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Canada’s luxury real estate market is on fire. Can the foreign homebuyers’ tax cool it? – Global News



Canada’s pandemic real estate craze goes all the way to the top, according to new data compiled by Sotheby’s International Realty Canada.

The report, which tracks sales of properties priced over $1 million, $4 million and $10 million, shows triple-digit growth in major cities across Canada in terms of the number of luxury homes and condos that switched hands in the first half of 2021 compared to the first half of 2020.

Read more:
Rising interest rates will be ‘No. 1 issue’ for Canada’s housing market, economists say

“We’re seeing this right across the country for the first time in a long time: all the major (urban) centres are basically firing on all cylinders,” says Don Kottick, president and CEO of Sotheby’s International Realty Canada.

He is optimistic that momentum will carry forward to 2022, even as Ottawa promises to implement a tax on empty properties owned by foreign non-residents.

“All the indicators are leading into a strong bull market going into 2022,” he says.

Click to play video: 'What is vacancy tax and how can it change Toronto’s housing market?'

What is vacancy tax and how can it change Toronto’s housing market?

What is vacancy tax and how can it change Toronto’s housing market?

Luxury sales soaring above pre-pandemic levels

While the onset of the COVID-19 pandemic briefly sent homes sales plunging in the spring of 2020, this year’s sales of luxury homes are strong even when compared to pre-pandemic sale volumes.

The Greater Toronto Area, for example, recorded 414 properties sold for over $4 million in the first six months of 2021, up around 300 per cent compared to the 103 such properties sold over the first half of 2019.

Overall, $1 million-plus residential sales surged to 29,394 transactions between January and June of 2021, up roughly 240 per cent compared to the 8,612 transactions above $1-million recorded over the same period in 2019.

Read more:
What a developer’s plan to buy $1B in homes could mean for Canada’s housing market

The data likely reflects both frenzied buying and selling activity as well as the fact that soaring valuations are pushing a larger number of properties above the price threshold that has traditionally been considered “luxury.”

Nationally, sales volumes reached an all-time record in March, before settling at lower but still historically extraordinary levels in April and May, according to the Canadian Real Estate Association.

Home prices have also skyrocketed across much of Canada, with the national average home price reaching a little over $688,000 in May 2021, up a whopping 38 per cent from the same month last year.

Click to play video: 'What a developer’s plan to buy $1B in homes could mean for Canada’s housing market'

What a developer’s plan to buy $1B in homes could mean for Canada’s housing market

What a developer’s plan to buy $1B in homes could mean for Canada’s housing market – Jun 15, 2021

The luxury market is having a moment right across the country, according to Sotheby’s report. In Vancouver, the number of homes selling above $10 million was up 300 per cent year-over-year. Montreal saw the sale of a $12.9 million condo, which broke Quebec’s historic record for condominium prices on the multiple listing service (MLS).

And even in Calgary, sales of single and attached homes saw healthy activity, with 615 properties selling for over $1 million in the City of Calgary, although sales of condos above that priced remained a very small percentage of the market, according to the report.

Read more:
Will the housing market crash? Why home prices may stay hot

According to Kottick, the factors that propelled sales in the upper echelons of Canada’s real estate are the same ones that fuelled homebuyers’ fever in the rest of the housing market: record-low interest rates, a desire for bigger properties and more space, and a chronic undersupply of homes.

The luxury market has moved “in tandem” with the broader market, coming to a virtual halt in March and April but then quickly recovering and progressively heating up through the summer and fall of 2020 and through the winter, reaching eye-popping sales volumes in the spring of 2021.

Like in the rest of the market, sales activity has tempered a little lately, though it remains strong, Kottick says. He believes it’s just a temporary “breather.” As Canada’s reopens its borders to immigration while interest rates remain low, the pressure from buyers will build up again, he predicts.

Click to play video: 'Priced Out: A look at why the hot housing market is out of reach for young Canadians'

Priced Out: A look at why the hot housing market is out of reach for young Canadians

Priced Out: A look at why the hot housing market is out of reach for young Canadians – May 28, 2021

National tax on foreign homeowners looming

Even a looming federal tax on vacant and underused properties held by foreign homeowners won’t do much to slow down Canada’s luxury real estate market, Kottick believes.

As eye-popping home price increases put the dream of homeownership out of reach for many young Canadians, the Trudeau government has vowed to impose a nationwide levy on foreign homeowners aimed at clamping down on international speculators.

