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What are 4 Economic Factors Driving Up Toronto's Real Estate Market?

Whether you’re interested in buying or selling in Toronto’s real estate market, there are a few factors you should be aware of that are driving up prices and demand across the city.

For many years, there have been talks and predictions that the climbing price of Toronto’s real estate would come to a halt or even drop but none of these guesstimations have proven true. 

So what are the main reasons that Toronto’s real estate prices continue to rise? Here are four economic factors to consider when evaluating Toronto’s rising real estate prices. 

1.   Supply & Demand 

One of the main factors increasing Toronto’s property prices relates to lack of supply in the Greater Toronto Area. Continuously, Toronto home buyers are going into bidding wars and competing against multiple offers, because of lack of supply which in turn is creating higher real estate prices. 

This supply issue poses true to all stages of purchases, however, first-time home buyers trying to get into the market at entry level prices (around the $400,000 price mark) are being affected the most.  

2. World-Class City Contender 

As Toronto keeps making a name for itself as one of the world’s up-and-coming cities to live in, people from around the globe are listening. And as a city, Toronto is working to live up to world-class expectations. As the fourth largest city in North America, Toronto trails behind a few of the top internationally known cities; New York City, Los Angeles and Mexico City. Real Estate prices in New York City and Los Angeles are much higher than those we see in Toronto; however, as we continue to grow and gain international awareness, the cost of living will be reflected across the board which will include real estate prices. 

3.  Population Growth 

Over the next 20 years, the population of the Greater Toronto Area is expected to grow by roughly 3 million people, states the Ontario Ministry of Finance. Which means the city is projected to grow by an average of 150,000 people per year. With these expected rising numbers of residents and the lack of housing supply across the city and province, we can only expect that real estate prices will continue to rise as the competition in the market tightens for buyers. 

4. Speculative Investing 

As Toronto grows speculative investors interest grows parallel. Speculative investing is when a person purchases a home in hopes of turning a profit and does not live in the purchased home. These investors usually purchase a property and in turn sell it quickly to capitalize on increased real estate prices. In Toronto, speculative investing has become more popular with the influx of housing prices. A recent article in the Globe and Mail states, that in Toronto’s hot market of April 2017, every three of ten properties purchased were by speculators. 


Those waiting for Toronto’s “real estate bubble” to burst may be waiting a very long time as these above economic factors show no signs of the market slowing down.
 

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Everything You Need to Know About Ontario's 15% Non-Resident Buyers Tax

The start of 2017 for Ontario’s real estate market was boiling hot. After a few short months of bidding wars, frustrated buyers and some of the highest selling prices seen to date, the heated market reached its breaking point.

On April 20, 2017, the Ontario government announced 16 policies changes in an attempt to cool the hot housing market. The policies covered various city concerns including vacancy taxes and rent controls, however, the policy that garnered the most attention was a 15% non-resident speculation tax (NRST). 

What does the 15% NRST mean for Toronto real estate purchases? 

Any person or corporation that isn’t a permanent resident or classified as a non-citizen of Canada must pay an additional 15% tax on top of the purchase price. 

Why did the Government create the 15% NRST? 

The goal of the Ontario Government implementing a tax for non-resident buyers was to help create a more predictable real estate market for permanent Ontario residents. 

The province of British Columbia passed a similar foreign tax policy a year earlier to help cool its heated market, which proved successful. 

Before this tax came into play, the real estate market posed an unfair disadvantage to permanent residents purchasing property across the province. Canadian currency and resident incomes faced trouble competing against foreign exchange. 

How has the 15% NRST changed the market? 

Since implementing the NRST the number of foreign real estate transactions has dropped in almost all municipalities of the Greater Golden Horseshoe. The image below highlights the percentage of properties purchased by foreign buyers, by area. 

Who is or can be exempt from Ontario’s Foreign Buyers Tax? 

There are a few exceptions and rebate options for foreign buyers when investing in Ontario real estate. 

Exemptions: 

Nominees - An international person who has applied for permanent residency under the Ontario Immigrant Nominee Program.

Protected person - An international person who is a protected landed immigrant and/or refugee under the Immigration and Refugee Protection Act of Canada. 

Spouse - An international person who is purchasing a property with a spouse who is a Canadian citizen. 

Rebates: 

To qualify for an NRST rebate a foreign buyer must comply with one of the following situations:

An international person who becomes a permanent resident - A person that becomes a permanent resident within a four year period of property sale. 

An international student - Foreign students enrolled in at an Ontario college or university for a full-time program for a minimum of two-years from the date of purchased real estate. 

An international worker - A foreign worker who works on a full-time basis with a valid working permit for a minimum of one year from the date of purchased real estate. 

Interested in learning more about Ontario’s Non Resident Buyer Tax, visit the Ontario Ministry of Finance website bulletin board.  

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2 Must Know Changes to the Landlord Tenancy Regulations

Freeze! Don’t move - An expression many renters in Toronto want to hear! And Ontario’s new Fair Housing plan is listening!

As Toronto’s housing demand continues to rise, the city’s renters face many challenges, including skyrocketing rent prices, limited supply, and unlawful evictions.

Recent city wide reports indicate the average price for a one bedroom apartment in Toronto is over $2000 per month, which is an 11% increase year-over-year. It’s no surprise that many renters have little interest in moving; however, some landlords have taken illegal liberties to capitalize on high times.

As of September 2017, new policies are now in place protecting tenants from eviction and unexpected rental increases.

 

1. No-Fault Eviction Compensation

One of the most common use cases of no-fault eviction is when a family member (of the landlord) plans to move into the tenanted unit or property. In this situation, tenants who are on month-to-month leasing agreements can be evicted at no fault with 60 days notice. And because many landlords are looking to increase profits on owned rental properties, this family rule is being abused.

New rent control policies outline that any tenant being evicted for a landlord’s family member to take possession, must receive compensation of a minimum of one month’s rent or must be offered another comparable rental unit.

In addition, if a landlord advertises, re-rents (to non-family), demolishes or converts the apartment within one year of eviction, he or she could face a fine up to $25,000.

 

2. Rent Increase Caps

As you may know, the amount a landlord can increase a rent price is a percentage based on the Ontario Consumer Price Index. The percentage increase is capped at 2.5% annually. For 2018, the province announced a 1.8% rent increase cap.

These caps apply to the recently-passed Rental Fairness Act, 2017 which expands rental controls to all private rental units, which includes occupancy after November 1, 1991. Before April 20, 2017, units built before this time did not have to comply with the government’s annual percentage increases. This meant a landlord of a newer Toronto condo building could increase rent by X amount. For example, a tenant paying $2000 per month could be requested to pay an additional $200 a month after the first year of the lease with the appropriate 90 day notice. Now, because of this new act, all rentals regardless of date built must comply with the annual capped increases.

What does this mean for renters? If someone is paying Toronto’s average rent price for a one bedroom, $2000. The landlord is only allowed to increase the price by 1.8% for the year. \

2000 x 1.8% = 36

In 2018 the maximum increase is $36 for the year, making rent $2036.

The above changes were made in accordance with Ontario’s 16 change policies with the goal of improving and maintaining affordable housing across the province - one which proves Toronto renters a peace of mind.