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Toronto real estate market enters the second wave on a high – NOW Toronto

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Prices did not fall in September, but there were signs of a slowdown even before the second wave lockdown


The second wave of the COVID-19 pandemic will likely bring Toronto real estate transactions to a screeching halt.

As the province brings in “modified” lockdown measures to Toronto, Peel and Ottawa, Ontario Real Estate Association (OREA) and the Toronto Regional Real Estate Board (TRREB) are calling on realtors to scrap open houses.

TRREB president Lisa Patel said in a statement on Friday that real estate agents should go virtual. She outlined instructions to follow health and safety best practices while conducting showings to pre-qualified clients.

The second wave of the pandemic will cap the Toronto real estate market’s scorching hot summer season. The average home price hit another all-time high coming in at $960,772 for the Greater Toronto Area, according to TRREB. The average price was $1,022,051 for the city.

While the average price is up, there were signs of cooling in the Toronto real estate market in September.

Prices for semi-detached and detached homes in the city have been taking a dip since June and July, respectively. The average price for a detached house in the city of Toronto in September was $1,487,122. That’s down 3.5 per cent from July’s average at $1,541,003. The average price for a semi-detached in September was $1,166,226, down nine per cent since June’s average, $1,287,832.

The average price for a Toronto home was pulled up by townhouses and condos. Prices for all home types were up in the 905.

Condos in Toronto real estate

Bloomberg News reports that condos in the downtown area flooding the Toronto real estate market. Citing TRREB figures and data from research firm Urbanation, they report a 215 per cent listings increase, year-over-year.

According to TRREB, there were 4,783 new condo listings added to the Toronto market in September, but only 1,549 sales. The downtown area alone had 1474 new listings.

The trend will likely get worse during the second wave of the pandemic, which will dramatically limit transactions. COVID-19 exacerbated a growing trend, with rental listings outstripping transactions. The downward pressure on rentals could drag down sale prices.

Dwindling condo sales could potentially trigger a market correction.

According to Swiss investment bank UBS, the over-priced Toronto real estate marketis sitting on a bubble and due for a correction.

@justsayrad


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Canadian Real Estate Is Becoming More Bubbly According To The US Federal Reserve – Better Dwelling

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The world’s largest central bank is seeing the warning signals for Canadian real estate get brighter. US Federal Reserve (US Fed) updated their exuberance indicators for Q2 2020. Their measures for Canada show recent acceleration over the past two quarters. There was a brief period in the data where it appears Canada almost came back to reality. In the first quarter of this year though, buyer’s became more exuberant. 

Exuberance Is Not A Fundamental

First, let’s quickly run through the concept of exuberance. Exuberance is the state of being excited. When used in economics, it means emotion and excitement is the driving mechanism. If a buyer is said to exuberant, they are buying not based on any fundamental reason – but rather their emotional reasoning. In other words, they’re paying more based strictly on the fact they think they should be paying more. Not because any fundamental basis is driving the valuation higher. 

Exuberance doesn’t mean markets can’t or won’t go higher. Markets driven by an emotional state are more vulnerable to correction though. If buyers aren’t using fundamentals, then a sudden change in emotion means they need to discover the actual price floor. That’s sometimes a ways down.  

Canadian Real Estate Becomes More Exuberant

Canada is seeing exuberance accelerate over the past few quarters. The indicator reached 1.89 in Q2 2020, up from 1.56 during the same quarter last year. The market has seen two consecutive quarters of acceleration. 

Canadian Real Estate Buyer Exuberance

An index of exuberance Canadian real estate buyers are demonstrating, in relation to pricing fundamentals.

Source: Federal Reserve Bank of Dallas, Better Dwelling.

Canadian real estate has been consistently in this level for years, but not as many as some people want you to think. It first breached the critical threshold in Q1 2015, and hasn’t fallen below that level since. There’s been a few periods where it almost has, which have been followed by policy moves to prop up the market. Technically the market has only been exuberant for half a decade. Although that may feel like forever, it’s not really that long. 

The Federal Reserve warns this indicator doesn’t tell us when we’ll see a correction, just the likelihood of one. After 5 quarters above the critical threshold, the Reserve believes markets will require a correction. The longer this trend persists, the further detached the market is from fundamentals. This means a larger correction will be required, whether in terms of falling prices or inflation that kills the real value. 

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Changing The Landscape For Real Estate Brokers And Salespeople In Ontario: Personal Real Estate Corporations – Real Estate and Construction – Canada – Mondaq News Alerts

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Canada:

Changing The Landscape For Real Estate Brokers And Salespeople In Ontario: Personal Real Estate Corporations

To print this article, all you need is to be registered or login on Mondaq.com.

