Places like British Columbia have had vacant real estate taxes for a few years now. Will the vacant home tax achieve its goal of reducing real estate prices? Where has the tax been sued before, and what were its results? This article will analyze the various proposals for vacant home taxes and look at places like BC, which have instituted such a tax to see how effective they can be.

Friendly reminder: Please speak to an accountant or tax professional when dealing with any potential taxes (be it on your property or personal income). This article provides information about taxes – not tax advice.

How do the proposed Vacant Home Taxes Differ?

Income taxes are prevalent worldwide at Federal, Provincial and State levels. Of course, the specific income tax in different regions varies in what percentage of income is taxed, and vacant home taxes can vary in the same way. On top of what percentage is taxed off the value of an empty home, how that tax is enforced can differ in numerous ways.

Peel’s proposed vacant home tax responds to an estimated 13 000 vacant units across the region. The tax, developed with the help of Ernst and Yonge, has the goal of encouraging owners to either sell vacant houses or rent them. Owners would have to report if a property is vacant, and if vacant, the municipalities of Peele would collect the vacant tax with property taxes. A 1% tax would net about $16.4 million a year, with the cost of administering the tax being $5 million annually.

The region of Peel is currently still in the process of collecting public consultations about their inputs on the level of public support, public policy implications, potential effectiveness of the tax in terms of increasing the supply of affordable housing, its impact on affordability, and privacy-related concerns. The results of the consultations will help them determine next steps and program design options of the implementation.

The Toronto vacant home tax follows a similar structure to the proposed one of Peele. The onus is on property owners to declare if a home is vacant each year, and the city will investigate possible homes suspected to be vacant. While the proposed Peele Region tax is still being developed, the Toronto vacant home tax seems to have more devices to tackle homeowners with vacant homes that have not declared their residences as such. On top of being subject to the tax, the city may subject non-declaring owners to various penalties and fines. Toronto’s tax is set at 1% and is predicted to raise $55 to $66 million for the city.

Overall, the much-discussed vacant home taxes in Ontario follow a similar structure of self-declaration and enforcement through auditing. The difference in Ontario’s jurisdictions is how much the tax is (with Peel considering a tax of 1-3%) and, as shown through Toronto, how they plan to reprimand homeowners who do not declare their vacant homes.

What is the Toronto Vacant Home Tax Declaration in Toronto?

Property owners in Toronto must annually now declare the occupancy status of the properties they own, even if they are currently living in the property.

This declaration  will determine if the Vacant Home Tax will apply and needs to be paid.

The Vacant Home Tax is 1% of the Current Value Assessment (CVA) and applies to Toronto homes declared, deemed, or found vacant for over 6 months in the previous year. The tax is based on the property’s occupancy status in the previous year.

To declare, you’ll need your 21-digit assessment roll number and customer number from your property tax bill or statement. Declarations can be made through the City’s online portal or via a paper form. Incomplete paper forms will not be accepted. Owners of unoccupied properties may be subject to an audit.

Corrections to declarations can be made before the February 2 deadline or by filing a Notice of Complaint after the deadline. Failure to declare or making a false declaration may result in a fine of $250 to $10,000.

Some Exemptions exist where a property can be left vacant and the tax does not need to be paid:

Source: https://www.toronto.ca/services-payments/property-taxes-utilities/vacant-home-tax/

What was the effect of British Columbia’s vacant home tax?

BC’s vacant home tax (the “Speculation and vacancy tax”) turned three years old at the end of 2020. Like the goals of the proposed vacant home taxes in Ontario, BC implemented the tax to increase the affordability of real estate. Owners must declare if their home is vacant, and if vacant, the relevant tax rates apply.

The BC model differs from many of the proposed models in Ontario because the rate depends on one’s citizenship. After 2019, the tax rate stayed at 0.5% from its 2018 level for Canadian citizens and permanent residents who are not part of a satellite family. However, if you are a foreign homeowner or a satellite family, your tax rate will be 2% off the value of your home.

Vancouver’s empty home tax has a similar structure of administration (declaring, audits, etc.) but increased to a tax rate of 5% in 2023 compared to 3% in 2021-2022. However, Vancouver and BC’s taxes are, of course, different – theoretically, someone could be exempt for both or have to pay both when the taxman comes knocking. Hence, a Canadian citizen may have to pay Vancouver’s 5% tax and BC’s 0.5% tax for their empty home. If Ontario were to implement a vacant home tax on a provincial level, it would likely interact with the taxes of its municipalities like Toronto similarly.

In terms of effect, both taxes use their revenue to invest in housing initiatives, on top of their intended effect to deter empty houses. For the fiscal year 2020, BC raised $81 million for affordable housing programs. However, Vancouver and BC at large still remain seller’s markets – BC housing prices are still unaffordable for many people. So, evaluating the effectiveness of the taxes becomes a bit of a chicken or the egg situation – is the tax ineffective? Or would prices have increased even more without their implementation? One of the tax goals, to stop houses from being vacant, seems to be effective, with rental units increasing in metro Vancouver.

