The Best to Know in Canadian Real Estate Market – Don’t Time the Market

In today’s competitive market, most of the Canadians wonder whether it is good time to sell or buy a home. If we talk about reality, there is no right or wrong answer to this question. The real question that should be asked is whether it is best time that suits you or not. Don’t time the market as it is considered as a big mistake. If you are planning to buy a home, then you need to find out the cost versus the expected return from that property. After determining the situation, make a decision if the situation is likely to improve in the future if you are willing to wait. Due to low interest rates in Canada, it is really affordable to own a home in Canada. You can get help from a local real estate agent about the mortgage payments, average utility bills, taxes and other expenses after you make a down payment. Buyers that are investing first time in Canada may find that the carrying costs are match up to their rent expense. Moreover, keep this in consideration that you can now lock down your mortgage rates in order to keep your costs stumpy, even if the rate of interest starts moving upwards. 

In most of the cases, you will find that you will be losing a lot if you have decided to wait. There will be high carrying cost if the mortgage rates increase and the lost equity that you may perhaps be building could be considerable if you have decided to wait. People who are trying to save money for a large down payment will especially find this true when they consider that they will still have to pay the rent while they are saving money for their home. 

On the other hand, if you are owner of a home in Canada and planning to sell it in order to buy another one, then you have to consider both ends of transaction. The major factor in making a decision in this situation is the difference among the prices of both the properties you want to buy and sell. You need to consider the additional expenses that can be incurred on the new property as compared to the home you presently acquire. Here also, you will need help from your property advisor as he will be the person who will help you in estimating the proceeds from the sale of your current home. He will also be providing you help on how you can keep your carrying costs at low level for your next home that you are planning to buy. He will also be of great help for you in locking a great mortgage rate prior to you buying of new house.

Consequently, if you are thinking that it is the correct time for you to make a move, then consider the relative costs of waiting consult with your local estate agent for their expert advice. So, don’t time the market, in fact, make a sound decision that best suits you and your family.

Canadian Real Estate for New Immigrants

Likewise different countries, Canada provides the opportunity to choose a place to which you can call it as “Home”.  In Canada, you can easily find homes that are fully furnished. It means that all the necessary furnishings will be included in the home such as furniture. Furnished homes and apartments can really be a good option if you are immigrating for the first time in Canada and especially from the far countries because you can’t bear the cost of moving your own furniture to Canada. So, the option of furnished home would be the best to take into consideration. But most people in Canada don’t do this. They always opt for unfurnished home or apartment as they want to decorate it as they want to see it. Some of the unfurnished homes will still provide the kitchen appliances like stoves and refrigerators.

 While shifting to Canada, it is important to decide whether you will rent or buy the home where you plan to live. This is important to decide because it will influence your decision of considering the list of property while you are searching for the home. Most of the permanent residents prefer renting a home initially so that they can get to know the environment of the place they live in, find a reasonable job and then do a steady and deep research on real estate in Canada and their prices. On the other hand, there are some people who come to Canada and straight away buy new homes for their livings. If you plan to buy a new home, then you should be ready to pay the down payment for that home as most of the banks and mortgage providers in Canada will definitely ask you for at least 10-15% of the down payment to the total cost of home. It means that if you are planning to buy a home that worth $100,000, then you will have to pay $10,000 as down payment.

On the contrary, if you are planning to rent a home, then also you must be ready to pay some amount upfront as advance for first and the last month’s rent as most of the landlords in Canada will ask you for this when you sign the lease for your new home. Also, you will have to provide contact information of a reference to the landlord and that must be someone from Canada. For Example, your employer would be a good reference.

In any case whether you rent or buy home, you should expect to pay amount of $400 to $2500 per month depending on the quarters you choose. Considering it as a rule of thumb, one should not spend 50% of his income on housing costs that includes your rent/mortgages and utility bills. That means that you should set up a budget prior to start hunting for house/apartment in Canada. Also, remember that you will find different living costs in the same province. So, try to focus on finding homes outside areas of major cities to save costs.

Spring has Come and Brought Home Sales in Canada

Spring has completely penetrated all over Canada and now the time has come for the real estate agents and home sellers as it is considered as the time for buying and selling homes in Canada. I realize that there are many reasons behind this such as it’s a natural time for new beginnings and transitions, and the time when the weather brings people of Canada out of winter-induced hibernation. No matter what the reason is, home sales increase as soon as the winter goes and Spring takes its position. 

