Archive

Posts Tagged ‘Real Estate Tax’

Ontario Foreign Buyer Tax 2017

April 24, 2017 Leave a comment

On April 20th, the Ontario government announced a sweeping series of 16 different initiatives, all designed to slow the real estate market. Perhaps the most contentious proposal is to add a 15% tax for non-resident foreign buyers of residential real estate in southern Ontario. Here is my take on the new tax:

And here is a complete transcript of the video:

Hey there everybody. It’s Randy Selzer here. Welcome back to my real estate channel.

Today is kind of a red letter day. It’s actually April the 20th, 2017, and today our provincial government here in the province of Ontario rolled out a major initiative on real estate in trying to cool off the real estate market. They rolled out a plan with 16 different components that they’re going to be implementing, which is going to, I think, drastically affect the real estate market here locally.

Anyways, today we’re only going to talk about one thing, the first item out of the 16. That is the imposition of a foreign buyer’s speculation tax, is what they’re calling it, a non-resident speculation tax, which they’re going to be rolling out in the very near future, and, which will consist of a 15% tax to pay on closing when a foreigner, or a non-resident of Canada, purchases residential real estate in the province of Ontario.

Before we get into the details, this is going to apply for a large area of southern Ontario, basically going from Niagara Falls up to Hamilton, out to the west towards Kitchener-Waterloo, all throughout the GTA, north to Orillia and Barrie, over eastwards to the Kawarthas and Peterborough, so it’s a large chunk of southern Ontario where this tax will apply. Although it hasn’t been put into law yet, they have to put it through the legislature to make it into law, it will be retroactive to tomorrow, April the 21st. Anyone entering into an agreement of purchase and sale, if that purchaser does not live in Canada, and they’re a non-resident, non-Canadian, they will be obliged to pay a 15% tax on their purchase of residential property going forward. That’s going to be a major effect, I think, on the local market.

There are a number of different details, which they’ve released. I think some of the stuff is probably still being worked out. There’s going to be certain exemptions. For example, if a foreigner, non-resident, is married to a Canadian citizen, there will be no tax to pay. That’s interesting. I can foresee perhaps there will be a lot of marriages coming up to Canadians in the near future, because that will make them exempt from the tax. There’s also going to be some provisions where people can get their … If they pay the tax, they’ll be able to get that money back if they immigrate to Canada within four years of purchasing the property and paying the tax. They can get that money back, apparently, with interest. That’s in the press release that the government put out.

Also, there’s going to be some special provisions for students. I believe what they said was that if a student has been going to school here for at least two years, that student may be able to purchase some property without paying the tax. That’s a good thing, because I know for a fact that there are a lot of parents who send their kids here for university, and they like to buy a condo for them to live in during the course of their studies, rather than pay rent. Hopefully that’s going to mitigate things a little bit.

Let’s talk a little bit about the history of the tax. This 15% tax was originally rolled out in British Columbia last year, in 2016, in the greater Vancouver area. The people there, the politicians there, were trying to do the same thing to slow down the booming Vancouver real estate market. Vancouver’s a little different, in that they determined that about 10^% of all the purchasers in Vancouver were foreign buyers, people from other countries who are buying property in the Vancouver area.

Toronto’s numbers are a little bit lower. We had to complete a survey last year conducted by Ipsos Reid, was mandatory for all of the realtors to do, and they were able to determine that in Toronto, it’s about half that amount. Somewhere between 4% and 5% of all the purchases, all the buyers in the Toronto area, are foreign buyers.

When Vancouver rolled out the tax last summer, there was an immediate effect. Basically, all the foreign buyers dried up. They stopped … Very few people are going to pay on a $1 million purchase of a home, very few people want to pay $150,000 in tax, in addition to the basic land transfer tax on the day they get their keys. I think very few people, no matter how wealthy you are, are willing to spend that kind of money just to pay a tax. That dried up right away. But an interesting thing happened in B.C., where the local buyers, Canadian buyers, also decided to step back, because they wanted to wait and see where the prices would fall. It became a self-fulfilling prophecy, and prices and activity did fall rather dramatically in the Vancouver area over the course of last summer and fall.

