Thursday, February 25, 2010

Provincial Land Transfer Tax and HST

Since the concept of harmonizing the provincial PST with the federal GST was first announced by the Ontario government, the Ontario Real Estate Association (OREA) has been aggressively opposed to the proposal on the basis that it will make the prospect of home ownership more difficult for Ontario residents.
In addition to the estimated $1,500 in additional taxes that home buyers will on average incur upon the completion of a home purchase, there is also the added burden of additional taxes on the ongoing operational costs of a home. It is estimated that the annual hydro cost per home will increase by $100 and the annual cost for natural gas will go up by $125 driven by the combining of the two taxes into the new HST which takes affect July 1st of this year.
To offset the increased taxes resulting from the onset of HST, OREA is proposing that the province reduce the provincial land transfer tax that is payable by buyers on the closing of their home purchase.
The median home price in Ontario for 2009 was just over $318,000. Currently, the provincial land transfer tax payable is 0.5% on the first $54,999 of value, 1.0% from $55,000 to $250,000 and 1.5% on $251,000 to $400,000. The land transfer tax payable on that median purchase transaction of $318,000 would be $3,250. Under the OREA proposal no tax would be payable on the first $55,000 of value and the 1.0% and 1.5% tax brackets would be reduced by 0.5% each. The resulting land transfer tax payable under this new format would be $1,658 a saving of $1,591.
I guess the $64,000 question is will $1,500 in additional taxes resulting from the implementation of HST on July 1st deter buyers from fulfilling their dream of home ownership. I suspect that $1,500 is probably a fairly common monthly payment for many people in Ontario currently paying rent or making a mortgage payment. As such in the overall scheme of things it's not a pile of money.
The OREA proposal is admirable and it is estimated it would cost the province about $311 million annually in lost tax revenue. At the same time if its implementation would enhance home ownership across the province, other tax revenue would be realized as a result. On average, studies show that home buyers in Ontario spent approximately $32,000+ in the 3 years following a property purchase. This includes money spent on appliances, landscaping, and other improvement costs and services. Whether OREA's proposal is seriously considered or not, only time will tell if the implemnentation of the HST on July 1st will harm the current resurgence of real estate sales activity across the province.
Share your opinion by completing our current online poll.

Wednesday, February 24, 2010

Great Lakes Water Level Update

Back in December the International Joint Commission studying the impacts on water levels in the Great Lakes issued their summary report. For anyone with concerns regarding the low water levels in Georgian Bay, the summary recommendations or lack thereof were somewhat disappointing.

In summary, the report found that the water level in Lakes Michigan and Huron which includes Georgian Bay have declined approximately 9" from 1963 to 2006. Erosion of the St. Clair River bottom whose increased flow rate has long been felt as one of the major contributors to these low water levels has in fact been relatively stable now for a number of years. In total, the change in water carrying capacity of the St. Clair River is the estimated cause for 2.8" to 5.5" of the aforementioned 9" decline.

The second component of the decline is allegedly caused by a phenomena known as glacial isostatic adjustment. In layman's terms, the earth's crust is expanding (rising) which gives the impression that the water level is decreasing. Glacial isostatic adjustment is particularly pronounced in the area around Georgian Bay and accounts for 1.6" to 2" of the 9" water level decrease.

Lastly and most importantly is the change we are experiencing in climatic patterns ie: global warming. These changes have become more significant in recent years and is said to represent up to 76% of the decline in water levels between 1996 and 2005. Overall. the affect is 3.5" to as much as 6.7" of the total 9" decline that has taken place.

For the time being, no remedial actions of any significance are going to be implemented. Additional studies are ongoing and we can expect these to examine such issues as the St. Clair River, water flow from Lake Superior into Lakes Michigan and Huron as well as other factors.
For those interested copies of the report are available at the following link:

The next public meeting scheduled for our area is: March 22, 2010 at 7:00pm. North Simcoe Sports and Recreation Centre 527 Len Self Blvd, Midland.

Friday, February 19, 2010

MLS® - What's at Fault, The System or The People?

