Residential

Ever wondered who resolves these types of problems?

Program

First-time home buyers may be eligible for a 15 per-cent income tax credit
for closing costs.

Details

• To assist first-time home buyers with the costs related to the purchase of a home.
• The First-Time Home Buyers’ Credit (FTHBC) provides a 15 percent credit on a maximum of $5,000 of home purchase costs (e.g. legal fees, land transfer taxes, etc.), meaning maximum tax relief of $750.
• Applicable to first-time buyers purchasing a home closing after January 27, 2009.
• The FTHBC is claimable for the taxation year in which the home is acquired.
• An individual will be considered a first-time home buyer if neither the individual nor the individual’s spouse or common-law partner owned and lived in another home in the calendar year of the home purchase or in any of the four preceding calendar years.

For more information contact us today: 416-648-4080 or visit www.fin.gc.ca

Program

You may be eligible to claim a rebate for a part of the GST you pay on the purchase price or cost of building your home if:

• you buy a new or substantially renovated home (including the land or if you lease the land) from a builder
• you buy a new mobile home (including a modular home) or a floating home from a builder or vendor
• you buy a share of capital stock of a co-operative housing corporation
• you construct or substantially renovate your own home, or carry out
  a major addition (or hire another person to do so) or
• your home is destroyed in a fire and is subsequently rebuilt.

Details

• Resale homes are exempt from the GST.
• New homes are subject to the GST. New home buyers can apply for a 36% rebate of the GST applicable to the purchase price to a maximum of $6,300 for homes costing $350,000 or less before GST.
• For new homes priced between $350,000 and $450,000 before GST, the GST rebate would be reduced proportionately.
• New homes priced $450,000 before GST or higher would not receive a rebate.

NOTE: In the Greater Toronto Area, most builders include the GST in the price of the house, and any rebate would be assignable to the builder as they would be absorbing the net GST cost.

The purchase price of your home is only one of the costs you’ll encounter. Here are other possible costs you need to consider:

• Mortgage loan insurance: If you are putting less than 20 per cent of the house value down, you’re going to need mortgage loan insurance. Depending on the lender, the premium can be added to mortgage payments.
• Appraisal fee: Lenders typically loan a percentage of the home’s purchase price or the market appraisal of the property. Cost depends on the size and complexity of the assignment.
• Land survey: The lender may ask for a current survey or certificate of location before signing off on the loan. There can be a substantial cost for having a new survey done on the property.
• Deposit: A deposit normally goes with the formal offer to purchase.
• Insurance: The lender will require proof of property insurance for the replacement value of the house and its contents from the day you take ownership.
• Title insurance: Provides coverage in case of problems with the property title among other things. The cost is relatively low, usually a few hundred dollars.
• Application fee: Some lenders will pass on the cost to process your application. These fees vary and some lenders will waive entirely if you have other accounts with them.
• Mortgage broker’s fee: If you use a mortgage broker, a fee may be charged to arrange a mortgage on your behalf.
• Home inspection fee: An inspection protects the buyer by revealing any problems in the property that you’d want to know before you move in.
• Legal fees: You can save some of the legal fees usually charged by the lender if your lawyer draws up the mortgage. You’ll also pay for disbursements which are the costs involved in drawing up the title deed, conducting a title search, and preparing and registering the mortgage.
• Land Transfer Tax: Use the land transfer tax calculator to calculate both your Ontario and City of Toronto (if applicable) land transfer taxes. First time home buyers qualify for a maximum $2,000 (LTT on a $227,500 home) provincial rebate and a maximum $3,725 (LTT on a $400,000 home) City of Toronto rebate.
• Goods and Services Tax: Resale (used) homes are exempt from GST but it does apply to newly constructed homes and may qualify for a partial rebate depending on the sales price and if the home is going to be your primary place of residence.
• For new homes costing $350,000 or less, you will receive a GST rebate of 36% of the GST paid to a maximum of $8,750. The rebate for new homes costing between $350,000 and $450,000 declines to zero on a proportional basis. GST also applies to most of the services provided in completing the real estate transaction.
• Other costs: These include moving costs, fees charged by utilities for service hook-ups, property tax and other adjustments (an adjustment takes place when the seller has already paid for something in advance and wants to be credited for the unused portion on the date the house becomes yours), and ongoing maintenance (condo fees etc) and utility costs.