But the problem arises here is that you have to work really harder in order to make your home look different as there will be a tough competition in the market in these days. You will have to set your home according to the spring season if you want to attract the spring-time buyers. Try to make sure that your windows should shine up with the sunlight and also, brighten up the faded paint in your home. People are looking for new beginnings at this period of the year instead of worn out old homes.

Old listings are another major factor in selling your home in this season. If you listed your home and people didn’t take much interest in it whole winter, then try to pull it out if it is possible for you. If you give your home some time off market, it will make it emerge as a fresh listing to the people when you re-list it. New listings are much more interesting for the people as compared to the old listings. So, think about the options you have got and consult your real estate agent for advice for the information related to your specific market.

Although the spring season is the hot season for home sales, the tough competition can make the things a bit hairy.  Planning for future is sometimes the best thing to do. For example, if you have just started to consider that you will sell your home, then to wait and promote it later and spend a lot of time in order to make it ready to sell can be a  sensible move.  Try to fix nagging repairs over the summer season and work on landscaping so that your home could be a cream of the crop in the next Spring. It seems that a lot of time will spend but it all depends on the priorities you have got. Well prepared homes sell quicker and at high prices. On the contrary, if you are in hurry to sell your home, then you will have to sell it at any cost that meet your needs. 

All the general rules in real estate depend on your needs and wants and there are very little aspects to this market that are general. But certainly, Spring is really a busy period for the home sellers. Therefore, sit back and enjoy this lovely season or jump in the market to have the real taste of real estate market.

Canada Avoiding Foreclosure Problem

Why the homeowners in Canada are less likely to confront foreclosure? Less than 1% of the mortgages in Canada are in arrears as compared to the 2.9M people that received the notices for foreclosure in US in year 2010. You might be thinking that the reason behind this is the lower number of Canadians and you would be right about it to some extent. The population of Canada is 34.4 million, whereas the population of US has now exceeded 307M. But the rates for foreclosure are 20% in highest hit states. Therefore, population doesn’t explain the whole difference.

Canada circumvented the housing bubble that was faced by both UK and USA. This is all due to the conservative banking practices adopted by Canada. Canada has strict underwriting principles and the banks in Canada sets aside more money for potential losses in case of downward turn by the market. Banks are not alone in conservative in lending but also, the private mortgage insures now have more control over the approval of the mortgage. Any Canadian who pays less than 20% down payment on house has to pay full fee of mortgage insurance upfront, furthermore, the private mortgage insurance company has the right to approve or even reject appraisal of the property. This in return allows the buyers and banks to get the realistic property appraisals.

In Canada, when people try to apply for the house mortgages, they are confronted with different choices of mortgages. Most of the mortgages are for the period of 5 years and the rate of interest is readjusted to the current rate of interest after every 5 years. This in result encourages people to pay off the mortgages even faster. Also, there are penalties for the prepayments which discourage the refinancing practice. Another big difference between US and Canada is that the Canadians don’t get any kind of tax deduction for their mortgage interest, and so, they haven’t got any incentive to keep on paying mortgage. 

In Canada, you cannot just walk away if you have got a mortgage.  Canada has full option on your mortgage that even if the bank has foreclosed on your home; you must have to pay the mortgage. If the house has less worth than the mortgage after the bank forecloses, then the bank has the right to sue you for deficiency judgment. In Canada, the low-income groups are discouraged to take the home ownership. In place of that, the government of Canada provides public funding for the low-income rental housing. If we talk about reality, then we can say that there is not much difference between rules for home financing in Canada and the rules that led US to the housing bubble. Before the booming years, banks used to require information in order to prove the income and set strict income standards. Also, banks used to hold appraisers to a higher scrutiny. This is what the Banks in Canada continued to practice, whereas the UK and US Banks lowered their underwriting standards.

Canadian Real Estate in Year 2011

Like other places, the living costs in Canada are increasing with a high rate in the current times.  If we have a look at facts and figures, we will find that the people in Canada are finding themselves in difficulties to meet the expenses like rents, taxes, mortgages etc. Due to all this, the net extra income of people is reducing continuously.