What we see now is that the Vancouver market seems to have picked up again, and even without foreign buyers, and it seems to be headed upwards once again. Whether or not this drop will happen here in the Toronto area, we’re not sure yet. Again, this was just announced this morning, and we’ll have to be watching the market very carefully going forward to see where it’s headed.

There’s something I’d like to mention. This was rolled out, again, this morning. They’re calling it a non-resident speculation tax. I have a problem with this, the way they’ve packaged this, because think about it. If a Canadian buys a house in Florida, does that automatically make them a speculator? Or if a wealthy Canadian buys a condo in New York City, does that automatically make them a speculator? Or could it just possibly be that they want to invest in that property in Florida, or in New York, just for their own benefit, or to rent out, or just simply as an investment?

The fact that they rolled it out as a speculation tax, I think is a little bit disingenuous. Let’s not make these people into the bogey man. This 5% of the buyers out there, they’re not the ones that are driving the market. The fact that they’re calling it a speculation tax is really not at all the situation. You can’t call anybody who buys a house, a foreigner who buys a property in Canada, automatically a speculator. I just wanted to mention that.

Anyway, so anyway you look at it though, this is going to take effect once they pass it into law. It will take effect, and the lawyers are going to be busy if there’s anybody, foreign countries, who decides to purchase property.

It’s just for residential properties. It is only for units up to six residential units. It’s going to apply for houses, and semis, and townhouses, and condos, up to six units, so duplexes, and triplexes, up to six-plexes. Anything over that, like a large apartment building, for example, if an investor wants to buy that, and they happen to live overseas, there’s no tax to pay on it, so only up to six units.

Anyways, that’s the first of the 16. That’s all we’re going to talk about today. I’m not sure this is the best thing for our government to be doing. It’s not addressing the primary problem that we have in the real estate market here, which is so simple. We have an imbalance of supply and demand. There’s more demand than there is supply. For every house that comes on the market, every house or condo, there’s 10, or 15, or 20 buyers that want to buy it. That’s an imbalance. By imposing this tax, I think it’s too superficial. That’s not really the problem we have, but we’ll talk about that another time.

Anyways, thank you for joining me again today. It’s always a pleasure to talk to you. If you have any comments, if you’re on YouTube, I welcome them. If you’re on any other social media, I always like to talk to you guys. If you want to call me or text me, 416-433-3556, and I’d be happy to talk to you.

Thanks a lot, and have a great day. Bye.

5 Government Programs that help Home Buyers in Ontario

February 4, 2016 Leave a comment

ontario programs home buyers

There are a number of programs available from both the provincial and the federal government, which provide help for home buyers in Ontario. Each of these can help you to save money, either directly, or when you file your tax return. Here are 5 helpful programs which can save you money:

 

Ontario Energy and Property Tax Credit

This is a tax credit that helps low to moderate income individuals with property taxes and the sales tax on energy expenses. The credit is part of the Ontario Trillium Benefit and refunded on your tax return.

http://www.fin.gov.on.ca/en/credit/oeptc/

 

Home Buyers Tax Credit (HBTC)

This is a tax credit for first time buyers which reimburses a portion of closing costs. The credit is refunded on your tax return.  The max is $750.

http://www.cra-arc.gc.ca/gncy/bdgt/2009/fqhbtc-eng.html

 

Ontario Healthy Homes Renovation Tax Credit

ontario healthy homes credit

This tax credit benefits seniors and can help them with the renovation costs to improve safety and accessibility in the home. Seniors are eligible for up to 15% back when they spend a max of 10,000 on home renovations.  Amounts are refunded on your tax return.

https://www.ontario.ca/page/healthy-homes-renovation-tax-credit

 

Home Buyers Plan (HBP)

First time home buyers can withdraw up to $25,000 from their RSP’s tax free to use towards down payment and closing costs when buying a home.

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/hbp-rap/menu-eng.html

 

GST/HST New Residential Rental Property Rebate

This rebate is for purchasers of a newly constructed home for use as a rental property and GST/HST was payable at closing. As a landlord, you are eligible to receive most of it back by filling out an application and mailing it in.

http://www.cra-arc.gc.ca/E/pub/gp/rc4231/rc4231-e.html

We hope you find these programs useful. With thanks to Sherry Love, Home Financing Advisor at Scotiabank Mississauga, for her expert input. You can reach Sherry at (416) 908-8563.