The tax is expected to yield $700 million in additional revenues over four years starting in 2022-23, money Ottawa says will be used to improve housing affordability for Canadians.

British Columbia has a 20 per cent land-transfer tax for foreign buyers in some regions, along with an additional speculation levy on empty homes, while Ontario’s 15 per cent tax applies to foreign buyers investing in certain cities.

Read more:
‘Nowhere to go’: Canadian homebuyers without family help are running out of options

But with immigration grinding to a halt during the pandemic, the vast majority of those snapping up the country’s multi-million-dollar homes over the past year have been Canadians, according to Kottick. At first, it was affluent buyers upgrading to larger properties, leaving downtown urban centres or moving across provinces. Then mostly domestic investors joined the fray, he says.

“Real estate is now considered an asset class,” he says.

With the reopening of the border, he expects international demand for Canadian housing to come back from both foreign investors and immigrants regardless of the new federal tax.

Some economists reckon even an empty-homes tax targeted narrowly at foreign buyers may send a chill through the housing market, curbing the “fear of missing out” mentality that has anecdotally gripped buyers in many parts of the country.

Still, some housing experts argue government efforts to cool the market should focus broadly on all investors.

“Any policies that should be put in place should just be geared towards investors, period, whether domestic investors or foreign investors,” John Pasalis, president of Realosophy Realty in Toronto, previously told Global News.

To discourage buyers from purchasing property only to flip it after a short period and pocket the gain from rapid appreciation, Ottawa could impose a tax on residential real estate sales with the rate gradually falling to zero over five years of holding the property, BMO senior economist Robert Kavcic wrote in a report in March.

“This could easily crowd out speculation and alter market psychology,” he wrote.

© 2021 Global News, a division of Corus Entertainment Inc.

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Interest rates send shivers through B.C. real estate market – Business in Vancouver



A wintry summer is brewing for B.C.’s real estate market with soaring interest rates drastically reducing buyer purchasing power while sellers clamber for yesterday’s prices. Home sales fell sharply in May while home values are declining, slowly but surely.

Multiple Listing Service (MLS) sales fell 16.3 per cent in May adding to April’s 13 per cent decline to a seasonally-adjusted 6,853 units. On an unadjusted basis, sales fell 34 per cent.

While sales remained above levels observed just prior to the pandemic and above the same-month average from 2010-19, momentum is quickly weakening. This is not surprising with fixed mortgage rates well above four per cent and at a 10-year high, while variable rates are rapidly shifting higher. With home prices up 40 per cent during the pandemic, prospective buyers face a very different market, and many have quickly been priced out of ownership. High consumer price inflation is further amplifying affordability challenges for households.

Sales declines were observed in most regions of the province. Specifically, the real estate boards of Chilliwack (-25 per cent) and the Fraser Valley (-20 per cent), which covers Abbotsford-Mission and eastern communities of Metro Vancouver, including Surrey, led the drop in sales while the rest of Metro Vancouver fell 18 per cent. Vancouver Island fell 18 percent, but remained elevated, with more modest declines in the interior and northern markets. In contrast, retiree demand and migration from Alberta continues to support conditions outside Metro Vancouver.

Declining sales are contributing to a quick moderation in market conditions. Fewer sales and steady new listings lifted active listings in the province for a fifth straight month with inventory on the rise in most markets. Sales-to-active listings ratios remain in a range consistent with a sellers’ market, but the rapid decline suggests markets are nearly balanced, with the potential to move into a buyers’ market range.

At $980,324, the average price fell 4.7 per cent from April and marked the first sub-million-dollar reading since November. Consistent with sales, declines were deepest in Chilliwack (-4.3 per cent) and the Fraser Valley (-6.7 per cent), although average prices eroded in most real estate board areas.

After an impressive run where B.C. manufacturing sales increased for seven consecutive months, the streak came to an end in April as sales dipped 2.9 per cent from March to $5.8 billion. Both durable goods (down 1.6 per cent) and non-durable goods (down 4.5 per cent) posted weaker sales.

Key manufacturing areas such as wood products (down 5.9 per cent); transportation equipment (down 5.5 per cent); computer and electronic equipment (down 3.2 per cent); and electrical equipment, appliances and components (down 5.1 per cent) weighed down overall sales. The decline was only partially offset by a few sectors showing gains, such as food manufacturing (up 1.7 per cent), fabricated metal products (up 2.3 per cent) and sales of machinery (up 3.9 per cent).