One of the major factors that are contributing to the increase in property prices is the low interest rate offered by Bank of Canada. These interest rates have made more and more people to invest in the real estate industry. Moreover, this has attracted the investors from China, Russia and other countries to invest in the real estate industry in Canada, which is one of the resistant economies over the recent past years. According to the professionals, the Canadian real estate sector is passing through a bubble, which is expected to end in the near future. They are hoping that the prices of real estate in Canada will fall down with 25% in two to three years. The economists also say that the Canadian real estate sector will not face the negative impacts of the bubble burst that were actually faced by US in the past.

Currently, the Bank of Canada has set the interest rate of 1% which is adopted all across Canada. If they want to avoid the great bubble burst, then they have to increase the interest rate.  But if this happens now, it will really have an adverse effect on the people who are paying mortgages. Concurrent to the recent survey, if the Bank of Canada increases the interest rate only by 1%, then it is expected that half of the Canadians paying their mortgages will not be able to pay their complete mortgage installments. So, it is not easy to increase the rate as it looks so. Economists, bankers, politicians etc are all trying to find a solution to this problem that Canada is facing.

According to current opinion by IMF, it is expected that the debt burden of Canada is going to enlarge in the coming years and the major reason behind this will be customer and accommodation debts. According to this explanation, it is also expected that Canada will be experiencing 2.8% rise in financial advancements this year; however, the inflation will also increase unpleasantly. Due to all this, IMF has now suggested the Canadian policy makers to find some way in order to increase the interest rates sooner or later. 

The question arises here is that what is the real solution for all this? Whether the Canadian people should reduce their expenditure in the real estate sector or the government should have a look at their policy and make the necessary changes.  Whatever the choice is, it should be done quickly and in the very near future to avoid the consequences as USA faced in the past with bubble burst causing many of USA citizens unable to pay their mortgages and many of the debts are still pending today

Canada: A New Option for Real Estate Investors

To own property in Canada can really be profitable if you know the tax laws for real estate in Canada. There is no requirement for residency of citizenship in Canada to buy property. You can temporarily get residence in Canada but you will have to fulfill the immigration requirements if you want to have extended stay or wish to become a permanent resident. Also, non-residents of Canada can get possession of rental property but they need to file the annual tax returns with Canada Revenue Agency.

When you purchase a property, you have to pay provincial transfer tax that is around 1 percent on the initial $200,000 and 2 percent tax on the remaining balance. There is also some exemption for the first property purchase done in Canada. Purchases of new homes are subjected to the federal GST, but for new and builder-renovated homes, one can get a partial debate if he plans to live in that home. The GST is not applicable to the resale homes. Income Tax Act of Canada requires 25 percent of gross property rental income to be remitted each year. If the rental property is incurring losses, then you can reclaim the taxes that are previously paid. Mortgage and property tax, bank loans are tax deductable in Canada in case of the property bought for the reason of investment.

 If any of the non-resident of Canada sells property in Canada, the government charges 50% of the capital gain as withholding tax. US residents also have to report their capital gains to Internal Revenue Service. Conversely, if the gain from selling property is taxed in Canada, then you can claim it as foreign tax credit. If non-resident sells a property in Canada, then he has to provide clearance certificate to the buyer which is prepared by Canada Revenue Agency. If this certificate is not provided to the buyer, then the buyer has the right to withhold some percentage of the payment as he will be responsible for any unpaid taxes by the non-resident. On the other hand, if you are Canadian resident and the property is your place of residence, then you are not liable to pay any taxes on capital gains when selling the property. But if you are resident of Canada and own a property but not resident in that place, then you are liable to pay the capital gains for the period you didn’t designate that specific property as your residence.

Real Estate Investment trusts are the public traded corporations that invest in the portfolios of the real estate assets. Most of the REITs based in Canada trade on Toronto Stock Exchange.  These REITs must distribute their taxable income to the shareholders as they are work as trusts. In 2007, federal government of Canada legislated that REITs must convert themselves to ordinary taxpaying companies by Jan, 2011 but there were many REITs that were exempted from this legislation. To be exempted from this legislation, the REIT must maintain 95 percent of its income generating from passive revenue sources and 75 percent from rent and capital gains segment of the previous law. 

In conclusion, when it comes to own real estate in Canada, the laws are quite liberal. You don’t have to be a citizen of Canada or even you don’t have to live in Canada, and interest expenses and property taxes are tax deductible. For a profitable investment, you must have knowledge of the tax implications in each stage of investment, whether in owning the property and renting or inhabiting it, to ultimately selling it.