The city of Toronto is estimating the tax will bring 66 million in revenue per year, which will be used to create affordable housing.

The post The Full Guide to the Vacant Home Tax in Ontario and Lessons to be Learned from BC first appeared on RankMyAgent - Trusted resource about Buying, Selling and Renting.

What is bridge financing?

A bridge loan, also known as bridge financing, is a temporary loan that allows you to use the equity of your present home to pay the down payment of your next home even before your home sells. It is commonly used when closing dates are not aligned and you are in a competitive housing market with high demand. This loan is a quick and easy solution if you are financially stable.

These loans are usually between 3 to 6 months and can go up to 12 months, depending on your financial circumstances. A stable income and a good credit score are necessary to be eligible for this loan. The majority of lenders also need a minimum of 20% equity. However, some lenders will consider your income level and adjust the requirements accordingly. After those qualifications are met, you must make a sale agreement on your current home that contains the firm closing date and a purchase agreement on your new home in order to get a bridge loan.

The cost of bridge financing

While this loan is convenient and can provide comfort, there is a cost associated with this loan.

The cost mainly consists of three values:

1. Legal cost- Registering the loan requires your lawyer to do extra work so that they may charge more
2. Lender fee- Lenders need to set up the loan so that they can charge for the time it takes them to set it up
3. Interest rate- The bridge loan interest rate in Canada will approximately be Prime +2.00% or Prime +3.00%

To sum up the costs, a bridge loan usually costs between $1000 – $2000, but it also depends on a case-by-case basis and your circumstances.

Calculating your bridge loan

Now that we’ve looked at the cost of a bridge loan, how much can you get from a bridge loan?

To calculate your loan, take the amount of equity you have on your present home and subtract the down payment of your new home. Let’s take a look at a bridge loan example.

You have $150,000 equity on your present home, and your down payment for your new home is $50,000.

$150,000 – $50,000 = $100,000

Your bridge loan is $100,000 and is financed until the sale of your present home is over.

To get an accurate estimate of the sale amount available for your bridge loan and the approximate cost of your loan, be sure to use a bridge loan calculator.

Pros of bridge financing

Now that you know what a bridge loan is, let’s look at its advantages.

Buy your next home before the current one sells: The main advantage of this loan is that you get to buy your dream house even before your current home sells. This provides relief as you don’t have to stress over your home not being sold in time for purchasing your next home, especially if you are in a competitive area.

Financial Flexibility: A bridge loan also provides financial flexibility as it allows you to use the equity of your present home to pay for the down payment of your new home. If you find a house you love but can’t afford the down payment of it, this loan can be useful in covering the balance until the sale of your present home closes.

Find capital for renovations: if you want to make changes or renovations to your new home, this loan provides you with the funds and extra time that may be needed before you move in.

Cons of bridge financing

Despite how efficient bridge financing may sound, there are possible disadvantages that you should consider.

High-interest costs: Even though this is a short-term loan, the interest can get costly as the interest rates are generally higher than the interest rate you are paying for your mortgage. So evidently, the longer your loan is, the more interest you will have to pay your lender.

Need to qualify: Various factors, including income, credit score, and equity, determine the terms of your bridge loan. So, many aspects of a bridge loan may fluctuate, like the duration of the loan, interest rate, and requirements.

You must sell your home before the end of the bridge loan: This loan can lead to a higher risk because if your bridge loan exceeds the term and your present home is still not sold, you will have to pay for two mortgages until you can sell your home.

Who offers bridge loans?

Since more homeowners are using bridge loans, the well-known banks, including RBC, Scotiabank, BMO, CIBC, and TD, all provide their mortgage customers with the option to get a bridge loan. However, you can always reach out to your mortgage broker for more options if you’re unsure whether your bank offers bridge loans. A mortgage broker can help you find alternative lenders who may be more flexible towards home buyers with low credit scores or inconsistent incomes.

Alternatives to bridge loans

The most common alternative is the home equity line of credit (HELOC), also known as a second mortgage, which allows you to borrow against the equity in your house. The lender will then use your home as collateral to guarantee that you will pay back your loan. This is very similar to a bridge loan, except the repayment period can be as long as 10 years later.

If you have a stable job and a good credit score, another alternative is a personal loan which doesn’t require collateral and is usually funded more quickly. Certain lenders can give you a decent-sized loan with lower interest rates and fees. However, if your credit score is not superb, you can still qualify for a personal loan, but it may have higher interest rates and more fees.

Overall, bridge financing is a great resource if your closing dates don’t match up. However, you should contact your mortgage broker to find out the pros and cons that specifically apply to you.

The post How bridge financing can help you buy first and sell later first appeared on RankMyAgent - Trusted resource about Buying, Selling and Renting.

For many Canadians, owning real estate requires creativity – and House Hacking is a creative solution. Through House Hacking, you could reduce or eliminate your monthly housing costs entirely. In this article, we digest what House Hacking is and its advantages and drawbacks. If done right, you could be on the road to living in your home for free.

