorough research before purchasing land in Ontario.

New home sales in the Greater Toronto Area (GTA) continued to ease in June.

According to a new report from the Building Industry and Land Development Association (BILD), the total new home sales of 1,694 units were down a notable 56% from June 2021 and 52% below the 10-year average.

The data is generated by Altus Group, BILD’s official source for new home market intelligence, and reveals a telling tale of the current climate — one where the frenzied pandemic-inspired real estate drama is decidedly a thing of the past (at least, for now it is).

“New home sales numbers for June reinforced the expected easing of sales from last year’s exceptionally fast pace,” said Edward Jegg, Research Manager at Altus Group. “With interest rates continuing to rise, high inflation, affordability pressures and general economic uncertainty, many buyers are adopting a wait-and-see attitude that is expected to run through at least the summer months.”

 

Sales of new condominium apartments — including units in low, medium and high-rise buildings, stacked townhouses, and loft units — with 1,519 units sold, were down 44% from June 2021 and 36% below the 10-year average. Single-family homes, including detached, linked, and semi-detached houses and townhouses (excluding stacked townhouses), accounted for just 175 units sold, down 85% from last June and 85% below the 10-year average.

While new home sales may be down, prices are up, says BILD.

The benchmark price for new condominium apartments in June was $1,189,894, which was up 12.4% over the last 12 months and the benchmark price for new single-family homes was $1,843,595, which was up 31.2% over the last 12 months.

Total new home remaining inventory increased compared to the previous month, to 11,639 units, comprised of 9,717 condominium apartment units and 1,922 single-family lots, representing 3.5 months and 2.7 months of inventory respectively. A balanced market would have nine to 12 months of inventory.

“While many prospective home buyers in the GTA are delaying purchasing the homes they need in the midst of economic uncertainty, our region’s fundamental challenges around housing supply remain unresolved,” said Dave Wilkes, BILD President & CEO. “Shorter-term demand-side economic conditions and inflationary pressures cool demand but increase the costs of new builds simultaneously. This will continue to impact overall supply. Now is the time for bold decisions by all levels of government to ensure we provide the housing supply and choice future generations of GTA residents will need.”

 

While interest rates have been on the rise for the past few months, the Canadian housing market continued to see price growth during the first six months of this year, according to the latest “Price Per Square Foot” survey by CENTURY 21 Canada.

The increases were particularly notable in suburbs and smaller communities outside metropolitan centres, spurred by a flight from the mounting unaffordability of the Greater Toronto Area and Greater Vancouver regions.

“While some markets have cooled after the boom that occurred during the COVID-19 pandemic, prices overall have continued to remain elevated for the start of the year,” CENTURY 21 said.

Long-term growth is also expected to continue despite fears surrounding higher interest rates.

“The highest point of the boom may have passed, but the trend is still towards higher prices, especially in suburbs where younger and first-time home buyers are looking to escape competitive metropolitan areas now that remote work has become more common,” said Brian Rushton, COO of CENTURY 21 Canada.

Rushton said that more volatility is not out of the question as the full impact of rate hikes will become clearer as the months go on.

“What will be interesting is to compare the data we’ve received from the first half of this year with the data we gather in 2023 to see how the rising rates impact the market for the next six months,” Rushton said.

“We don’t want to get ahead of ourselves, we’re going to keep seeing how the market performs and whether or not it cools down after the frenzy of the past year. With inflation on the rise, folks may be less able to purchase but even a slight dip would only take us to the level of a few years back, possibly the 2018-2019 period.”

 

Today, the City of Toronto announced the launch of an enhanced Home Energy Loan Program (HELP) that will offer zero-interest loans and incentives to help Toronto homeowners make their homes more energy-efficient and reduce the emissions contributing to climate change. The HELP program has been offering low-interest loans to homeowners since 2014.

Currently, homes and buildings are the largest sources of emissions in Toronto, generating approximately 57 per cent of total community-wide emissions, primarily from the burning of fossil fuels (natural gas) for heating and hot water.

For a limited time, through the enhanced HELP program, Toronto homeowners will be able to access:

  • Zero-interest loans of up to $125,000 for terms of up to 15 years; 20-year terms are available for retrofits that include rooftop solar PV, geothermal, new windows and electric heat pumps.
  • Incentives for specific measures including electric heat pumps, which can replace a home’s natural gas furnace and air conditioner; rooftop solar PV and deep retrofits that significantly reduce a home’s emissions.