Greater Toronto REALTORS® reported 87,308 MLS® transactions in 2009 – a 17 per cent increase over 2008. This result included 5,541 sales in December. The 2009 result was in line with the healthy levels of sales experienced between 2004 and 2006, but lower than the record of 93,193 set in 2007.

Download Full Report: December Resale Housing Market Figures

CTV News reports that finance minister Jim Flaherty is considering raising the minimum down payment required for a mortgage in Canada and possibly reducing the maximum amortization period allowed in an effort to cool down Canada’s hot real estate market.

Flaherty warns “If we see further evidence that there is excessive demand in the housing market or that there’s an indication that people are taking on obligations that they will not be able to handle in the future when interest rates rise, then we will take some action,”

“The likely action we will take is to increase the size of the down payment from 5 per cent to a higher number, reduce the amortization — bring it down from 35 years to something less,” he said.

Low interest rates have been one of the key drivers behind the quick turnaround in Canada’s real estate market.  The federal government is looking for ways to cool the demand in the real estate market without raising interest rates.  Increasing interest rates would have a negative effect on the other sectors of Canada’s recovering economy.

Canada’s residential real estate market is forecast to remain unusually strong through the first half of 2010 as economic conditions across the country improve and the stimulus impact of low interest rates continues to stoke demand, according to today’s Royal LePage House Price Survey and Market Survey Forecast. As confidence in the recovery builds in early 2010, increases in average house price levels and overall market activity are expected to continue. The gradual erosion of affordability driven by higher house prices and the expected late-year modest upward movement of interest rates, together with an improvement in listings supply as confidence improves, are expected to bring the market back into balance in the second half of the year, when home price increases are expected to moderate.

“The Canadian real estate market enters 2010 with considerable momentum from a unusually strong finish to the previous year, said Phil Soper, president and chief executive, Royal LePage Real Estate Services. “The stimulus effect of low borrowing costs has contributed to a sharp rise in demand that has driven activity levels to new highs. This demand, coupled with a typical seasonal undersupply of homes for sale, should cause home prices to continue to appreciate significantly during the early months of the year. Improving supply as the year unfolds and easing demand as the cost of home ownership rises should moderate home price increases in the second half of 2010.”

In contrast to the difficult months during the worst of the recession, house prices appreciated during the later part of 2009, with fourth quarter price averages surpassing averages from the fourth quarter 2008. The average price of detached bungalows rose to $315,055 (up 6.0%), the price of standard two-storey homes rose to $353,026 (up 5.2%), and the price of a standard condominium rose to $205, 756 (up 6.4%). The first two quarters of 2009 saw significant year-over-year price declines across the housing types surveyed and the third quarter provided the first signs saw a strong rebound in Canadian home values.

Regions that saw the strongest declines during the recession are now showing marked gains. Those regions include Toronto and the Lower Mainland, B.C. Vancouver in particular experienced a robust quarter, with home prices rising across all housing types surveyed.

“No other sector of the economy has been as highly affected by economic stimulus as housing,” commented Soper. “As consumer confidence has improved, Canadians have shown a lingering reluctance to acquire depreciating assets such as consumer durables, but have embraced the opportunity to invest in real property. Predictably, the regions benefiting most from this renewed interest in home ownership are those with lower average house prices and strong economic confidence, such as Winnipeg and parts of Atlantic Canada.”

Soper added, “Our forecast is built upon an expectation that interest rates will ease upward before the year’s end, which should have a dampening effect on demand, allowing it to come into balance with the supply of resale homes on the market. Further, we expect to see an increasing number of homes listed for sale as the year progresses – as Canadians regain confidence in the economy, they should be more willing to enter into a large financial transaction such as the sale of a home.”

Regional Market Summaries

Halifax saw varied gains across all surveyed housing types in comparison to fourth quarter 2008. Notably, more affordable homes posted the highest price increases due to the influx of workers returning from Western Canada.

Montreal saw strong gains this quarter as year-over-year price levels rose across all three housing types surveyed. Recent increases in demand have resulted in lower than normal inventory levels. Inventory levels are expected in increase in 2010. Continued demand is expected to result in moderate price levels.

House price levels in Ottawa are moderately higher this quarter compared to fourth quarter 2008 across all housing types surveyed. Fourth quarter sales activity did not slow as expected, and the demand has resulted in higher incidences of sellers receiving multiple offers, an unusual occurrence in end of year activity for this region. While inventory levels are low and there is competition among home buyers, this may abate as the government eases economic stimulus in 2010.