What is House Hacking?

The goal of House Hacking is to cut your living expenses while you build home equity. The premise is to purchase a larger home than you need so you can rent out the remaining space and act as a landlord. Your tenants’ rent should cover the full or a substantial amount of your mortgage payments. All the while, it’s you who builds equity in the property.

What goes into house hacking?

House Hacking starts as soon as you look for a property – you must find a home you can live in and rent out. Some House Hackers opt to purchase a duplex or triplex or a home with a basement apartment. But you can simplify it further. For example, you can rent out an extra room in your house to start your House Hacking journey. The tenant’s rent in that other room, basement or unit goes toward your mortgage payment. Thus, you’re effectively building equity in your home for free!

When buying a home, you’re not only looking for your primary residence but an investment property. Therefore, you want to consider your neighbourhood and how you can renovate the property. University towns are great areas to look at, as they consist of student renters who are often ideal tenants. You’ll also want renovations that aren’t specific to your taste and appeal to the general population.

What rental income can I plan for?

Of course, for house hacking to work, you need to plan how much you can earn in rental income. That is very dependent on where you House Hack. Vacancy rates are tightening after they fell during the pandemic’s peak, so conditions are becoming more favourable for landlords. In many Canadian markets, you can expect at least $1000 of rental income, and in peak metropolitan areas like Toronto or Ontario, you may be able to get $2000 monthly. To determine how much you can earn, but sure to do research localized to the region you are looking to buy in.

You have to put your investment before your comfort

House Hacking is time-consuming and full of upfront costs

Purchasing a home is hard. It’s even harder when you’re trying to buy a larger home so you can House Hack. There will be costs that you will have to pay upfront, including a down payment, lawyer fees and realtor commissions. Additionally, you’ll likely need to renovate the property to make it desirable to tenants. Renovations will further take time, and it can be a stressful process for some. If you don’t have the time or capital for these upfront costs, then House Hacking may not be suitable for you.

House Hacking means being a landlord is your new part- or full-time job

The idea of your mortgage payments being paid by a tenant seems amazing. However, you want to remember that you’re a landlord, which will take up a sizeable part of your week. Despite what some believe, being a landlord is a job and requires attending to particular duties. You must prepare to find tenants, draft leases, and manage ongoing tenant issues and maintenance requests.

Because you’re living with your tenant, a rigorous tenant selection process is more important than ever. You’re not just looking for someone to pay your mortgage; you’re looking for someone to cohabitate with.

Property management is much easier when you live there

On the flip side, property management can be challenging when you’re far away. Often landlords may live in a city but have investments across the province. If a toilet’s clogged at 2 AM, a landlord often can’t just get out of bed and drive over. Calling a plumber or other professional to remedy the situation may also be expensive or challenging. This issue doesn’t exist when you House Hack because you live with your tenant. If there’s an issue at 2 AM, it’s a matter of going downstairs or to the other unit.

Tax considerations have both pros and cons

There are both tax benefits and disadvantages to House Hacking. In terms of benefits, House Hacking lets you deduct the costs of being a property owner, such as property taxes, house maintenance, utilities, and interest payments.

In terms of disadvantages, the Canadian tax system will not allow you to claim the whole property for your principal residence exemption—only for the areas of the home you live in. This is easily calculated if you’re in a duplex, triplex, or renting a basement apartment. But more complex situations such as a tenant that shares a kitchen and bathroom can create confusion about your tax bill. In this case, it is best to talk to a tax professional to see how much you can deduct and how much you can owe.

Final thoughts

House Hacking is a way to buy property while minimizing your financial expenditures. However, it’s not as simple as getting a “Get a House for Free Card.” It will take time and money, and whether you have enough of both to reap the benefits of House Hacking is dependent on your situation.

The post How a House Hacking Strategy in 2022 can reduce your Housing Costs to Zero first appeared on RankMyAgent - Trusted resource about Buying, Selling and Renting.

The legislation, which “governs real estate brokerages, brokers and salespersons” in Ontario, seeks to modernize how our real estate sector is regulated. TRESA has updated our laws in different phases. For phase one, instituted on October 1^st, 2020, the act contained updates, such as changing the rules in which advertisements can “refer to brokers and salespersons.” We are currently in phase two of implementing TRESA’s new regulations, with the latest phase set to create more ambitious changes. These changes will update the Real Estate Council of Ontario’s (“RECO”) Code of Ethics, enhance RECO’s powers, increase disclosure obligations for RECO registrants, and perhaps what has been the most newsworthy change, instituting Open-Bidding in Ontario.

Does TRESA bring Open-Bidding to Ontario? The Federal and Provincial approach to Blind-Bidding

Open-Bidding has been a hot topic for the past few years, as real estate prices have skyrocketed since the pandemic. The current Federal Government, led by Prime Minister Trudeau’s Liberal Party, ran on instituting Blind-Bidding for real estate sales. While there is currently no timetable on when the full Blind-Bidding ban will be implemented, the Canadian Real Estate Association is working on an Open-Bidding pilot. As of now, though, there is no currently detailed set of legislation proposed that would allow analysis on how the ban on Blind-Bidding would work, be implemented, or the effects on the real estate market.