Over 2022’s first four months, total sales remained 10.1 per cent of last year’s pace with durables (up 6.7 per cent) and non-durables (up 15.1 per cent), considerably ahead of last year’s pace notwithstanding April’s dip in activity. Manufacturing sales activity dipped across the province in May. In Metro Vancouver, sales fell 1.5 per cent and were down 4.3 per cent in the rest of British Columbia.

Bryan Yu is chief economist at Central 1 Credit Union.

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Simplicity launches real estate conveyancing solution in Ontario –



Today, Simplicity Global Solutions, a Canadian technology company, announced that its real estate conveyancing solution, Prolegis Real Estate, is available in Ontario.

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Source: Simplicity Global Solutions

Prolegis is a cloud-based real estate conveyancing solution made for real estate lawyers. It integrates with a real estate practice, providing tools and information to help each user enhance their performance, customer engagement, and work-life balance.

Prolegis is designed to help users save time, with all the capabilities and key third-party integrations needed to convey a real estate transaction. The solution provides user flexibility to configure and organize work, communicate with clients, and manage the real estate transaction end-to-end from a single solution at any time. It offers a library of document and workflow management tools, community databases, stakeholder portals, and real-time support.

‘Simplicity is incredibly pleased and excited to offer Ontario real estate lawyers and conveyancers a fresh new choice in a legal software provider. Collaborating with our valued customers and a network of trusted stakeholders, we are building a better, brighter future for real estate legal professionals and Canadian homebuyers,” said Neil N. Babiy, co-founder and chief executive officer of Simplicity Global Solutions Ltd. “At Simplicity, we envision a future where innovative technology is at the forefront of enhancing the customer experience in the real estate ecosystem. We are committed to helping advance technology utilization and adoption within the real estate sector by providing solutions that are user-friendly, easy to implement, and economical to acquire and operate.”

Ontario real estate lawyers and conveyancers can now book a demo and learn more about the tool here.

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U.S. real estate giant Blackstone says it will not target single-family homes in its Canadian expansion – The Globe and Mail



Blackstone Inc. BX-N said Monday it has no interest in investing in single-family homes in Canada, laying to rest speculation the giant global asset manager would scoop up hundreds of Canadian houses and turn them into rental properties.

After Blackstone announced plans in May to establish a Canadian office in Toronto, rumours abounded that the private equity firm would unleash its firepower, gobble up homes and increase competition for individuals and families looking to buy homes. The typical home price across the country has climbed 50 per cent over the past two years and real estate investors have come under scrutiny for their role in ramping up competition and driving up prices.

But Blackstone’s head of real estate Americas, Nadeem Meghji, said that is not in the cards for the company’s Canadian expansion.

“It’s just not an area that we are focused on in Canada,” he said in a joint interview with Janice Lin, the new head of Blackstone Canada.

Blackstone targets Canadian real estate, opens office in Toronto

The New York-based company, which has US$915.5-billion in assets under management, has been accused of profiting off the 2007 U.S. housing meltdown after it bought swaths of distressed properties and then rented them out to U.S. residents.

Blackstone has said it did not own any single-family homes before the crisis and didn’t foreclose on any of the properties. It has also said many of its purchases were homes that had been sitting vacant and dragging down local property values.

Blackstone has since sold that business and owns a rent-to-own business called Home Partners of America – one of the many players in a growing single-family home rental market in the U.S.

“We don’t have a similar platform in Canada and we don’t have the intention of launching one because, from our perspective, we think there are just more interesting places to deploy capital in the Canadian market,” Mr. Meghji said.

Ms. Lin, a former Canada Pension Plan Investment Board executive, is in charge of Blackstone’s expansion in Canada. She cited the country’s favourable immigration policies and its strong population growth as two key factors that make Canada a winner for Blackstone’s capital.

Blackstone mostly owns warehouses and other industrial space in Canada, as well as a couple of office towers. It also has some investments in apartment building developments. All together, they are worth about US$14-billion, according to Blackstone, representing just a tiny fraction of the company’s global real estate portfolio.

Ms. Lin and Mr. Meghji both said the company will continue to invest in industrial and top office buildings, as well as hotels.

Blackstone has previously said it expects its growth here will be significant. Mr. Meghji would not quantify “significant” except to say he expects growth will be material and Canada could eventually command a larger share of Blackstone’s global real estate portfolio.

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