James Metcalfe's Toronto Real Estate Update Nov 2013


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James Metcalfe's Toronto Real Estate Update Nov 2013

  1. 1. 1 FEB APR JUN AUG OCT DEC FEB APR JUN AUG OCT DEC for more detailed GTA statistics:JAMESMETCALFE.INFO James Metcalfe 416-931-4161 BROKER www.OurHomeToronto.com | Service@OurHomeToronto.com REAL ESTATE UPDATE Royal LePage Real Estate Services Ltd. Johnston & Daniel Division, Brokerage 477 Mount Pleasant Rd.,Toronto, ON M4S 2L9 VOLUME,PRICE SPURT CONTINUES IN OCTOBER NOVEMBER 2013 Greater Toronto REALTORS® reported 8,000 residential sales through the TorontoMLS system in October - a sizeable 19% increase versus October 2012 sales of 6,713 units. Significant volume increases occurred across all four key market segments: single-detached (+18%), semi-detached (+8%), townhomes (+22%) and condo apartments (+25%). This is the fourth consecutive month of double digit volume growth for the market as a whole and demonstrates that the rebound in sales which began in July is very real. It is clear that even with the recent minor uptick in fixed mortgage rates, buyers who were on the sidelines for at least one year following the July 2012 introduction of stricter mortgage guidelines, are returning to the market in droves. The average price of a GTA resale home in October was $539,058 - a healthy 7% increase versus the October 2012 average price of $502,127. Price growth was solid across all four key market segments: single-detached (+9%), semi-detached (+7%), townhomes (+6%) and condo apartments (+6%). In addition, the MLS® Home Price Index Composite Benchmark (which factors out price changes based on sales mix) was up by 4.5% on a year-over-year basis. The Toronto Real Estate Board predicts continued growth above the inflation rate for both the average selling price and the MLS® Home Price Index Composite Benchmark through 2014. The bottom line is home ownership in the GTA will continue to be an excellent investment. GTAAVERAGERESALEPRICE 201320122011 $560,000 $540,000 $520,000 $500,000 $480,000 $460,000 $440,000 $420,000 GTA RESALEHOMESALES 12,000 10,500 9,000 7,500 6,000 4,500 3,000 1,500 201320122011
  2. 2. 2 With thousands of new Toronto condominiums being completed each year, investor purchasers are putting many of them on the market, anxious to cash in on their profits. Unfortunately, the paperwork involved in selling them, either during construction or after completion and registration, is complex and problematic. Adding to the difficulties, the Ontario Real Estate Association (OREA) has not published a template agreement for these flips, and as a result real estate agents and lawyers involved in these resale transactions are forced to “ reinvent the wheel” for each new sale. The flipping of condo units can take place at different times during the lengthy construction process. During construction, with the written consent of the builder, the agreements themselves can be transferred to new purchasers. Some builders refuse consent under any circumstances. Others will ask for a fee of $2,000 to $5,000 (plus HST), effectively becoming a partner in any profits garnered by the investor. When the condo is flipped and the purchase agreement is transferred before the building is finished, the parties need to prepare an assignment agreement which will determine whether the investor gets his profit immediately or only when the building is completed and registered. An assignment can also take place after the investor gets registered title. In this case, the buyer has to close on the purchase, arrange financing and the pay land transfer tax as well as legal fees on the purchase, mortgage financing and subsequent resale. Either way, there are many issues which must be dealt with in negotiating condominium flip transactions. Some of the important ones are: •If the reseller/investor sells without moving in, and the ultimate purchaser is buying a previously unoccupied unit, the reseller must re-register the unit with the Tarion Warranty Corp. by completing a Vendor (Reseller) Registration Package and paying a fee of $350. Failure to do this may result in charges being laid under the Tarion legislation. •If the ultimate purchaser from the builder is an investor or landlord, he or she will forfeit the HST buyer rebate (but may qualify for an equivalent rebate as a landlord). The resale agreement should make clear that any lost rebate is an expense for the end buyer, in addition to the resale purchase price. •If the unit was originally sold when the federal GST rate was either 7 or 6 per cent, the purchaser is entitled to a transitional rebate directly from the Canada Revenue Agency. This brings the net GST payable down to 5 per