On October 1, 2020, the Government of Ontario announced the
first phase of regulatory changes affecting the Real Estate and
Business Brokers Act
(“REBBA“)
which will soon be renamed as the Trust in Real Estate Services
Act
, 2020 (“TRESA“). These changes
address a number of important issues in Ontario’s real estate
industry. Most notably, the changes allow real estate professionals
to structure their business using a Personal Real Estate
Corporation (a “PREC“).

Personal Real Estate Corporations

As a result of the amendments, real estate brokers and
salespeople regulated by TRESA are now permitted to conduct their
business and pay themselves through a PREC. For many years, a wide
array of regulated professionals have provided services through
personal corporations and enjoyed tax planning and other benefits
associated with personal corporations. Real estate brokers and
salespeople are now among those permitted to use a corporation as a
means to structure their business. Of course, there are a number of
benefits to incorporation and real estate brokers and salespeople
should analyze these with their advisers. However, when considering
the suitability of a PREC, real estate brokers and salespeople
should be aware of the restrictions that apply to this type of
corporation. We summarize the most notable restrictions imposed on
PRECs as follows:

  1. No federal corporations: PRECs must be
    incorporated under Ontario’s Business Corporations
    Act
    ;
  2. Controlling the Board of Directors: The
    corporation may only have one director and that director must be
    the controlling shareholder (a broker or salesperson);
  3. Officer of the Corporation: The corporation
    may only have one officer and that officer must be the controlling
    shareholder (a broker or salesperson);
  4. No non-registered voting shareholders: All of
    the voting shares of the corporation must be owned (legally and
    beneficially) by a broker or salesperson;
  5. Non-voting Shareholders to be Family Members:
    Non-voting shares of the corporation may only be owned by the
    controlling shareholder, by one of its family members, or by
    trustees in trust for one or more children of the controlling
    shareholder who are minors as beneficiaries;
  6. Inability to Limit Sole Director’s Powers:
    There is no agreement or other arrangement that restricts or
    transfers in whole or in part the powers of the sole director to
    manage or supervise the management of the business and affairs of
    the corporation.

For real estate brokers and professionals considering the
benefits of incorporating a PREC, understanding the regulatory
environment in which it will operate is crucial.

Read the original article on
GowlingWLG.com
.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

POPULAR ARTICLES ON: Real Estate and Construction from Canada

Real Estate Double Tax Trap

Goldman Sloan Nash & Haber LLP

Here is an interesting case study I wanted to share regarding potential tax issues during estate planning.

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Danish Plan to Cut Tax Loophole Has Real Estate Funds Worried – BNN

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(Bloomberg) — Real estate investors are trying to figure out how to block a proposal by Denmark to close a legal loophole through which they’ve enjoyed virtually unlimited tax deferrals on value gains.

The plan, which still needs to go through parliament, represents the latest step by Denmark to rein in commercial property companies. The Social Democrat government has criticized the industry, arguing it’s padded its pockets while leaving average residents struggling to pay rent.

“Foreign investors have been able to push back tax payments for eternities and that is of course completely unacceptable,” said Christian Raabjerg Madsen, a member of the parliamentary finance committee for the ruling Social Democrats, and the party’s finance speaker.

Denmark’s government wants to use the extra tax revenue to cover the cost of early retirement for low-wage workers. It’s part of a broader plan whereby money is being moved from the finance industry and over to the country’s blue-collar demographic.

Michael Norremark, a partner at the law firm of Kromann Reumert, whose clients include some of the firms affected by the proposal, says it “effectively is targeted at foreign investors.”

Earlier this year, parliament passed legislation that freezes rent hikes for five years after renovations. The measure was aimed at property speculators and followed explicit government criticism of Blackstone Group Inc.

Blackstone has said in the past that it complied with the law. The firm declined to comment on Denmark’s latest proposal.

A lot of deals in Denmark are structured so that, technically speaking, it’s not the property that is sold but the holding company behind it, Norremark said. As companies are transferred, taxes on property gains get deferred “for quite a long time,” he said.

The plan to close the tax loophole would also affect local real estate firms, according to the Danish Property Federation. Its pitch for a compromise, under which taxes would be paid at the point of sale, was rejected. The group is now lobbying to raise the threshold at which the tax will apply.

“The burdens of the new tax are disproportionately heavier for smaller firms,” Anders Jeppesen, a consultant at the trade group, said.

Denmark’s commercial real-estate market has weathered the Covid crisis better than its Scandinavian peers. Deal volumes in the first half of the year fell much less than elsewhere in the region, according to data compiled by Catella Group, a property investment specialist. Volumes were down 2% in Denmark, compared with as much as 22% in Norway.

©2020 Bloomberg L.P.

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