 

The Government of Canada provided funding to enhance the program through the Green Municipal Fund, administered by the Federation of Canadian Municipalities (FCM), including a loan of up to $9.712 million to fund the zero-interest loans and a grant of up to $4.856 million. A portion of the funds will support the development of training, education and resources for homeowners, contractors and other industry stakeholders, including training for Toronto contractors to become a Net Zero Renovator, qualified by the Canadian Home Builders’ Association.

The new zero-interest loans and incentives will be available until the funding allocated for each is fully subscribed, after which homeowners can continue to access low-interest loans.

Home improvements eligible for financing include electric heat pumps, insulation (attic, wall, basement), upgraded windows/doors, air sealing, geothermal systems, rooftop solar PV, tankless water heaters, solar hot water systems, EV charging stations, battery storage and more.

Eligibility has been expanded to include tax-exempt properties (e.g. non-profit homes, supportive housing, rooming houses) in addition to the currently eligible detached, semi-detached, row/townhouses, and duplex and triplex apartment buildings.

Improving the energy efficiency of homes is one of the most substantial things that homeowners can do to help address the climate emergency. The highest impact measures include replacing a home’s furnace with an electric heat pump (which can provide both heating and cooling), insulating from attic to basement and upgrading windows and doors.

In addition to the loans and incentives available through HELP, homeowners may also be eligible for the federal government’s Canada Greener Homes Grant of up to $5,000.

The City’s HELP program supports the goals and objectives of the City’s TransformTO Net Zero climate action strategy, which set Toronto on a path to reduce community-wide greenhouse gas (GHG) emissions to net zero by 2040, and its Net Zero Existing Buildings Strategy which recognizes the need to transform housing. The accelerated climate strategy was adopted by Toronto City Council in December 2021. Toronto’s net zero target is one of the most ambitious in North America. The HELP program has supported 245 home retrofit projects since it was launched in 2014.

The City’s BetterHomesTO program further supports homeowners with a one-stop website with information about a range of home energy improvements – everything from air sealing and windows to insulation, heat pumps, green roofs and rooftop solar – including tips on what to look for when purchasing, cost estimates, and a list of all of the incentives and rebates available from all sources.

“Improving the energy efficiency of our homes and buildings will be key to reaching our net zero target by 2040 and advancing our TransformTO Net Zero climate strategy. Ongoing investment and action from all levels of government will be required to address the climate crisis and I thank the federal government and FCM for this funding. I encourage Toronto homeowners to take advantage of HELP financing and incentives, as well as the federal Greener Homes grant, to make their homes much more efficient and reduce the emissions that are changing our climate.”
– Mayor John Tory

“Improving energy efficiency and decarbonizing our homes is one of the biggest things that homeowners can do to help address the climate emergency. It will also create a better, more resilient future for our city. I encourage all homeowners to make a plan to improve their homes and explore the loans and incentives available through City’s HELP program and other sources.”
– Councillor Jennifer McKelvie (Scarborough-Rouge Park), Chair of the Infrastructure and Environment Committee

“Today’s $14.5 Million investment will enable the City of Toronto to build on the Home Energy Loan Program’s (HELP) legacy of retrofitting hundreds of homes, in line with Toronto and Canada’s ambitious climate targets. This is a tangible step towards bringing energy efficiency, job creation, and affordability to communities across Ontario and Canada.”
– The Honourable Jonathan Wilkinson, Minister of Natural Resources

“It’s critically important to have everyone in the climate fight. Municipalities across Canada are doing their part with innovative solutions that create jobs and climate resilience. Green infrastructure investments in Canadian communities will make our air cleaner, our economy stronger, and set us on the path to a net-zero future.”
– The Honourable Steven Guilbeault, Minister of Environment and Climate Change

“Energy-efficient homes are more affordable to heat and cool, while reducing emissions and allowing us to adapt to our changing climate. We are working as a partner to our cities to help Canadians make their homes more energy-efficient. “
– Julie Dabrusin, Parliamentary Secretary to the Minister of Natural Resources and to the Minister of Environment and Climate Change, Member of Parliament for Toronto-Danforth

“Municipalities are on the front lines of climate change and climate action, and communities of all sizes are showing climate leadership at a time when we need it most. The Green Municipal Fund empowers them to get results on the ground. We deliver results with our federal partners – supporting cities like Toronto build a greener, more sustainable community, create jobs and helping Canadians make their homes more comfortable and affordable. Together, we are on the path to net zero.”
– Taneen Rudyk, President, Federation of Canadian Municipalities

Although there have been signs pointing to a cooling housing market, Canada’s rental markets have never been hotter as the majority of metro areas went up in monthly value in July, according to the Zumper Canadian Rent Report.

