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Address: 183 Wellington St W #3801
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Premier Kathleen Wynne announced 16 measures today to help increase supply in the Golden Horseshoe region. Hopefully, these measures will slow down the 30%+ increases, to the 10-15% range for the rest of the year. This won’t cause a decrease in prices, just a more gradual increase.
So for the Buyers out there, you may see some relief in the pre-construction sector. For the Sellers, not to worry, you’ll still be seeing the bidding wars and gains.
Here are a couple of the major measures announced and why they won’t curb housing prices:
15% Foreign Speculation Tax
This tax won’t affect the market much as it will only apply on home purchases by non-resident foreigners in the Greater Golden Horseshoe. It will not apply to new immigrants or those planning to live here. The Toronto Real Estate Board estimates that only 4.9% of residential real estate transactions are by foreign buyers and more than half of those are either buying for themselves or a family member. I concur with this estimate as virtually all of my ‘foreign’ buyer clients are either from other parts of the country or are buying for themselves or a family member living in the city.
Ban on Pre-Construction Speculators
This is something that the government has been trying to crack down on for years. This will be good buyers looking to get into the market and for the resale market, where investors will now go to invest in real estate.
Power for Municipalities to Impose a Vacant Home Tax
The Municipalities will wait and see how the real estate market will react to these new provincial measures before implementing a Vacant Home Tax. However, I am sure they will end up imposing such a tax in the near future because the measures announced today will not curb prices by much.
Other Measures Include:
– Expanding existing rent control systems to cover all tenants, including those buildings built after 1991
– Rebate of development cost charges to encourage building of more rental housing
– A move to identify provincially owned surplus lands that could be used for affordable and rental housing development
– $125-million, five-year program to encourage construction of new purpose-built rental apartment buildings by rebating a portion of development charges.
Overall, this will be good for the GTA because the 30-40% increases we are seeing this year are unsustainable. It will put us into bubble territory if it continues this way year-over-year and nobody wants that. For those who have been following me on social media, I have been a huge proponent of transforming single-family homes to multiple units as an investment vehicle. I continue to believe that it is a smart investment decision and now the government will make it easier to do so.
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A stunning mansion in the heart of The Bridle Path.
The house has more amenities than some condominiums in the city. With its very own indoor pool and spa, exercise room, his and hers change rooms, party room with commercial grade kitchen, wine cellar, billiards room, home theatre and tennis court, it truly has something for everyone. It even features its own playroom with specialized rubber for the little ones.
Big Selling Point:
The exquisitely landscaped grounds makes living in the city feel like cottage country.
Why use your hard-earned cash to pay the landlord’s mortgage when you could be using the rent money to buy a home of your own? Although home ownership is not right for everyone, it does make sense in many cases.
Here are 5 reasons why home ownership is better than renting:
Home ownership is a great investment. Although short term real estate prices may follow similar patterns as an economic cycle with peaks and valleys, there has always been a general upwards trend. Especially with cities such as Toronto, urbanization and gentrification become more predominant over time, and scarcity of land drives prices up. Over the past 40 years, the average Toronto home price increase per year still remains at 7%, even after a couple of recessions!
Leveraging your money. With interest rates at an all time low and with as little of a down payment as 5%, you can still have completely control of your property. Act fast though, because lending rules are becoming more stringent!
Home ownership acts as a method of forced savings.By getting into the real estate market early (imagine having your income trying to catch up with a 7% increase a year!), you are able to save for a more expensive home in the future by paying down your mortgage every month and leveraging your current home equity. Monthly costs of owning are often only a little more than what you would pay for an equivalent rental.
Pride of ownership and being in full control. Any improvements or decoration changes need no approval from your landlord. Feel free to upgrade as your please! (Amen to that!)
Tax benefits. Especially as a first time home buyer, there are many perks from a tax perspective such as RRSP withdrawals and land transfer tax credits. In addition, there are no capital gain taxes on a principal residence. Even for investment properties, there are significant tax deductions which can make property ownership a great investment strategy.
Buy vs. Rent Example
Featured listing: Gorgeous 2 bedroom + den at Yonge/Finch for sale at $299,000
Mortgage Amount (including Mortgage Insurance; Interest at 3% for 5 years)
Maintenance Fees Total Monthly Expenses
Annual Cash Spent Average Annual Savings From Principle (based on 5 year term)
Annual Cost of Ownership
Annual Cost of Renting at $2,150/month Savings From Home Ownership
As you can see, even with a down payment of 5% and having to pay mortgage insurance, it would be more beneficial to purchase vs. rent, even without taking into consideration home price appreciation! As GoC bond yields decrease (which is what our fixed-mortgage rates are based on), interest rates will be even lower, allowing an even greater gap between this buy vs. rent scenario. In addition, this example is based on the first 5 years, with additional savings as time passes as you pay down more of your principle and have less interest in your mortgage.