Comparatively, we have more to work with regarding the new TRESA Blind-Bidding regulations. The Ontario Blind-Bidding approach is noticeably looser than the Federal Government’s approach to Blind-Bidding. The current Bidding system for real estate is blind; you are looking to buy a house from Jane, but Tom is looking to buy that house as well, and June also just decided to put in a last-minute bid. Real estate brokerages must tell June, Tom and you that there are three written Bids for Jane’s property. However, there is no obligation for Jane’s brokerage to tell each of you the dollar value of said written Bids. Under Ontario’s current regime for bidding, you can know the number of bids competing against yours, but not the dollar value.

The Ontario regulations create an “Open-Bidding option.” Blind-Bidding will still be available, but the seller can decide whether they want to engage in an Open-Bidding, or Blind-Bidding process. The new Open-Bidding Option will come into force in April 2023, along with the other recent changes from phase two of TRESA.

What is the effect of Open-Bidding on the real estate market?

That’s the billion-dollar question. In terms of a total blind-bidding ban, critics feel that such a policy is overhyped in terms of its effect on real estate prices. They propose that to truly reduce the average cost of a home, efforts to increase supply and change zoning laws would be more effective. Some proponents of Blind-Bidding bans agree that Open-Bidding isn’t sufficient to bring down housing prices but a necessary step that must be complemented by increasing supply and reforming zoning laws.

Those critiques of Blind-Bidding are better suited toward the Federal Government proposition. As the Ontario Open-Bidding Option is different, the comments vary from those of the Federal Government’s complete ban. Proponents, such as Tim Hudak, the CEO of the Ontario Real Estate Association, welcome the Open-Bidding Option, as the new regulation strikes “the right balance between adding more transparency to the offer process and protecting a homeowner’s right to sell their home how they want, instead of blanket bans on the traditional offer process.”

On the other hand, critics disagree with the new rule because of the discretion it gives to the seller. They believe that the goal is increasing transparency. Open-Bidding must be the only option to achieve that goal. Such transparency is more valuable to a functioning real estate market and society than the right to Closed-Bidding for sellers. Some critics are not necessarily proponents of Open-Bidding, but again critique the choice given to sellers, saying that either you go all-in on Open-Bidding, or maintain the current Closed-Bidding-only regime.

Perhaps Ontario’s Open-Bidding Option will impact the average price of real estate in the province. Still, if it does, it will likely not be as significant as how changing zoning laws and increasing supply can impact price. Whether you disagree or agree with the new rule, it probably depends on whether you believe sellers should have the option to engage in Open-Bidding, or whether Open-Bidding should be mandated for transparency.

The post What do the new TRESA Regulations mean for Closed-Bidding? first appeared on RankMyAgent - Trusted resource about Buying, Selling and Renting.

Besides the stress test, Credit can disqualify you from a mortgage

In a more case-by-case scenario, a common factor for mortgage rejection is poor or no credit history. A credit score is a number on a scale of 350-900, where 350 is bad and 900 is stellar, which explains a person’s ability to pay off their debts or their debt utilization rate (let’s say you have $10 000 of credit available but have only used $1000. You have a 10% credit utilization ate – the lower the rate, the better the credit score). In addition to your history of paying off debt and credit utilization rate, the score looks at how long you have had a credit account, new inquiries for credit, and other factors.

Quite frequently, first-time homebuyers run into issues with their credit score. This could have been a mismanaged credit card or high student loan debts, which would have resulted in a terrible credit score. Another issue is if the person has never had credit. This would result in no credit history that the lender could rely on.

There is hope, however. Even with a bad or missing credit history, individuals can still get approved if they have a guarantor or co-signer. This is someone legally liable for your loan payments if you default. For many first-time homebuyers, a co-signor or guarantor is a family member.

Self-employment is another common way people find themselves unable to approve their mortgage applications. Due to the instability of their income, A lenders find self-employed people a greater risk. Thus, the bank may require a higher taxable income or a larger down payment to approve someone self-employed.

Lastly, life is full of twists and turns, and many people make financial mistakes; this can result in bankruptcy. People who have declared bankruptcy in the past few years won’t get approved by any major bank and will have to seek help from a B or private lender.

The alternatives

While A lenders consist of the major banks (RBC, TD, CIBC and Scotiabank) and the major credit unions (Meridian, Vancity and more), there are many more organizations willing to lend money. However, just because an A lender has declined you doesn’t mean your only option is to take a stroll to a dark alleyway and find a loan shark that charges a 50% interest rate. That’s where B and C Lenders come in: alternative lenders have a lower barrier to entry in exchange for a higher interest rate. They also commonly charge a processing fee of 1-2% of the mortgage and a brokerage fee, usually 0.5% of the mortgage.

It should be noted that using a B or C lender often is not a permanent fix. The mortgage terms tend to be shorter, up to 5 years. Many borrowers use an alternative lender to rebuild their credit and then switch to a mortgage with an A lender later on.