Looking into 23 of the most populous metros, Zumper.com found that 18 metro areas experienced a monthly increase in rent, five experienced a decrease and one remained flat in pricing.

The most expensive markets aren’t too surprising: Vancouver continues to top the list as one-bedroom rent climbed 2.7% to $2,300, while two-bedroom rent remained flat at $3,300.

Next is Toronto, hitting a two-year high with one-bedroom rent at $2,100 and two-bedroom rent at $2,700. Burnaby comes in as the third most expensive, with one-bedroom rent at $2,060 and two-bedroom rent at $2,750.

“The majority of the priciest markets, besides Toronto, have either hit or surpassed their respective pre-pandemic rent prices, which shows that the mounting demand for rentals has not been met with enough supply in many markets,” Zumper said.

Zumper added that the upward trend is expected to continue as employment and interest rates soar amid the “summer moving season.”

Windsor, Quebec and St. Catharines experienced the largest monthly changes in rent price as the 17th, 20th and 11th most expensive cities, respectively. In particular, Windsor saw a 6.3% jump to $1,350 for one-bedroom rent, Quebec a 6% jump to $1,060 and St. Catherines a 5.4% jump to $1,550.

Similarly, Quebec and Windsor take the lead for the largest year-on-year growth, along with Halifax in third place.

The three markets to note a slip in rent prices are Abbotsford, Kelowna and Barrie, falling 6% to $1,400, 5.7% to $1,650 and 5.1% to $1,670, respectively. Meanwhile, Saskatoon is the lone area to remain flat in its monthly one-bedroom rent at $990.

The breakneck pace of new home construction in the Toronto area continued in June, according to new data from the Canada Mortgage and Housing Corporation.

But that could soon be coming to an end, according to some economists.

“Long-term, I think the home construction market is going to remain strong, but the next six to 18 months, there will be some weakness. We’re not going to see numbers like this continue,” said economist Mike P. Moffatt, an assistant professor at Western University’s Ivey School of Business.

Monday, the CMHC said new housing starts in the Toronto area hit 49,860 in June, a 27 per cent rise from May’s 39,381.

Across the country, there are already signs of a housing construction slowdown. Nationally, there were 273,841 housing starts in June, a three per cent drop from May’s 282,188.

Rising interest rates, prompted by the Bank of Canada’s efforts to slow down runaway inflation, will likely prove to be a double-whammy for homebuilders, Moffatt argued.

“Not only are their financing costs for projects going up, there’s also lower demand from consumers,” said Moffatt. “It will be interesting to see what happens in the fall.”

Last week, the Bank of Canada shocked observers by hiking its key overnight lending rate a full percentage point to 2.5 per cent, a huge change from the 0.25 per cent it began the year at. The Bank of Canada also hinted it would need to raise rates again before the year is out.

Most economists and bank watchers had expected an increase of three quarters of a percentage point.

BMO senior economist Robert Kavcic agreed that there could well be a slowdown in construction, prompted partly by rate hikes, but also by falling prices for resale homes.

“The interesting part will be how construction responds to higher interest rates, compressed margins and a clear sharp pullback in resale demand. We could very well start to see some project cancellations and a pullback in activity through next year,” Kavcic said in a research note Monday looking at the CMHC data.

But, he added, there’s no immediate sign that the slowdown in resale housing prices is moving to new-builds.

“All in, unlike the resale market, new building activity is running strong — but this segment of the market lags, so any cracks wouldn’t realistically begin to show in the data until later in the year,” Kavcic said.

On Sunday, Kavcic said the Bank of Canada rate hike is “hammering” the resale market.

“The Bank of Canada’s 100 bp rate hike sets us up for an even deeper correction in housing through next year. The fact that the market had already cracked after the BoC’s initial move in rates only reinforced how sentiment-driven the market was, and how quickly that can change,” Kavcic said.

The lag between the resale market and new home construction is particularly keen in multiple unit buildings such as condos, where builders typically only go forward with construction once the majority of units are paid for, according to Chris Zakher of the CMHC.

“A lot of this was sold pre-construction, so this really reflects demand and sales from two or three years ago,” said Zakher, Toronto market analyst at the CMHC. “This is a lagging indicator.”

Still, even if new home construction dips, there will still be plenty of demand in the long run, argues Phil Soper, CEO of real estate giant Royal Lepage.

Immigration is starting to bounce back to pre-pandemic levels, Soper said. And so are the numbers of international students attending Canadian universities. Both, Soper said, drive demand for condos, in particular. So, too, does the fact that many office buildings are gradually reopening; people who ditched their downtown condos and bought a house with a yard in a smaller city during the pandemic are starting to come back.