Regulator of Ontario’s new home building industry, Tarion Warranty Corporation has introduced a number of program changes which will benefit consumers, including lower enrolment fees and better disclosure of extra charges in builder sales agreements.
By law, every agreement of purchase and sale for a new home or condominium must contain a lengthy disclosure statement called an addendum. Tarion has now introduced a new schedule to be added to every addendum, called Schedule B.
Schedule B became optional for builders on July 1st, and on October 1st it will become mandatory for all homes and condominium projects where the first purchase agreement is signed on or after that date.
There will be two parts to the schedule. Part I will contain an itemized list of all charges, fees or other adjustments to the final purchase price or balance payable on closing, where the dollar value is set out in the builder’s agreement of purchase and sale.
Charges listed in this section may be items such as the Tarion enrolment fee (which has now been reduced by $150), a charge for holding the purchaser’s deposits in trust, a fee to discharge the builder’s construction financing and a fixed charge to subsidize the builder’s legal fees.
Part II of the new schedule will set out all additional charges, fees or other anticipated adjustments to the final purchase price, which are to be calculated after the purchase agreement is signed, according to the written terms of the agreement.
For condominium purchases, charges in this section may include items such as:
The unit’s proportionate share of the cost of installation of gas, hydro, sewers and water service and meters in the project,
Any new / increase in taxes, levies or development charges imposed on the unit by any level of government after the agreement was signed (such as parks and other municipal charges, education or transit development charges)
A portion of the costs associated with a development agreement entered into with the city,
HST on the value of the appliances included with the unit,
Interest on the balance of the purchase price until final closing,
A portion of the building’s first common elements study.
Each charge will be referenced to the relevant text in the purchase agreement so buyers can determine whether it is unlimited or capped at a particular amount.
Your real estate agent should be limiting the charges on your behalf, however, assembling all the open-ended charges in one place will also alert purchasers to the additional financial risks involved in signing the pre-construction agreement.
Another significant change to the Tarion warranty came into effect on July 1st. It affects all new houses sold after that date and all condominium units where the first purchase agreement in the project was signed after that date.
A new definition of “major structural defect” has been implemented by regulation. The warranty program now protects purchasers against a defect in work or materials if it results in a failure of a structural load-bearing element, or adversely affects the use of the building for the usual and ordinary purposes of a residential dwelling.
Breakdown of mechanical equipment like a furnace, where the builder has no control over its manufacture or ongoing functionality, will now rest solely with the manufacturer, either through the original warranty or ongoing service contracts.
E Condos is located in one of Toronto’s most sought after locations – Yonge & Eglinton. This mid-town condominium project will have direct access to subway and with the expansion of the much-anticipated Eglinton Crosstown below grade LRT, there will soon be another added convenience to the east-west transit link. This project is just steps to the Yonge / Eglinton Centre, an energetic entertainment/shopping complex with movie theatres, bookstore, supermarket and shops.
Contact me today for VIP access to prices & floorplans of this highly anticipated project!
When looking to purchase a condominium, there are essentially two choices – resale or pre-construction. There are advantages and disadvantages to both, however when buying new, there are some details you should be aware of that differ from a typical resale.
Unlike When buying resale where you could have a down payment as low as 5%, buying directly from the builder requires a minimum down payment of typically 20-25%. This may seem like a lot, especially for first time buyers, but this may be an advantage as there will not be additional CMHC loan premium insurance costs and this will reduce your monthly mortgage payment. In addition, the deposit is paid in installments, so it does allow for some time to save. A payment schedule could look like this:
$5,000 upon signing the Agreement of Purchase and Sale
Balance of 5% in 30 days
5% in 120 days
5% in 350 days
5% at occupancy (see below)
TIP: Your Realtor may be able to negotiate a better deposit structure for you.
10-day Cooling Period
By-law in Ontario, anyone who buys a new property from a builder has a 10-day cooling off period, during which they can rescind their offer with no penalty. This also allows time to do 2 things: 1) have your Agreement of Purchase and Sale reviewed by a real estate lawyer, and 2) obtain a mortgage approval for your purchase to satisfy the builder’s requirements.
TIP: Sometimes lenders work with specific builders to offer special rates and incentives.
When you buy pre-construction, there are some additional closing costs that you do not incur when buying resale. Estimates are hard to make because they vary by developer, but averages are outlined below:
Development and educational levies ($500-$6000)
TARION Warranty enrolment fee ($900-$1200)
Utility hook-up fees ($1000-$2000)
Misc. fees (law society of Ontario, discharge of builder’s mortgage, etc.) ($200-$500)
Assignment fees (if you sell before final closing, or ‘flip’ your unit) ($3000)
Occupancy fees (see below)
TIP: some of these closing costs can be capped at a maximum figure so it’s important to have Realtor and a lawyer who are experienced in pre-construction condos on your side to help you negotiate these terms with the builder.