B Lenders

Contrary to what one might think, there are dozens of banks in Canada. Many of these smaller banks, such as Equitable Banks or B2B Bank, allow clients to miss one or more of the components that the big banks look for in a client. For example, they may approve someone even though they have a poor credit history if the applicant has a stable job and no recent bankruptcies. B lenders also more heavily consider the property being purchased in offsetting default risk.

B lenders can also be found at the Big Banks. With Canada’s housing industry roaring over the past couple of years, the major banks have diversified, and their mortgage departments often feature B level lending arrangements.

There is no need to fear B lenders. B lenders are still reliable organizations, commonly listed on the stock exchange, and have many clients worldwide. While banks dominate the mortgage market at approximately 71% of the market and credit unions at 15% of the market, the other 15% or so of the market are B or C lenders. The Canadian Mortgage and Housing Company also approve them as a mortgage lender.

C Lenders (Private lenders)

After both A and B lenders have turned you down, private lenders are usually the last resort. These lenders are often wealthy individuals or a group of individuals who lend out their own money for a better return, such as Mortgage Investment Entities (which can also be B lenders). However, as private lenders take on an even riskier clientele than their B-lending counterparts, they also charge a higher interest rate. As a result, you can expect interest rates anywhere between 10-to-18% and even more.

The barriers to entry for these mortgages are lower than that of B lenders. Instead of approving a mortgage only on credit scores and occupations, a private lender weighs more emphasis on the property type and value. If you are refinancing a home, they also consider the amount of equity you already have. This is not to say that other lenders don’t consider the property itself, but private lenders care more about it. It is the type of property that lenders seek to buy, and their high-interest rates that reduce the risk that C Lenders hold.

Lastly, because you may not be dealing with a massive and trustworthy corporation in the private lending landscape, it is best to have a lawyer thoroughly look over any documentation.

How to get a subprime mortgage: B and C Lenders

The term “subprime mortgage” should not give you a flashback to the 2008 recession. Subprime mortgages are realistically a part of everyday life and refer to any loan granted to those with a poor credit score. The mortgages provided by B and C lenders are usually subprime mortgages.

So if you’ve decided to get one, where should you start? Unlike A lenders, B and C lenders do not have a brick-and-mortar stores at the corners of every major intersection. And while you could scour the websites of every B-lender bank looking for the best rate, it may be more efficient to contact a mortgage specialist.

Mortgage brokerages or freelance mortgage specialists help homebuyers navigate the alternative lending market. They have access to multiple lenders and their mortgage rates, and they can even negotiate a lower rate for you. With their expertise, they can also find the most suitable lender for your situation. However, they take a percentage of your total mortgage as a commission, which can motivate them to approve you for a mortgage you shouldn’t be approved for.

Online mortgage brokers are now also a popular method to scour the B-and-C lender landscapes. These brokers cut margins by operating online and passing the savings onto their customers. Using technology, they can find out who the best lender is for you.

If a major bank has denied your dream mortgage, there’s still hope. Though it may cost a bit more in terms of interest, you can use B and C lenders as a temporary stepping stone you get your credit back on its feet. B and C lenders can help you get one step further to do what you thought was previously impossible.

The post The Ultimate Guide to B and C Lenders: Mortgages beyond the Big Banks first appeared on RankMyAgent - Trusted resource about Buying, Selling and Renting.

Let’s get into specifics, though – if you want to save for a down payment on a home in either of these cities, what kind of salary do you need? What if you also pay rent and want an average city lifestyle? We’re going to answer these questions and break down Vancouver and Toronto real estate prices.

It’s been no secret that housing sales have been one of the pandemic stories. In the Greater Toronto Area, there remains a strong demand for homeownership. Sales were down year over year for February in 2022 – however, the average selling price for all types of homes was up 27.7% to $1 334 555. For Metro Vancouver, the Real Estate Board of Greater Vancouver represented an 8.1% decrease in home sales year over year for this February. The average price of all homes was $1 313 400, a 20.7% increase from February 2021.

While both markets need more homes, Toronto’s supply might have overtaken Vancouver. In Toronto, fewer new homes are being built than in Vancouver, which has seen a slight increase. The average price of homes in Metro Vancouver and Toronto in February 2022 are listed below:

Conventional mortgages usually require a 20% down payment. So for even the cheapest option on the above table (Toronto apartment), it means $159 993 for only the down payment.

If you want to move to one of these cities to start a family in a detached home, it costs well $1.5 million. A 20% down payment for an average Vancouver detached is around $408 960 and for an average Toronto detached is about $359 440

Now that you know what you need to save for the down payment let’s look at some everyday city-lifestyle expenses.

Because real estate prices aren’t low, rent isn’t either. According to housing rental tech company Zumper, the average cost for a single-room apartment in Vancouver is $2200/month. A two-bedroom apartment is $1550/month (suggesting you have a roommate split the costs). While Toronto has now moved past Vancouver at the price of buying a house, the city is doing better when it comes to renting affordability. In Toronto, a solo lifestyle costs $1900/month and living with a roommate costs $1200/month.