“People are coming back to offices, even if it’s two days a week,” said Soper. “And they’re finding it difficult to live in St. John if they’ve got to be in Toronto two days a week.”

 

For first-time home buyers, it can feel intimidating when you want to try and buy a home. Beyond the work of seeing houses and facing competition in the market, you also simply need to have enough money saved to cover your down payment. Many first-time buyers are younger and haven’t had as much time to save or reach their high-earning years in their careers, making even a minimum down payment feel out of reach.

Making enough money for a home will never be easy, but luckily there are some programs to help make it at least a little bit easier for first-time home buyers. One popular program is the Home Buyers’ Plan (HBP), which allows buyers to collect tax savings using their Registered Retirement Savings Plan (RRSP) to fund a home purchase.

The HBP is undoubtedly not a bad option, and many Canadians have used it to help buy their first home. However, it may not be for everyone. You need to be aware of some downsides before you withdraw money from your RRSP to buy a house.

In this article, we will explore funding a home purchase with your RRSP, how it works, and look at some of the advantages and disadvantages of using the Home Buyers’ Plan to buy your first house.

What is an RRSP?
Before you can understand the Home Buyers’ Plan, you need to know how your RRSP works. Hopefully, if you have been contributing to your RRSP, you already know this, but maybe you haven’t begun using an RRSP yet or need a refresher.

In brief, your Registered Retirement Savings Plan (RRSP) is a tax-deferred retirement savings account, so any RRSP contributions you make for the year are deducted from what you owe on taxes. An RRSP is not truly tax-free, as you will need to pay taxes when it comes time to withdraw the money you have saved.

You also will not be taxed on any capital gains made within the account, such as through investments, as long as the gains remain within the account. The idea is to help Canadians save money while they are in their prime earning years while also getting a tax break and then withdraw it in retirement when your marginal tax rate is lower.

As long as your RRSP isn’t locked-in, you can still withdraw the money whenever you want, but you will simply need to pay taxes on the amount like any other income. You will also lose any contribution room used when you put the money into the account.

RRSPs are one of Canada’s most popular registered accounts, so many people have a lot of money saved within one. If you are many years from retirement, it can be tempting to dip into a bit of that money, especially if you want to buy a house. Luckily, the CRA provides you with an option to do just that.

What is the RRSP Home Buyers’ Plan?
The Home Buyer’s Plan is a federal program designed to help Canadians buy their first home with funds from their RRSP. Under the home buyers plan, you can use money from your RRSP while still enjoying the tax savings. However, there are some significant limitations to this option.

How much you can withdraw
First, your withdrawal under the home buyer’s plan is limited to $35,000 per buyer. Your spouse may also withdraw that amount for the same home purchase, allowing you up to $70,000 for your down payment. You also need to have saved that money in the first place unless you choose to go with an RRSP loan.

The amount you withdraw does not incur any taxes and can be put toward a home purchase. When withdrawing money through your Home Buyers’ plan, you will need to provide your financial institution with a T1036 form indicating the purpose of the withdrawal. Otherwise, it may not count towards your HBP loan, and you may end up paying tax on the money you take out.

Repayment rules
Using the home buyers plan, you have 15 years to pay back the amount, with a one-year grace period before repayment starts. You will not need to pay interest, and because the value of the loan and the repayment period are fixed, you will have the same yearly payment for the entire 15 years. If you withdrew the maximum amount under the home buyers plan, you would pay about $2,333 per year for 15 years or around $194 per month on top of your mortgage.

Paying your Home Buyers plan loan will not affect your RRSP contribution limit, as the money has already technically been contributed. This means you can still contribute your yearly amount on top of your loan repayment. However, any amount you repay on the loan is not deductible, as you already saved the tax on those dollars when you first contributed them to your RRSP.

The penalty for missed repayment on a Home Buyers plan loan is not very severe. When you fail to make a payment towards your Home Buyers plan loan, the missed payment amount will simply be treated as any other withdrawal from an RRSP and will be counted as taxable income for the year. Your principal still goes down, and you will simply owe more come tax season.

Also, be sure to designate any repayments as such, or you risk the Canada revenue agency counting it as a regular contribution. This can lead to you missing your payment and potentially exceeding your contribution limit.

Who is qualified for the Home Buyers’ plan?
To take advantage of the Home Buyers’ Plan, you must meet some qualifying criteria. First and most obviously, you will need to be a first-time home buyer, meaning you or your spouse have not owned a home in the last four years.