When buying new, there is usually a short period of time between when occupy the condo and when you actually receive title to your condo, known as the occupancy period. During this time, you must pay the developer for the right to occupy the suite. The amount of the occupancy fees is more or less equivalent to interest on the amount outstanding on the purchase price + monthly property taxes + condo fees. You will only pay occupancy fees until your final closing, where you begin paying for your mortgage, but you will never have to pay both at the same time.
TIP: to minimize your occupancy fees, buy as high up into the building as possible. Buildings take occupancy from the ground up, therefore the higher your suite is in the building, the shorter your occupancy period will be.
Final closing when the building is finally registered and your occupancy period is over. This is when your mortgage payments begin and you officially own your unit. You can choose to put down additional funds on your condo if you want to have more than the typical 20-25% that most builders require.
TIP: remember that you can shop around for the best mortgage rate right up until final closing, so even if you obtained an approval during your 10-day cooling off period. You can even choose a different lender if you like. That is, your initial pre-approval will satisfy your credit worthiness to the builder, but you can always get another pre-approval from an alternative lender up until you close.
Ashley Lo | Real Estate Advice, Real Estate Solutions
A couple of weeks ago, I did a home buyer seminar. I got a lot of good feedback so I decided, why not share some of the key points?
Interest rates are at historical lows! In the 1980’s, interest rates were at all time highs at about 18%. Now, interest rates are at all time lows! We are seeing interest rates such as 2.99% for a 5 year fixed term! The only caveat is that lending rules are becoming more and more stringent, so if you can approved, go for it!
We are not in a bubble! Contrary to what some people may say, we are not in a housing bubble! A bubble is It is characterized by rapid increases in valuations of real property such as housing until they reach unsustainable levels and then decline. We did see this in the late 1980’s when average percentage increase in the years leading up to the peak was 22%! Between 1986 and 1987, there was actually a 36% increase! In the past couple of years, we’ve been seeing increases, on average, at about 6%. (See previous post – The Canadian banking system is unlike the States)
The Canadian GDP is correlated with Toronto housing prices. There is a strong correlation between Canadian/Ontario/Toronto GDP and Toronto housing prices. The last time we saw a deviation, it was during the housing bubble in the 1980’s. Currently we are seeing a steady growth in Toronto GDP, which is expected to increase about 13% from 2010 to 2015! This is also in line with Canadian GDP growth.
Other factors. What can I say, Toronto is a great city to live in! Due to high immigration, population is expected to grow by 1 million people in the next decade. That’s an increase of 33%! Foreign investors also see the potential. We are seeing investors from all over the globe including China, Iran, India & European countries such as Greece and Italy.
There’s no time like the present! If you have any questions, feel free to Contact me.
Ashley Lo | Real Estate Advice, Real Estate Solutions
When buying a pre-construction condo, it can be quite confusing as it is more complicated than a regular resale condominium. There are a couple of different phases that the building must go through before final closing. A ‘condominium’ is not technically formed until it completes and passes all approvals with the Land Registry Office. Only when the building is finally ‘registered’ that the title of your unit will be transferred you.
Once the interior of the building is complete, a number of inspections and approvals also occur at this time by firstly the municipal council, then the regional planning department, and on to the Minister of Consumer and Commercial Affairs. These checks and balances are in place to ensure that the building upholds what is stipulated in the draft plan and Condominium Declaration. Once all parties agree that all the requirements have been met, the registration is complete.
When approvals are complete on a municipal level, an ‘occupancy certificate’ is issued. Owners will have a chance to do a PDI (Pre-Delivery Inspection) in the unit and report any deficiencies. Residents will begin occupying the units in phases and depending on your floor, this could take anywhere from 3 months to a year. This is known as ‘interim occupancy’, the period between the occupancy date and when the condominium is registered.
Since the vendor still owns suites during the occupancy period, you will be required to start paying ‘occupancy fees’ which is the interest on the balance owed to the builder (based on a one-year Bank of Canada mortgage rate), your estimated share of maintenance, as well as annual taxes.
There are also interim closing costs to consider including outstanding deposit amounts plus adjustments, occupancy fees, any upgrades, and enrollment of your suite to with TARION Warranty. You must have your homeowner’s insurance in place and arrange for your utility hook-ups at this time as well. Since you cannot obtain a mortgage until you receive title and it is difficult to predict the length of the occupancy period, you must ensure that you have enough savings preceeding the ‘final closing’.
A couple of months before the closing, you will be notified to secure your mortgage as rules and rates may have changed. When the building finally registers, it will take a couple of weeks for a final closing date, in which the balance of your purchase price will be due (where your mortgage kicks in!). Additional closing costs will also include but are not limited to, the land transfer tax, development charges, and legal fees.
Purchasing a new condominium is very exciting and has many benefits including increased value of your unit even before you take possession! However, it is important to understand the entire process very clearly to ensure a smooth transaction. Make sure you obtain a knowledgeable and trustworthy real estate agent to help guide your through this process.
Contact me if you have questions regarding real estate!
Ashley Lo | Real Estate Advice, Real Estate Solutions