Modern-day necessities like a cell phone and home internet cost around $74/month, while a monthly transit pass costs $100 in Vancouver and $156 in Toronto. And if you’re like most city dwellers, $60 for Ubers and taxis every month can come in handy. Lastly, around $300 for groceries every month is necessary for the days and nights you aren’t eating out. So your monthly necessity expenses should approximate $608 if you’re in Vancouver or $664 if you’re in Toronto.

What about the unessential? If you buy two lunches a week (at $20/lunch) and dine out for dinner twice a week (at approximately $30/dinner before drinks), that’s already $400 a month. And then budget in three $3 coffees a week, and that’s another $36/month. So finally, a fair estimate is $250/month for drinks and entertainment and $170/month for extras (maybe for a trip to the salon or a new pair of loafers?). So your monthly total for non-essentials should approximate $906/month, regardless of the city.

The last item on the list is a gym membership. If the condo gym isn’t cutting it for you or if you want a few specialty classes like cycling or kickboxing, it’s not going to come cheap. The standard gym membership is $60/month. This covers both classes and a more comprehensive range of equipment.

If you tally up the expenses, living in either city in your apartment costs around $3500/month! Living with one roommate costs slightly above $3000 in Vancouver and approximately $2700 in Toronto. This doesn’t include yearly expenses like vacations or Christmas shopping. Additionally, if you have a car or outstanding debts, that’s a whole new budget.

Conclusion

In this scenario, the plan is to go from nothing to a down payment in five years. This is how much you would need to save for the following:

Adding in monthly expenses, buying a Vancouver detached while living alone or a Toronto detached while living with a roommate requires a net annual income of around $104 568-$126 480. To afford a Vancouver apartment while living alone or a Toronto apartment while living with a roommate requires an annual net income of $64 680-$80 244. All scenarios are expensive, but it is essential to keep in mind that a lot can change in 5 years (prices could go down or go up quite a bit).

Other things to consider

Vancouver and Toronto are two very different cities, and the price of a property is only one of many characteristics of each city. Vancouver provides milder weather; there are less extreme hots and colds than Toronto. Vancouver is also great for the outdoorsy people, with Stanley Park only steps away from the city’s core. In contrast, people cite Toronto for better and higher-paying career opportunities. The city is also better known for its restaurants, bars, and nightlife in comparison to its west-coast counterpart.

The post The Salary you need in 2022 to buy a home in Toronto or Vancouver first appeared on RankMyAgent - Trusted resource about Buying, Selling and Renting.

British Columbia has recently discussed a few reforms towards real estate consumer protection, primarily using the B.C. Financial Services Authority to establish and implement them. Amid new COVID restrictions, B.C. is also looking at ways to provide homeowners with relief. These recent changes stand to be significant for B.C. residents and all of Canada, as when the B.C. government acts, other provinces are always watching.

Cooling off periods are coming: Regulatory action

This past November, the Ministry of Finance announced their intent to create a regulation implementing cooling off periods in the sale of B.C. homes.[5] The proposed regulation is still developing, but it is similar to rules for pre-construction condos in B.C., which have a 7-days cooling off period. Finance Minister Selina Robinson hopes that the regulation will reduce the current market’s volatility.

Cooling off periods have been instituted in other provinces as well. In Ontario, consumer protection legislation creates a cooling off period for newly built condos. Consumers can rescind their offer to buy without penalty 10 days after receiving the fully signed purchase agreement. Where B.C. differs from most is planning to institute the cooling off period for homes, rather than just condos.[6]

Cooling off periods increase consumer power and allow them to take more time to evaluate their buying decision and decide what is best for them. However, some real estate professionals are skeptical that this proposed regulation will benefit consumers in the long run. B.C. Realtor Alex Dunbar, to Storeys.com, states that such a policy may make sellers solely consider offers on price, rather than thinking lower offers that come from buyers who are less like to back out. By putting everyone on an even playing field, and everyone having the ability to back out, buyers will compete on price even further, causing the market to still be volatile and trend upwards.[7]

Participate in the regulatory consultation process

On the other hand, because cooling off periods have already been used for pre-built condos, perhaps the concerns are overblown. The good news is that the regulation is still in its consultation phase. The BC Financial Services Authority is consulting relevant stakeholders for feedback about the proposed rule. While the BCFSA has already and continues to engage with industry associations and real estate boards, anyone can make their voice heard and provide input to coolingoff@bcfsa.ca. The Ministry of Finance will be reviewing all communications for feedback on the proposed regulation.[8] After the consultation is finished in mid-February, the legislation will begin to solidify, and stakeholders can then properly ascertain the effect of the new legislation.[9]

Consultation for the future, Homeowner Grant for Now

The consultation period for the cooling off period may very well end up being very impactful to the near future of B.C.’s real estate market. However, today, many are looking for help. With the COVID-19 Omicron variant causing provinces to implement new restrictions, the B.C. government has responded by setting their Homer Owner Grant threshold at $1.975 million for 2022.[10] Over 92% of residential properties can now receive assistance for their property taxes.