You will need to be a Canadian citizen or permanent resident, and you will need to withdraw funds all at once or in multiple installments within a single calendar year. You must use the money for a home purchase, so you can’t spend it on just whatever you want. The funds you withdraw must also be in your RRSP account for 90 days prior to withdrawal, which will be essential to know if you are borrowing or being gifted money into your RRSP.

You must also occupy the home you plan to buy, so you can’t use the Home Buyers Plan to buy an investment property you won’t live in.

Advantages of using the Home Buyers Plan
There are clear advantages to using the Home Buyer’s Plan to buy a home.

For one, it allows you to save income tax on a significant amount of your down payment, which can mean a lot of extra money in your pocket. It is also an interest-free loan, meaning the amount you borrow is the amount you will pay without any added costs. Finally, you have a long time to pay it back, meaning not only is the financial impact spread out, but you also still get to have that money in your RRSP when it comes time to retire.

Disadvantages to using the Home Buyers Plan
Savings required
One of the biggest issues with using the Home Buyer’s Plan is that it requires a significant amount of savings to be most beneficial. Those with an extra $35,000 saved can make the most of the Home Buyers’ Plan. The higher your income, the more you can save, and your income tax rate will be higher, making the HBP’s advantages even greater. However, for those who make less and save less, the benefits of the Home Buyers’ Plan will be reduced.

Long term loan
The Home Buyers’ Plan repayment is fixed at 15 years, meaning you commit yourself to a long-term loan repayment schedule. This means 15 years of increased home costs and 15 years when you could potentially miss your repayment and be charged taxes.

This may also be a problem if you plan to retire and use your RRSP within 15 years. The one upside is that you can prepay early for no penalty.

Missing out on RRSP income
Saving into your RRSP is one thing, but making the most of it is another. Many people choose to invest in their RRSP. When it comes to investing, it’s always best to have as much as possible as early as possible to take advantage of compound interest. Though retirement may seem far away, the number of years until you retire are limited, and every year counts in investment growth.

By taking $35,000 out of your RRSP, you miss out on the potential growth of that money if it were invested. Though it will be back in your account after 15 years, that’s 15 years you missed out on investment growth. On the other hand, this money is technically being invested in your home, so you may still see some returns. This is not necessarily a downside, but you must consider where your money is best spent based on your expected investment returns and personal goals.

Repaying your Home Buyer’s Plan loan may also limit your ability to continue contributing to your RRSP further, leading to years of playing catch up. In this case, you would also be missing out on the tax benefits of the RRSP for future years.

Is it right for me?
Though there are downsides to using the Home Buyer’s Plan to borrow from your RRSP, they are far from deal-breakers. The Home Buyers plan will not be for everyone, but it is an excellent option for some. The person who will get the most out of the home buyers plan is anyone with a large amount of savings already in their RRSP and who makes a significant income.

This means that you will be able to withdraw the maximum amount and benefit most from the tax savings of having contributed. In addition, a high income will help with repayment and allow you to contribute at the same time, allowing you to continue making tax deductions.

As your savings amount and income go down, so does the feasibility of the Home Buyers’ Plan. However, it may still be a good idea if you expect your income to increase in the coming years. You can save the taxes now, and your loan will become even easier to service over time, meaning there are few downsides if you keep on top of your payment schedule.

Suppose you are deciding between using the Home Buyers’ Plan or withdrawing directly from your RRSP and paying the tax. In that case, it will be in your best interest to use the HBP as you can retain the contribution room by repaying the plan, which is not an option with a straight withdrawal.

If you are considering using the Home Buyers’ Plan for your first home purchase, consider talking to a tax professional or financial advisor. They can offer you a more in-depth understanding of how the program can benefit your particular financial situation.

The topic of housing supply isn’t front and centre of the affordability discussion like it was just a few months ago.

Despite housing affordability in the first quarter posting its worst decline “in a generation,” according to recent data from National Bank of Canada, the public’s focus is now squarely on inflation, rising interest rates and falling home prices.

And for good reason. Inflation is at a 30-year high, mortgage rates have more than doubled from their record-lows of last year and the average national home price is down 8%, as of April, from its February peak. In many local markets, prices are down well in the double-digits.

However, the lack of new housing supply remains the root cause of housing un-affordability in Ontario. At least that was the consensus of a virtual panel discussion last week hosted by Teranet.

Its panelists included Tim Hudak, CEO of the Ontario Real Estate Association (OREA), Jason Mercer, chief market analyst for the Toronto Regional Real Estate Board (TRREB), and Joe Vaccaro, founder and president of RIOS Real Estate Operating System.

All three were in agreement that new housing construction isn’t keeping up with demand, in large part due to the province’s rapidly growing population.