The Toronto market saw year-over-year price increases across the housing types surveyed in the fourth quarter. Of particular interest is the increase in sales of higher-priced units, which were hit hard by the recession over the previous 12 months. There was a surge of first-time buyers active in the market last year, depleting the inventory of entry-level units. They are expected to be joined by move-up, executive, and luxury buyers in the coming year, resulting in additional price appreciation.

Winnipeg saw some of Canada’s largest home price increases this quarter. More than one third of homes sold in the region went for above their asking price driven largely by first time buyer activity. This strong growth is expected to continue well into 2010.

Inventory levels in Regina are low, as much as thirty per cent lower than expected for this time of year; this situation should be corrected in the spring of 2010. House prices should continue to increase into 2010, driven by labour force growth in the construction industry.

Price levels in Calgary remain constant as the market is correcting from the record growth seen in the middle of the previous decade. Inventory levels are one quarter the levels seen in 2008, and the reduction in choice has delayed purchases. Activity and price levels are expected to increase modestly in 2010.

House price levels in Edmonton are also still correcting from the 2005 to 2007 boom. Low inventory levels have provided some price support, and activity is expected to increase in the spring of 2010.

Vancouver saw significant gains in price levels, with average increases of approximately ten per cent across the housing types surveyed. Inventory levels are beginning to decrease, and there has been an increase in sales involving multiple offers. Sales activity may drop off due to the city’s focus on the Olympics in the first quarter, but the market is expected to be robust for the remainder of the year.

Average price rises 19% in November, compared with a year ago.

Steve Ladurantaye – Globe and Mail

National home sales increased by 73% in November from the trough seen a year ago, with Ontario and Quebec hitting new monthly records as buyers took advantage of record low interest rates to secure mortgages. The national average price gained 19% compared to November 2008, at $337,231, the Canadian Real Estate Association said. Since the beginning of the year, prices have gained 4.4% compared to the same time last year.

“The year-over-year increase in November continues to reflect the high degree to which the average was skewed downward last year by plummeting activity in Canada’s priciest markets, and then upward by rebounding activity,” the association said in a statement. CREA tracked 36,383 deals on its Multiple Listing Service in November. Crediting the housing market for leading “the overall Canadian economy out of the recession,” association president Dale Ripplinger said the numbers were a sign of an entrenched recovery. “National home sales activity last month shows how strongly the housing market has rebounded since the beginning of the year,” he said.

About 437,507 homes have been sold through the CREA-owned MLS system so far this year, up 5% from last year at the same time, but lower than the previous three years. One of the main drivers of price increases has been a lack of supply, but higher prices are beginning to draw more sellers into the market. Seasonally adjusted new listings rose 5% from October, to 69,110, in the largest gain since January 2008. There is still a dearth of supply however, with the number of homes for sale 23% lower than they were a year ago.

Comment: I wish we had 5% more listings here in Toronto! We are still down close to 50% from this time last year, making things very difficult for buyers.

The association’s economist, Gregory Klump, said as prices climb higher, would-be buyers may put off purchases, cooling off a hot market. Higher interest rates, expected in 2010, will also dampen their enthusiasm. “Deteriorating housing affordability will rein in sales activity as the overall economy further improves and the pool of buyers who qualify for financing shrinks,” he said.

While sellers have no doubt been delighted by the premiums their homes have been fetching, a growing chorus of economists are expressing concern that the recovery isn’t sustainable.

“We’ve got a long way to go before we could put a bubble label on this market,” Merrill Lynch Bank of American economist Sheryl King said Monday. “However, with mortgage rates at decades low – and even more attractive if home buyers choose the variable mortgage option which carries rates as low as 2.15% – the seeds of a bubble are definitely in place.”

You will need to present the following documents to a banker or other lender for the application of your new mortgage:

Self-Employed

• 2 years of Notice of Assessments
• 2 years of T1 general tax return forms
• 2 years’ proof of business (your GST number and article of incorporation)

Employed

• Written employment letter from Human Resources stating salary or hour wage /minimum hourly work week/position /start date – if less than 3 months (letter stating you are not on probation)
• Current pay stub
• 2 years of T4 statements if you would like to use overtime earnings

Have these documents ready when you meet with your mortgage specialist and things will move swiftly for you.