A great deal of media attention has arisen of late about how the Competition Bureau has decided to bring a case to the Competition Tribunal charging that the rules of The Canadian Real Estate Association (CREA) governing MLS® systems are anti-competitive, restrict consumer choice and prevent innovation in the market for residential real estate.
Canadian consumers are very fortunate to have an MLS® system that is universally recognized nationwide. If you live in Vancouver or for that matter anywhere in the world and are being relocated to Toronto or you want to purchase a recreational or farm property in Canada, you need look not further than the Canadian Real Estate Association's online consumer website for MLS® property listings across Canada. Such a system does not exist in the U.S. for example where there may be multiple MLS® systems within a given state making it much harder for consumers to real estate shop online. MLS® rules govern how properties are listed on the service with the intent of ensuring that the integrity of the information that is available to consumers is complete and accurate. The fact that a home is listed on a real estate Board’s MLS® system provides an assurance to the public that the information regarding properties listed on Boards’ MLS® systems is accurate and reliable and that there is professional involvement and accountability for that information - all of which protects the interests of home buyers and sellers. Nowhere in the MLS® rules does it state what fees or commissions are to be charged. These are now and have always been negotiable between the seller and their listing REALTOR®. Further, REALTORS® are often required to make concessions in the commission payable in order to bring buyers and sellers together that are deadlocked over price.
There are many aspects to the MLS® issue and the action being taken by the Competition Bureau. If consumers were to be asked to render an opinion on MLS® I suspect that very few would describe it as anti-competitive. As is evidenced in the many comments being made by consumers on media websites, the major complaint is one of "value." Many consumers, far too many in fact have had a bad real estate experience. Their REALTOR® was inattentive to their needs, failed to follow-up as promised, failed to provide accurate information with respect to a specific property(s) and so in. In short, the consumer did not receive good value relative to the fee or commission that was paid to the REALTOR(S)®.
The Canadian Real Estate Association conducted a consumer survey some time back asking consumers what they looked for in a REALTOR®. Although the comments and opinions were widespread and varied, they all came down to one thing, value. As REALTORS® we must be knowledgeable both about the market and the product, professional in appearance and demeanor, possess a high degree of integrity, be hardworking and most importantly, place our clients needs and interests above all else. After all, we are being entrusted with handling the largest most valuable asset that most consumers will ever own and as such, it's not unrealistic to have high expectations of the person involved with the sale or purchase of that asset.
Far too often consumer's expectations are not being met. Their dissatisfaction being expressed on blogs and news sites is not the fault of MLS®, it's the fault of some of the people involved in the profession.
My Home Cents© Help Tip entitled "Selecting and Working With a REALTOR®" has some valuable points in helping you select a REALTOR® to handle your buying and selling needs. As consumers all any of us really want is good value for money spent. The real estate community has at times failed to live up to consumer expectations in this regard and rather than blame the system as in MLS®, we need look no further than at some of the people involved.

Wednesday, February 17, 2010

Tougher Mortgage Rules - What do They Mean For You?

Worried about the over-heated housing market in some areas of the country and committed to curbing too much consumer debt, federal Finance Minister Jim Flaherty yesterday announced measures to tighten Canada's mortgage rules.
Variable rate mortgages currently at historically low rates are allegedly causing some consumers to pile on too much debt. When interest rates rise and sooner or later they will, some consumers need to be protected from themselves, something which the U.S. government arguably failed at miserably. Increased interest on a variable rate mortgage can be crippling down the road if safeguards are not put in place now. Placing a second or third mortgage on your home or taking a significant mortgage amount with a low variable rate when buying to free up cash to buy a new F150 pickup or boat as our neighbours to the south commonly did is a recipe for disaster.
In summary, the rules news are as follows:
  • Borrowers must be able to qualify for a 5-year fixed rate mortgage.
  • When refinancing their home, borrowers can only finance up to 90% of the property's value, previously it was 95%.
  • Insured mortgages being taken out for speculative real estate purchases which will not be lived in by the owner will now require a 20% down payment up from the previous 5%. If however a buyer is purchasing a multi-unit rental property and intends to occupy one of these units, the 20% rule does not apply.
  • Unchanged is the fact that mortgages with a 35 year amortization period are still available and a 5% down payment is possible for those homeowners who plan to live on their properties.

How these new rules will affect the local market remains to be seen. Those purchasing a property for use as their primary residence will not be adversely affected. Those looking to purchase and mortgage a recreational condo, chalet or other area property not to be used as their primary residence will no doubt encounter some increased scrutiny by the banks.

In recent months we have seen an increase in the number of power-of-sale listings throughout this area. Ironically the most notable of these have been at the upper end of the market with two sales in 2009 well over the $1 million mark. Typically, power-of-sale properties are no bargain. By the time the mortgage is in default, the bank(s) is in so deep they need everything cent they can ring out of the place.

All in all these new rules are a positive step in helping to maintain a state of sensibility especially in markets like Toronto where bidding wars and sale prices well above the listed price have again become commonplace. We have seen little of this foolishness in our market with supply and demand serving to keep a rein on buyers overpaying and over-extending themselves.

Wednesday, February 10, 2010

January Real Estate Sales Continue to Show Strength

Sales of area real estate in January continued to show the same strength and momentum that we experienced in the last quarter of 2009. Sales for the month as reported through the MLS® system of the Georgian Triangle Real Estate Board totaled $20.5 million as compared to $13.1 million in January 2009, an increase of 55%. Individual property sales for the month showed the same trend also up 55% with 81 properties changing hands as compared to just 52 one year ago.

Whether or not we are fully emerging from the latest recession remains to be seen but one thing is certain, consumer confidence remains high and with interest rates still at record lows, buyers are once again looking a properties and moving forward with their purchasing goals.

New listing activity has tapered off somewhat as have the number of expired listings as many sellers, unrealistic with their pricing expectations are electing to remove their homes from the market. The average residential price in January dipped 4.2% from $294,401 one year ago to $282,128 this year. Most if not all of this decrease in average price is attributed increased sales at the lower end of the market which saw sales in January below $200,000 increase by 46% while sales between $200,000 and $350,000 increased by 74% compared to the same month last year.
Overall we are off to a much more positive start with respect to area sales this year. Are we over the hump? Well that remains to be seen but one thing seems certain, at this point real estate seems to be the key area which is leading us out of the current economic doldrums. Seemingly over heated markets such as Toronto are causing some to put pressure on the federal government to tighten the lending requirements. While this may not affect mortgage rates, it will affect the availability of money to those who do not fully qualify.

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