“Most new Canadians want to be in the Greater Golden Horseshoe because it’s where the opportunity is,” said Mercer. “Also, unlike previous generations of immigrants, today’s new Canadians are coming with education and money to invest in homeownership. So, the market is getting bigger every year and the supply doesn’t change.”

Ontario welcomed 107,865 immigrants between July 1, 2020, and June 30, 2021, and that was down from the previous year due to COVID restrictions. In 2019, over 150,000 people moved to Ontario.

Hudak reminded the panel that demand pressures aren’t just being felt in the GTA.

The topic of housing supply isn’t front and centre of the affordability discussion like it was just a few months ago.

Despite housing affordability in the first quarter posting its worst decline “in a generation,” according to recent data from National Bank of Canada, the public’s focus is now squarely on inflation, rising interest rates and falling home prices.

And for good reason. Inflation is at a 30-year high, mortgage rates have more than doubled from their record-lows of last year and the average national home price is down 8%, as of April, from its February peak. In many local markets, prices are down well in the double-digits.

However, the lack of new housing supply remains the root cause of housing un-affordability in Ontario. At least that was the consensus of a virtual panel discussion last week hosted by Teranet.

Its panelists included Tim Hudak, CEO of the Ontario Real Estate Association (OREA), Jason Mercer, chief market analyst for the Toronto Regional Real Estate Board (TRREB), and Joe Vaccaro, founder and president of RIOS Real Estate Operating System.

All three were in agreement that new housing construction isn’t keeping up with demand, in large part due to the province’s rapidly growing population.

“Most new Canadians want to be in the Greater Golden Horseshoe because it’s where the opportunity is,” said Mercer. “Also, unlike previous generations of immigrants, today’s new Canadians are coming with education and money to invest in homeownership. So, the market is getting bigger every year and the supply doesn’t change.”

Ontario welcomed 107,865 immigrants between July 1, 2020, and June 30, 2021, and that was down from the previous year due to COVID restrictions. In 2019, over 150,000 people moved to Ontario.

Hudak reminded the panel that demand pressures aren’t just being felt in the GTA.

 

The construction of office space is declining in Canada amidst runaway inflation increasing construction costs.

A new report from Colliers Canada has found that although the number of under-construction offices is still very robust, with more than 15.7M sq. ft being built, that number is down from its earlier peak.

The office space that is going up is largely concentrated in downtown Toronto and Vancouver, Colliers notes. And there’s plenty of interest for it in those markets. In Toronto, downtown office occupancy is up 24%, compared to just 7% at the beginning of the year. And as the report states, employee attitude towards both travel and work safety has improved.

“Coupled with the warmer weather, this has led to a renewed vibrancy in the streets of the downtown core,” the report reads. “In the face of uncertainty regarding hybrid work, tenants have turned to experts in real estate and design to explore options for creating appealing and functional spaces for their employees, with flexibility and future-proofing at the forefront of tenants and designers’ minds.”

In Vancouver, demand is outpacing office supply, pushing the city’s office vacancy rate to fall to 5.8%.

“Larger office tenants form the most active segment but face a limited number of available options which continues to shrink,” the report reads. “Smaller tenants appear to be taking a wait-and-see approach as larger companies navigate the complexities of return to office strategies.”

But not everyone is jumping right back into the office real estate market. As the report says, the three already-implemented Bank of Canada interest rate hikes are causing significant drains on people’s wallets, giving pause to tenants and investors alike.

“Both tenants and investors have felt the impacts of the recent Bank of Canada interest rate hikes and their effects on consumer spending,” the report reads. “Tenants who do not have immediate space needs are taking the ‘wait and see’ approach to leasing, while higher interest rates have increased the cost of borrowing, leading to a smaller pool of buyers.”

Canada’s industrial market is similarly on the rise, experiencing a “bull run driven by fulfillment centres,” the report says. Across the country, rents are rising and vacancy has dropped below 1%. In major markets, the vacancy rate is even lower, hitting a minuscule 0.1% in Vancouver and 0.2% in Toronto.

Industrial rent prices are also on the up and up, rising 30% annually in some markets. In the Greater Toronto Area in particular, asking rental rates are up 35% year over year. Colliers notes that typically in the past, net rental rates would be discounted if tenants leased more space, but that discount is being offered much less frequently, if at all.

A new report from the Canada Mortgage and Housing Corp. says the country’s housing stock would need to climb to over 22 million units by 2030 to achieve affordability for everyone living in Canada.

The housing agency notes that two-thirds of the supply gap is found in Ontario and British Columbia, two markets that have faced major declines in affordability.