Got questions about home financing? You can equip yourself with all the latest money saving tips, by clicking here. Get all the answers to help you with the purchase of your next home.

How the HST Will Impact You in 2010

December 14, 2009 2 comments

The Ontario Government recently enacted legislation which will implement the much-dreaded HST Tax. This new tax will take effect on July 1, 2010.

The HST tax will effectively combine the Provincial Sales Tax of 8% percent with the Federal GST Tax of 5% percent, to create a new “harmonized” total tax of 13% percent. This new tax will be applicable to many real estate services which hitherto only had one or the other tax applied.

The HST will result in a 13% tax on new home construction, but my post today will concern those ancillary costs pertaining to the buying and selling of resale residential real estate properties in Ontario… 

First, the good news….there is no HST tax payable on the sale of a resale home (residential). So the single largest dollar amount exchanged is not taxable under HST.

However, under the harmonized sales tax (HST), home buyers and sellers will have to pay extra tax on a range of services associated with the real estate transaction: services such as legal fees, moving costs, real estate commissions and home inspection fees. Currently, consumers only pay the 5% Goods and Services Tax (GST) on these services. 

In a nutshell, after July 1, 2010, if you are a seller, there will be a 13% percent tax payable on the real estate commission you pay – currently there is only the 5% percent GST payable on this fee. Your lawyer’s fee will also be subject to the 13% percent HST. One bit of good news – the cost of a Condominium Status Certificate will remain the same; while there will be HST at 13% instead of GST at 5%, there cannot be an increase in the legislated maximum total amount of $100.

If you are a buyer, any Home Inspection you pay for will be subject to the 13% percent HST. And so will the cost of movers hired. In addition, the cost of the CMHC premium for “high-ratio” mortgages has traditionally been taxable for PST – this amount will now be taxable for the full 13% percent HST.

So one can see that, with the introduction of the HST, whether you are buying or selling a Resale Home in Ontario, costs will be going up.
A press release from the Ontario Real Estate Association earlier this year summarized some of these changes which will take place – the example that they used was for a resale house priced at $360,000, and it was determined that the HST would add over two thousand dollars in new taxes to closing costs. Please note, these taxes are in addition to the Land Transfer Taxes which exist for both the Province and the City of Toronto. OREA calculated that, in total, the HST would add $313 million annually in new taxes to resale home transactions.

CURRENT TAXES PAID, VERSUS THE NEW COMBINED HST TAX PAYABLE, ON A HYPOTHETICAL $360,000 REAL ESTATE TRANSACTION:

    ————————————————————————-
                        Table 1: HST and Resale Homes
    ————————————————————————-
                                      Current Tax                           HST Tax
    Taxable Service            Payable          New Taxes          Payable
    ————————————————————————-
    Mortgage Insurance
     Premiums(1)               $752.40        $470.25(2)        $1222.65
    ————————————————————————-
    Legal Costs                  $50.00            $80.00           $130.00
    ————————————————————————-
    Real Estate
     Fee/Commission          $720.00-        $1,152.00-      $1,872.00-
                                      $1,080.00       $1,728.00       $2,808.00(3)
    ————————————————————————-
    Home Inspection            $20.00            $32.00          $52.00
    ————————————————————————-
    Title Insurance               $24.00            $15.00          $39.00
    ————————————————————————-
    Total New Tax:                        

                                                              $1,749.25- $2,325.25
    ————————————————————————-

1) CMHC premium of 2.75% for mortgage with a 5% down payment on a
        $300,000+ home.
    (2) Consumers currently pay the 8% PST on mortgage insurance premiums.
    (3) Real estate commissions are negotiable or may be a flat fee.
        Estimated range of 4% to 6% used.
    (4) Ministry of Finance, Public Accounts, 2007/2008.
    (5) Altus Group, “Economic Impact of MLS(R) Home Sales,” June 12, 2007.

The HST Ontario Tax will add to the cost of buying and selling a resale home. Many market watchers are predicting a flurry of activity leading up to the July 1, 2010 implementation date, as buyers and sellers both try to avoid paying the tax.

%d bloggers like this: