The Ontario Real Estate Association (OREA) says it has no plans to back away from its campaign promoting home ownership to parties and candidates in the upcoming provincial election.
But OREA won’t be moving ahead with billboards supporting or criticizing individual political candidates, a spokesperson said Monday.
That clarification comes in the wake of reports of industry squabbling between OREA and the Toronto Real Estate Board (TREB). On Sunday, The Canadian Press reported that TREB president Tim Syrianos sent OREA a letter telling it to step back from a “misguided and ill-advised” campaign that could negatively affect Toronto-area realtors by highlighting the home affordability challenges in the region, which has had a slow start in some areas this year.
The campaign called “Keep the Dream Alive” urges politicians to help make home ownership affordable to millennials. “Rising home prices have pushed home ownership out of reach,” says the material on the association’s website.
Syrianos also suggested that endorsing or undermining certain politicians violated OREA’s mission to promote policies rather than people.
Targeted billboard advertising was only “one element of an election plan” OREA circulated to its board, of which Syrianos is a member, said Matthew Thornton, association vice-president of public affairs.
“Our board decided not to move forward with the program. It was a pilot initiative they were considering, and upon further review they decided not to move forward,” he said.
That decision was made before Syrianos’s letter leaked to the press, he said.
In it, the Toronto board president warned OREA against trying “to supplant TREB and overtake our expertise and well-respected voice.”
Syrianos also objected to OREA’s plan to use an “Ontario Realtor Party” as part of its campaign. The Ontario Realtor Party is the profession’s voice promoting the dream of home ownership and protecting the real estate profession, according to the association’s website.
TREB refused Monday to comment on the letter. It referred to a previous joint statement with OREA saying that “the letter is not reflective of the long-standing and positive relationship between OREA and TREB who jointly remain committed to helping create a new generation of homeowners.”
OREA represents 39 Ontario real estate boards, but about 50,000 of its 70,000 members belong to the Toronto board.
Thornton stressed that political campaigns aren’t new to OREA. He said the association successfully lobbied the province against allowing municipalities outside Toronto to levy their own land transfer tax.
The “Keep the Dream Live” campaign will move into a second phase in September through November, he said.
“It’s an opportunity for us to continue to promote this message that young people are struggling to afford a home, and policy-makers need to take this issue seriously,” said Thornton.
OREA CEO Tim Hudak is the former leader of the Ontario Progressive Conservative party. Last year, OREA lost its main function and key revenue source as the training provider for new realtors in the province, and it announced it would rebrand itself as the voice of the real estate industry and an advocate for home ownership.
The internal strife is typical of industry associations that have different tentacles or sometimes local, provincial and national arms, said James McKeller at the Brookfield Centre in Real Estate & Infrastructure at York University’s Schulich School of Business.
“It’s hard to figure out the motives of both of these organizations. They pretend they’re representing the public, but they’ve never given any evidence of that in the past,” he said.
Meantime, Bosley real estate agent David Fleming said he would be happier if TREB represented the interests of active agents, rather than the 50,000, who are licensed to practice, many of whom help transact one or fewer sales each year. But the board is dependent on its large membership for revenue.
Meantime, he said, OREA is “trying to figure out what is our purpose and they don’t even really know.”
With files from The Canadian Press
How the New Tax Law Affects Your Real Estate Business
Tax reform should have a positive impact on the real estate sector. Make sure your business is prepared for these major changes.
4 min read
The Tax Cuts and Jobs Act (TCJA) brings big tax changes to the real estate sector, the likes of which haven't been seen since the Tax Reform Act of 1986.
Fortunately, the impact on real estate businesses should be mostly positive. That said, there are some crucial changes that business owners and entrepreneurs in the real estate sector should look out for moving forward.
You have probably heard about the 40 percent reduction in the corporate tax rate to 21 percent under the TCJA. However, if you operate as a sole proprietor, or in a pass-through entity such as a partnership, LLC or S Corporation, the TCJA also contains a significant change to how you will be taxed.
A deduction of up to 20 percent of qualified business income is now permitted. This deduction is limited to the lesser of:
- 20 percent of qualified business income
- The greater of 50 percent of W-2 wages, or 25 percent of W-2 wages plus 2.5 percent of the unadjusted basis of qualified depreciable property
Congress and the IRS need to issue new rules to further clarify and explain some of the nuances of this provision, but real estate businesses should clearly benefit from it.
Real estate depreciation rules were already favorable, but the TCJA improved them even further. Qualifying property — including, for the first time, used property — acquired after Sept. 27, 2017 is eligible for 100 percent bonus depreciation in the year it is placed in service.
Eligible assets are those with a depreciable life of 20 years or less. This encompasses personal property, and was intended to include "qualified improvement property" defined as work done to the interior of a commercial building excluding costs related to enlargement, elevators and escalators or the internal framework. Because of a drafting error, however, it was not assigned the correct class life, so this is an important provision requiring Congressional remedy.
Remember that bonus depreciation will begin to wind down in 2023. The rate will drop by 20 percent per year beginning in 2023 until it is eventually eliminated in 2027.
Additionally, Section 179, which permits the expensing of assets for commercial properties, has been expanded. The annual limitation has increased from $500,000 to $1 million, with a phase-out beginning at $2.5 million for qualifying assets. For the first time, this provision now includes roofs, fire protection and alarm systems, HVACs and security systems.
Limitations on business interest and losses
The way the losses and gains from your real estate business are taxed is also impacted by the new law. For example, debt-financed real estate operations should note that any business with more than $25 million in average annual gross revenue over the prior three years will be limited in its interest expense deduction to interest income plus 30 percent of adjusted taxable income. Rental property owners and others in real property businesses can, in some cases, opt out of this rule and claim the full interest deduction, but that comes with certain trade-offs.
If you're on the opposite side of the scale with an overall tax loss, a new loss limitation rule allows only $500,000 for joint filers ($250,000 for single) to be used to shelter non-real estate income such as wages, interest, dividends and capital gains. These provisions will likely have the largest impact on qualifying real estate professionals.
There are many other pieces of the tax law that could affect real estate companies and investors. Section 1031 like-kind exchanges for real estate (but not for personal property) remained intact, but the taxation of carried interests, doubling of the estate and gift exemption and changes to some popular tax credits could affect your real estate holdings, taxes and financial planning.
In order to ensure you're getting the most out of your corporate and individual taxes — in real estate and elsewhere — make sure to work with a tax professional well-versed in these changes. The sooner you review these changes with a professional, the less likely you will be caught off guard when the 2018 tax filing season rolls around.
Opinions expressed by Entrepreneur contributors are their own.
Ottawa real estate firm Minto looks to create real estate trust
One of Ottawa's biggest landlords is looking to convert to a real estate investment trust, a move that would allow investors to cash in on the rent it charges for suites across the city.
Minto Properties announced Wednesday it's seeking to create the trust, which will include 22 properties across the country, including 14 here in Ottawa.
Other properties are in Toronto, Calgary and Edmonton.
Real estate trusts allow investors to essentially buy shares in residential properties, giving them a cut of the rent payments the company receives from tenants.
Carleton business professor Ian Lee said this is a chance for Minto to take the buildings, which are valuable assets, and get some money to potentially move in another direction.
"It appears they have decided to focus on a different part of the real estate market," he said.
"Usually, when you're selling off your entire portfolio, as they announced they are today, that suggests a change in strategic direction."
No changes likely for renters
In their prospectus to investors, Minto claims its properties are 98 per cent occupied and charge an average monthly rent of $1,358.
Lee said this isn't really going to change anything for renters.
"It's just as if the name of the company collecting your rental cheque every month has changed and you're indifferent," he said.
The move still has to be approved by regulators, but in a release Minto said it could eventually add more units to the 4,279 included in the initial offering.
CBC reached out to Minto CEO Michael Waters, but he declined to comment as the process unfolds.
Toronto Real Estate Leads The Country In Average Price Declines, Saint John Pops Higher
The average sale price of Canadian real estate is falling, and fast. Canadian Real Estate Association (CREA) numbers show the average price of a home is down 11.3% in April 2018. Most of the declines are being attributed to the country’s largest and fastest falling real estate market – Toronto. Yeah, I haven’t heard of it either.
The rumors are true, average prices aren’t great for determining how much you’ll pay for a home. When the range of distribution for sales is normal, the average price is a very effective measure. However, when the range of distribution is wide, it will tend to skew higher and lower, depending on extremes. That is, extremes to the high and low of prices can skew the number in either direction. It’s still a useful indicator if you know what you’re looking for.
The average price can be a useful proxy for dollar volume, and upgrade flow. After all, CREA only deals with resales. Usually people that sell will be upgrading, buying a more expensive home as well. This typically sends the average higher. If people are selling, but have no plans on buying again in this market, you’ll see the average slide. Who sells and doesn’t plan on buying again you might be asking? At least a quarter of people planning to sell in Toronto this year.
Vancouver Has The Highest Average Sale Price In Canada
Vancouver, Toronto, and Fraser Valley are still the priciest markets in the country. Vancouver has the highest average sale price at $1,067,266. Toronto comes in second with an average sale price of $804,584. Fraser Valley is in third with an average sale price of $780,736. These markets have remained in the same order for quite some time.
Average Sale Price of Canadian Real Estate (April)
The average sale price of all homes in Canada by major CREA regions. In Canadian dollars.
Source: CREA. Better Dwelling.
Toronto Has The Fastest Dropping Average Sale Price
Saint John, Saguenay, and Victoria had the fastest rising average sale prices compared to last year. Saint John had an average sale price of $199,136, an increase of 22.9%. Saguenay had an average sale price of $202,729, a 15.8% increase. Victoria had an average sale price of $703,592, an 11.9% increase. The first two cities are seeing huge growth, but are still cheaper than the national average. Victoria has been on a tear, but it also has one of the biggest drop in sales-to-new listings in the country.
Toronto, Thunder Bay, and Hamilton regions are the fastest falling compared to last year. Toronto saw the average sale price drop to $804,584, a 12.6% decline. Thunder Bay had an average sale price of $217,745, an 11.9% decline. Hamilton – Burlington saw the average sale price drop to $569,490, an 11.3% decline. Toronto and Hamilton-Burlington saw huge gains last year, so a drop was expected.
Canadian Real Estate ASP Percent Change (April)
The percent change of the average sale price (ASP) of all homes in Canada by major CREA regions.
Source: CREA. Better Dwelling.
The average decline in prices across the country is being attributed to B-20 Guidelines. The Guidelines subject uninsured mortgage borrowers to undergo a stress test. This reduced the maximum size of a mortgage people could borrow. Some have claimed the stress will have minimal impact on borrowers. However, the Bank of Canada estimates over 81,000 buyers last year would have been impacted by the new rules.
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