Around 2003 and 2004, an average household would have had to devote close to 40 per cent of their income to buy an average house in Ontario, and close to 45 per cent in British Columbia. As of 2021, that number is close to 60 per cent.

The report says additional supply would also be required in Quebec, as affordability in the province has declined over the last few years.

Achieving housing affordability for everyone in Canada will require developers to become more productive and make full use of land holdings to build more housing, CMHC says.

The agency also says governments must make regulatory systems faster and more efficient as well.

 

Developers could cancel the construction of approximately 5,000 new condominium units in Toronto in response to rising material and labour costs, an analysis conducted by the real estate research firm Urbanation has found.

Urbanation President Shaun Hildebrand shared the results of the analysis with CP24 on Tuesday.

He said building costs that are up approximately 20 per cent year-over-year are now rising “much faster” than real estate, which could result in some projects “no longer being economically feasible to proceed with.”

Rising labour costs amid record low unemployment are also a factor, according to Hildebrand.

“This is being exacerbated by supply chain issues caused by the pandemic and the war in the Ukraine and it is contributing to very, very strong increases in costs to the point now where construction costs for condos are up 20 per cent year-over-year and they are growing much faster than prices,” he said. “It is not just the 5,000 units that are already in the market that could cancel, it is all of the projects that should have launched over the next little while that are no longer going to be entering into the market. So that puts the supply squeeze not only on today but years down the line when these projects ultimately get delivered.”

Real estate prices have already started to soften amid an aggressive interest rate tightening cycle being taken by the Bank of Canada.

Hildebrand said that Toronto has been in the midst of a “condo boom” for some time, so overall supply should remain strong with about 87,000 units currently under construction and 33,000 more in the pre-construction stage.

But he warned that there will be some “collateral damage” due to the fact that “costs are rising very quickly at a time that prices are starting to soften.”

In that case he said that buyers will be entitled to have their deposits returned to them under Ontario law, but not necessarily with appreciation.

“Unfortunately, it could be years between when that deposit is paid and when they actually get their money back and in the interim prices could have escalated quite a bit and they are not usually able to get that appreciation from that deposit, which in some cases shoves the purchasers out of the market,” he said.

Data from the Toronto Region Real Estate Board has previously suggested that home prices have now fallen for three straight months. The average price of a Toronto home was, however, still up 10 per cent year-over-year in May.

These Are 10 of the World’s Least Affordable Housing Markets

It’s become increasingly difficult for middle-class families to purchase a home over the last few years—and the global pandemic has only made things worse.

According to Demographia’s 2022 Housing Affordability Report, the number of housing markets around the world deemed “severely unaffordable” increased by 60% compared to 2019 (prior to the pandemic).

This graphic looks at some of the least affordable housing markets across the globe, relative to median household income. The report covers 92 different cities in eight nations: Australia, Canada, China, Ireland, New Zealand, Singapore, the United Kingdom, and the United States.

The Least Affordable Housing Markets
Before diving in, it’s worth outlining the methodology used in this report, to help explain what’s classified as a severely unaffordable housing market.

To calculate affordability, a city’s median housing price and divided by its median household income. From there, a city is given a score:

  • A score of 5.1 or above is considered severely unaffordable
  • 4.1 to 5.0 is considered seriously unaffordable
  • 3.1 to 4.0 is considered moderately unaffordable

All the cities on this graphic are classified as severely unaffordable⁠—and, for the 12th year in a row, Hong Kong takes the top spot as the world’s most unaffordable housing market, with a score of 23.2.

One reason for Hong Kong’s steep housing costs is its lack of supply, partly due to its lack of residential zoning—which only accounts for 7% of the region’s zoned land. For context, 75% of New York City’s land area is dedicated to residential housing.

Sydney moved up one spot this year, making it the second most expensive city to purchase a home on the list, with a score of 15.3. Besides Hong Kong, no other city has scored this high in the last 18 years this report has been released.

There are several theories for Sydney’s soaring housing rates, but industry expert Tom Forrest, CEO of Urban Taskforce Australia, boils it down to one fundamental issue in an interview with Australia Broker—supply isn’t keeping up with demand:

“Housing supply has been consistently not meeting demand in the Greater Sydney and across regional New South Wales…if you have supply consistently not meeting demand then the price will go up. That’s what happened and we’re seeing it in abundance.

”TOM FORREST, CEO OF URBAN TASKFORCE AUSTRALIA

The COVID-19 Impact
Middle-income earners were already feeling the squeeze prior to the global pandemic, but COVID-19 only exacerbated housing affordability issues.