The grant varies based on location, with those in northern or rural areas eligible for more than those in Metro Vancouver, Fraser Valley and Capital Regional Districts. Homeowners 65 or older, or those with disabilities or who live with a relative with a disability, also qualify for more aid. The “fastest and easiest way to apply” for the grant is on the B.C. government website.

Change is coming, but what change?

B.C. is but one jurisdiction looking at reforms for dealing with the housing market. As the new year continues, we will continue to see pushes for new legislation and consultation periods to let stakeholders be heard. Take advantage of any opportunity to voice your concern or support new regulations. For the right now, for those that need help, it is important to look at the various programs that give homeowners, landlords and renters assistance.

[1] BRCEA: A record Year for the B.C. Housing Market: https://www.bcrea.bc.ca/economics/a-record-year-for-the-bc-housing-market/

[2] REMAX: B.C. Housing Market Projected to Remain Strong in 2022: https://blog.remax.ca/bc-housing-market-projected-to-remain-strong-in-2022/

[3] CBC: B.C.’s urban mayors demand urgent provincial action on complex housing needs: https://www.cbc.ca/news/canada/british-columbia/bc-mayors-housing-call-1.6311158

[4] Business Intelligence for B.C.: Most B.C. residents trust BC NDP to resolve affordable housing issues: poll

[5] CTV NEWS: ‘Cooling off periods’ part of B.C. real estate plan to protect buyers wanting to back out: https://bc.ctvnews.ca/cooling-off-periods-part-of-b-c-real-estate-plan-to-protect-buyers-wanting-to-back-out-1.5652568

[6] RECO:  Do real estate contracts have a cooling off period? https://www.reco.on.ca/ask-joe-question/do-real-estate-contracts-have-a-cooling-off-period/

[7] Storeys: Will BC’s New ‘Cooling Off Period’ Really Turn Down the Heat in its Housing Market? https://storeys.com/british-columbia-housing-market-cooling-off-period-work/

[8] BCFSA: Real Estate Consultations  https://www.bcfsa.ca/about-us/who-we-are/stakeholders#cooling-off-period-and-real-estate-consumer-protection

[9] BCFSA: Real Estate Consultation Launch https://www.bcfsa.ca/about-us/news/news-release/real-estate-consultation-launch

[10] B.C. Gov News: Home Owner Grant helps people with property taxes https://news.gov.bc.ca/releases/2022FIN0001-000004

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2021, like 2020, was once again a unique year for our National Real Estate Market. According to the Canadian Real Estate Association, monthly home sales were not as volatile as 2020 but still more volatile than what was seen in Canada during the 2008-09 financial crisis.[1] The high of monthly sales reached 807 250, contrasted with the low of 650 000 sales. This volatility took place in the macro situation of the COVID-19 pandemic and low-interest rates spurred by the Bank of Canada. The national average home price rose about 21% to $687 500 and is expected to increase again in 2022. The continued movement in the market made housing a top-button issue during the 2021 election, with the winning Liberal government set to implement their housing plan over the next four years. 2022, like the pandemic years before, is again looking to be a historic year for Canada’s housing market.

What’s in store for 2022?

The consensus seems to be that while 2022 will not feature the astronomical growth rates of 2021, the market is still set to increase, albeit at lesser growth rates than previous years. This year, the average price is still set to grow to $718 000 by 5.6%, per the CREA. As a result, Canada’s major urban centres such as Toronto or Vancouver as forecasted as having an enormous amount of risk in the annual global real estate bubble index.[2] Toronto specifically has been earmarked as having the second-largest housing bubble globally by Swiss bank UBS.[3]

While the housing markets of Toronto and Vancouver tend to dominate the conversation, REMAX anticipates the markets of other areas in Canada to start generating more buzz. In Atlantic Canada, Moncton and Halifax are expected to see increased prices respectively by 20% and 16% this coming year. Western Canada is expected to remain a sellers’ market in 2022, spurred by homebuyers hailing from Ontario and British Columbia.

Regarding BC, it appears that consumers are moving to regions outside of Vancouver. This trend is expected to maintain due to tight housing supply and powerful demand. In BC, buyers are moving to suburban areas outside the Greater Vancouver areas, such as Victoria and Nanaimo offer more affordable alternatives.

Ontario and Toronto offer a parallel situation to BC and Vancouver. It is expected that areas outside of the GTA, such as North Bay, Thunder Bay, Collingwood, Ottawa, and the Durham region, are expected to have increased average sales prices. Unless meaningful regulatory action is taken, these trends are likely to hold.[4]

2022: New regulations?

With Canadians looking to their government to act on the real estate market, 2022 may bring new laws and regulations. After September’s Federal election, we saw jurisdictions looking to make changes. In British Columbia, the province wants to create a cooling-off period where consumers have a few days after a sale to back out. This is reminiscent of cooling-off periods for pre-built condominiums in BC and Ontario but is instead targeted towards newly built homes.[5] As cooling-off periods are already found across Canada, BC adopting this new measure may set off a domino effect of other jurisdictions following suit.