cent. The resale agreement should provide whether the reseller or the final buyer is entitled to claim this rebate. •If unit occupancy has already taken place at the time of the resale, then within the following year or two, the City of Toronto will issue a retroactive tax bill (called a supplementary or “omit” bill) for property tax back to the date of first occupancy. Often builders will charge purchasers for this reassessment on the assumption that the builders themselves will eventually pay it, but their charges are often inflated. Agreements for resale of the units should provide a mechanism for tax adjustments among the builder, the reseller, the buyer and the City when the final tax bill is issued. • Every builder condominium purchase agreement requires the buyer to pay for “ adjustments” like development charges, the Tarion enrolment fee, utility connection charges and even part of the builder’s legal fees. Resale agreements should specify whether the reseller or the buyer will get hit with these charges, which may total thousands of dollars. •Occasionally the builder will impose conditions on giving consent to the flip. Resale agreements should provide a mechanism for negotiating changes if the builder’s conditions conflict with the resale agreement negotiated by the parties. Due to the complexity of condominium resale transactions, buyers and sellers would be wise to deal with real estate agents and lawyers familiar with creating condominium resale agreements. Hopefully, OREA will eventually create a standard form agreement for use by its members. This article was contributed by Bob Aaron, a prominent Toronto-based real estate lawyer. Please visit him at www.aaron.ca CONDO CORNER IT’S DIFFICULTTO SELL PRE-REGISTRATION CONDO UNITS
  3. 3. t 3This article was contributed by AmeriSpec Canada Inc., a leading Canadian home inspection company. Please visit them at www.amerispec.ca HOUSE SMART HOME INSURANCE CONSIDERATIONS FOR OLDER DWELLINGS Home insurance is intended to protect homeowners against most unforeseeable circumstances or accidents, but not against predictable or inevitable events. To minimize their risk, many insurance companies are requiring certain inspections or upgrades be made to high risk building components prior to granting home insurance on certain policies. These specific inspections or upgrades vary from company to company and from region to region in Canada. However, despite this variability, there are several common issues relating to homeowner’s insurance coverage for older dwellings: Aluminum Electrical Distribution Wiring. Single strand aluminum distribution wiring was installed in many homes between approximately 1968 and 1978. Due to its tendency to oxidize and its incompatibility with certain fittings designed for use with copper wiring, aluminum wiring has been determined to overheat in certain situations. As long as proper connections are used, and the connections are made without damaging the wire, aluminum wiring is considered safe. For years, the presence of aluminum wiring in a home has been an item that, if installed and managed properly, has not been a safety concern. However, more recently, several insurance companies have been requiring (for new insurance policies) that the aluminum wiring be inspected by designated electrical inspection/safety authorities, and if necessary, requiring certain upgrades or repairs to fixtures in the home or in some cases, requiring replacement of the aluminum wiring with copper wiring. 60-amp Electrical Services. 60-amp Electrical Services were commonly installed in homes prior to 1950. The term “ 60 amps” represents the maximum amount of current that a home may use from the local utility at one time. It is currently common to install a 100 amp electrical service (as a minimum) in new house construction. Whereas a 60 amp main electrical service is considered small by today’s standards, it is not inherently considered an unsafe system. However, there are two common safety issues often associated with older, 60 amp electrical services. These include increased risk of amateurish/unsafe historic electrical repairs and improper fuse size installations associated with the 60 amp system; both of these items can cause overheating of distribution wiring in the home, potentially causing an electrical fire. Knob and Tube Wiring. Knob and tube wiring is characterized by separately run hot and neutral wires, paper insulated wires, ceramic insulators and the absence of junction boxes at wire splices. If this type of wiring has been professionally maintained since its original installation, is often still a very safe system. However, ungrounded conditions, improper modifications and amateurish home owner repairs of this