As people began to work from home, high-income earners started to look for more spacious housing that wasn’t necessarily in the city center, driving up demand in suburban areas that were relatively affordable prior to the pandemic.

At the same time, supply chain issues and material costs impacted construction, which created a perfect storm that ultimately drove housing prices up.

But with interest rates rising and COVID-19 restrictions easing around the world, some experts are predicting a market cool down this year—at least in some parts of the world.

House prices are set to continue falling across Canada as a result of the current market cooldown, with the only question being by how much, according to a well-known economist.

Benjamin Tal (pictured), deputy chief economist at CIBC World Markets, told Canadian Mortgage Professional that the decline in value was likely to be most evident among low-rise properties, although he said that should be taken in the context of skyrocketing price appreciation in recent years.

“I think [prices] will go down in the low-rise more significantly than in the condo space. It depends where you live, what kind of neighbourhood, but you can see that low-rise is already down by roughly 15-20%, and that’s something that might continue,” he said.

“Remember, we’re talking about extremely elevated levels where prices went up by 50% in two years – so to see a decline of 15-20% is not crazy when interest rates [are] rising as quickly.”

As interest rates rise across the board, and with the Bank of Canada having introduced sizeable recent hikes to its benchmark policy rate, home sales figures have tailed off significantly in many of the country’s main markets.

That’s been accompanied by the first drop in the national home price index since April 2020, by 0.6% between March and April to around $866,700, with Southern Ontario markets such as London and Cambridge posting some of the most marked declines (4% and 3.9% respectively, said the Canadian Real Estate Association).

A new analysis by RBC Economics’ Robert Hogue indicates that recent central bank rate hikes have cooled homebuyer sentiment and are likely to negatively impact home prices in the long run.

“Interest rate hikes [are] straining affordability and weighing on property values, especially in expensive markets,” Hogue said.

House prices are set to continue falling across Canada as a result of the current market cooldown, with the only question being by how much, according to a well-known economist.

Benjamin Tal (pictured), deputy chief economist at CIBC World Markets, told Canadian Mortgage Professional that the decline in value was likely to be most evident among low-rise properties, although he said that should be taken in the context of skyrocketing price appreciation in recent years.

“I think [prices] will go down in the low-rise more significantly than in the condo space. It depends where you live, what kind of neighbourhood, but you can see that low-rise is already down by roughly 15-20%, and that’s something that might continue,” he said.

“Remember, we’re talking about extremely elevated levels where prices went up by 50% in two years – so to see a decline of 15-20% is not crazy when interest rates [are] rising as quickly.”

As interest rates rise across the board, and with the Bank of Canada having introduced sizeable recent hikes to its benchmark policy rate, home sales figures have tailed off significantly in many of the country’s main markets.

That’s been accompanied by the first drop in the national home price index since April 2020, by 0.6% between March and April to around $866,700, with Southern Ontario markets such as London and Cambridge posting some of the most marked declines (4% and 3.9% respectively, said the Canadian Real Estate Association).

A new analysis by RBC Economics’ Robert Hogue indicates that recent central bank rate hikes have cooled homebuyer sentiment and are likely to negatively impact home prices in the long run.

“Interest rate hikes [are] straining affordability and weighing on property values, especially in expensive markets,” Hogue said.

House prices are set to continue falling across Canada as a result of the current market cooldown, with the only question being by how much, according to a well-known economist.

Benjamin Tal (pictured), deputy chief economist at CIBC World Markets, told Canadian Mortgage Professional that the decline in value was likely to be most evident among low-rise properties, although he said that should be taken in the context of skyrocketing price appreciation in recent years.

“I think [prices] will go down in the low-rise more significantly than in the condo space. It depends where you live, what kind of neighbourhood, but you can see that low-rise is already down by roughly 15-20%, and that’s something that might continue,” he said.

“Remember, we’re talking about extremely elevated levels where prices went up by 50% in two years – so to see a decline of 15-20% is not crazy when interest rates [are] rising as quickly.”

As interest rates rise across the board, and with the Bank of Canada having introduced sizeable recent hikes to its benchmark policy rate, home sales figures have tailed off significantly in many of the country’s main markets.

That’s been accompanied by the first drop in the national home price index since April 2020, by 0.6% between March and April to around $866,700, with Southern Ontario markets such as London and Cambridge posting some of the most marked declines (4% and 3.9% respectively, said the Canadian Real Estate Association).

A new analysis by RBC Economics’ Robert Hogue indicates that recent central bank rate hikes have cooled homebuyer sentiment and are likely to negatively impact home prices in the long run.

“Interest rate hikes [are] straining affordability and weighing on property values, especially in expensive markets,” Hogue said.