The government is considering changing the rules regarding down payments on investment properties on a federal level. The Ministry of Housing Diversity and Inclusion and the Canada Mortgage and Housing Corporation specifically aim to target speculative investing. The Ministry sees speculative investing as something that causes Canadians to “overbid on properties, borrow beyond what they can afford, and push home prices even higher.” While they have not yet suggested a specific amount of which to increase the current 20% down payment that investors pay, industry professionals agree that an increase can curb the speculative market. [6]

When examining the mandate letter for the Ministry of Housing and Diversity and Inclusion, it is apparent the proposed increase in the down payment is in line with what the MInistry seeks to do in 2022. The mandate letter committed to other actions that seek to curb speculative investing in the real estate market, including, but not limited to:

Housing predictions and regulation – it’s all related

Of course, predictions are rarely accurate without some aberration in real-life results. Still, based on past trends, the experts are likely correct that housing prices are likely to increase. Demand is also set to increase outside of the major areas of Toronto and Vancouver due to unaffordability in those urban centres.

The main element set to affect the predicted trends are the regulatory actions’ that provinces, municipalities, and the federal government may take. Drastic new legislation may create powerful changes in the market – although such legislation can take months or years to have a visible effect. Outside of regulatory impact, it seems that the predictions of 2022’s housing market are set to be true.

[1] CREA: Quarterly Forecasts https://www.crea.ca/housing-market-stats/quarterly-forecasts/

[2] MacLean’s – Canada’s real estate market in 2022: What to expect in the new year https://www.macleans.ca/economy/canada-real-estate-outlook-2022/

[3] REMAX: Investors Remain Active in the Hot Canadian Housing Market https://blog.remax.ca/investors-remain-active-in-the-hot-canadian-housing-market/

[4] REMAX: 2022 Canadian Housing Market Outlook http://download.remax.ca/PR/2022CanadianHousingMarketOutlookReport_FULL.pdf

[5] British Columbia: BC working to strengthen protection for home buyers https://news.gov.bc.ca/releases/2021FIN0070-002097

[6] Financial Post: CMHC to review down payments on investment properties as part of federal strategy to tackle housings risks https://financialpost.com/real-estate/mortgages/cmhc-to-review-down-payments-on-investment-properties-as-part-of-federal-strategy-to-tackle-housing-risks

The post What does 2022 hold for Canada’s Real Estate Market? first appeared on RankMyAgent - Trusted resource about Buying, Selling and Renting.

The Conservative Party Platform 2021

The Conservative Party, led by Erin O’Toole has their housing tactics detailed in their platform Canada’s Recovery Plan. The Progressive Conservatives are focused on supply-side solutions to “make housing more affordable” and have a goal of building 1 million homes in the next three years. Some of the key points of their housing strategy are:

The Liberal Platform 2021

The Liberal party, led by current Prime Minister Justin Trudeau, addresses the 2021 housing market and real estate bubble beyond in their platform, Forward. For Everyone. The Liberal housing plan also looks at supply-side solutions, with more of an emphasis on renters and taxation to affect the prices in the housing market. The Liberals plan on building, preserving, and revitalizing a total of 1.4 million homes by 2025-26 (including the homes they have built-in previous administrations) Some of the Liberal housing priorities are:

The NDP Platform 2021

For Canada’s New Democratic Party, led by Jagmeet Singh, their housing plan is detailed in their platform Ready for Better.The NDP also focuses on supply-side solutions but is the most renter-focused out of the three main parties. The NDP is also more focused on social and non-profit housing. Their main methods to combat Canada’s housing crisis are:

With stats like that, the good news is that there is some degree of consensus between the three major parties on what to do. Besides the focus on increasing house supply through building houses, the Conservatives, NDP and Liberals see our tax system as a method to lower housing costs. Conservatives are more focused on using tax incentives to encourage those with the means to invest in rental housing, whereas the Liberals use the tax system as a way to increase first-time homeownership (through their proposed TFSA-like account) and to disincentivize behaviour such as speculation. The NDP are more aligned with the Liberals in how they use the tax system, be it through the 20% foreign homeownership tax to disincentivize behaviour, or using an increased tax credit to encourage home-buying.

Whatever Canadians find to be the best solution to housing on September 20^th, their hopes are that the chosen party has a sufficient solution. It should be kept in mind though that as there are some philosophical similarities between the different housing platforms of each party, Canada’s next Prime Minister will have to continue the cross-partisan alignment into governance. Policy that impacts housing, such as zoning, is also handled by the Provincial and Municipal level, and all three parties have Premiers across Canada. Hopefully, market forecasting for the future housing market past September 20^th will be optimistic.

The post How Canada’s Next Prime Minister Will Affect the Canadian Property Bubble first appeared on RankMyAgent - Trusted resource about Buying, Selling and Renting.