type of wiring can lead to certain safety/fire issues; this is the main reason why knob and tube wiring is considered a higher risk than contemporary wiring installations. Regardless of the actual rationale for the insurance companies concerns with 60 amp services and knob and tube wiring, their mere presence in a home is currently a common trigger for further review/upgrades to an older electrical system. Upgrading these components often reduces the insurance companies risk of an electrical fire and subsequent claim. Galvanized Plumbing. Galvanized supply and distribution piping was historically installed in homes prior to 1950. These pipes commonly rust or corrode from the inside out, often reducing the pressure or restricting the flow of water or worse yet, leaking and creating flood damage to a home. Life expectancies for galvanized plumbing are generally on the order of 40-50 years. Given that many galvanized pipe installations have recently reached their estimated life expectancies, the risk of a pipe leak occurring and the potential for flood damage is high. Some insurance companies are now refusing to provide homeowner’s insurance on houses with this type of plumbing. Fuel Oil Tanks. Fuel oil tanks have been installed across Canada for decades, although they are more common in eastern Canada. In many cases the fuel oil tanks are original or greater than 20 years old. As fuel oil tank/distribution system installations age, the probability for leakage from rust, corrosion, damage, etc. also increases. If a fuel oil leak occurs and goes undetected, the environmental cleanup for such a situation can be immense. More recently, certain insurance policies have limited or not provided coverage for homeowners with fuel oil storage tanks.
  4. 4. 4 James Metcalfe BROKER “YOURREFERRALSARESINCERELYAPPRECIATED! THANK YOU!” 416-931-4161 www.OurHomeToronto.com | Service@OurHomeToronto.com In accordance with PIPEDA, to be removed from this mailing list please e-mail or phone this request to the REALTOR® Not intended to solicit buyers or sellers currently under contract with a broker. The information and opinions contained in this newsletter are obtained from sources believed to be reliable, but their accuracy cannot be guaranteed. The publishers assume no responsibility for errors and omissions or for damages resulting from using the published information. This newsletter is provided with the understanding that it does not render legal, accounting or other professional advice. Statistics are courtesy of the Toronto Real Estate Board. Copyright © 2013 Mission Response Inc. 416.236.0543 All Rights Reserved. K0191 Royal LePage Real Estate Services Ltd. Johnston & Daniel Division, Brokerage 477 Mount Pleasant Rd.,Toronto, ON M4S 2L9 For several years now, the Bank of Canada has predicted a 2% inflation rate and a return to normalized growth “ just around the corner”. With that, they have signaled on numerous occasions that interest rate hikes were on the horizon. But the actual data has never supported these forecasts, so those interest rate hikes never materialized. As it stands, inflation lies just above 1% and economic growth is limping along at a sluggish 1.6%. So once again, on October 21st, the Bank of Canada announced that its keying lending rate would remain at 1%. What was different this time, however, was the Bank’s candid admission that future interest rate declines were just as likely as future rate increases. The financial markets have interpreted the most recent announcement this way: there will be no change to the prime rate throughout all of 2014. Since variable rate mortgages are priced off the prime rate, this is very good news for variable rate mortgage holders. The recent news for those considering a fixed rate mortgage is also positive. That’s because bond yields - which lead fixed mortgage rates - have sunk to a 3-month low. That could pull down long-term fixed rates by something in the neighbourhood of 10-15 basis points. All in all, the interest rate environment remains very positive for the real estate market as we head into 2014. Speaking of 2014, it’s hard to believe that this is my last newsletter of the year! I would like to extend my most hearty wishes to you and your family for a joyous and festive holiday season. I would also like to wish you a very happy, healthy and prosperous year in 2014. Speak to you again in January! “ Two things are infinite.: the universe and human stupidity; and I’m not sure about the universe.” – Albert Einstein “Between two evils, I always pick the one I never tried before.” – Mae West “I failed to make the chess team because of my height.” –Woody Allen “Get your facts first, then you can distort them as you please.” – Mark Twain