Vancouver home sales were up 29 per cent compared with a year ago in October, making it the second-best October on record, the Real Estate Board of Greater Vancouver said on Tuesday.
The board said its agents sold 3,687 homes last month, up from 2,858 sold in October 2019.
The benchmark price for Vancouver homes hit $1,045,100 in October, up six per cent from last October and 0.4 per cent from September.
Bowen Island saw the biggest one-month increase in benchmark home prices, of 5.7 per cent, followed by Sunshine Coast, where prices rose 3.2 per cent. West Vancouver was the priciest neighbourhood, with a benchmark of $2,266,000.
The housing market has been catching up after COVID-19 lockdowns earlier this year stymied the spring selling season. Borrowing costs have also been low amid the COVID-19 response from the Bank of Canada.
October’s housing market snapshot shows that people are re-thinking their housing situation during the COVID-19 pandemic, with more days and evenings spent at home this year, said board chairwoman Colette Gerber.
“Home has been a focus for residents during the pandemic,” said Gerber in a statement.
Home sales, which were up also 1.2 per cent from September, rose amid a surge in sales of detached homes. In October, 1,335 detached homes changed hands, a 42.3 per cent increase from the same period last year. Detached homes also saw the biggest year-over-year price increase in October, up 8.5 per cent to $1,532,800.
The smaller market for attached homes, such as townhouses and rowhouses, also saw sales rise 45.9 per cent to 782 sales. The benchmark price was up 5.4 per cent, year-over-year, to $813,000.
But sales growth was slightly slower in Vancouver’s most common home type, apartments. Apartment sales hit 1,570, up 13.4 per cent compared with October 2019, while the benchmark price was up 4.4 per cent to $683,500.
The pace of sales in the condo market – particularly, the number of listings hitting the market – has been a focus of economists.
“Rural and suburban areas that once lagged desirable city addresses are now roaring hot as homebuyers wearied by lockdowns seek bigger yards and larger living spaces” wrote RBC economist Robert Hogue on Oct. 29.
“As rents soften and vacancies rise, condo listings are spiking in Toronto, Montreal and Vancouver – albeit from low levels.”
Of October’s listings in Vancouver, 2,891 were apartments, 948 were attached homes, and 1,732 were detached homes.
But the 5,571 homes on the market last month – up 36.7 per cent from a year ago – was still below the 6,402 homes that were listed in September. The board said that a closely watched measure of housing supply and demand – the sales-to-active listings ratio – was above a key level that supports rising home prices. even for apartments.
“With demand on the rise, homes priced right for today’s market are receiving attention and, at times, garnering multiple offers,” said Gerber.
This report by The Canadian Press was first published Nov. 3, 2020.
How should your clients own real estate properties? – Advisor.ca
Under the Canadian tax rules, capital gains realized on the sale of a principal residence are generally exempt from tax if the taxpayer qualifies for the principal residence exemption (PRE). The PRE can only be claimed by individuals and certain trusts (such as alter-ego, joint spousal, and qualified disability trusts) under specific conditions.
Given the costs involved in setting up and maintaining a trust, your clients may prefer personal ownership. However, in some cases, the costs are warranted due to the estate planning benefits of using a trust. For example, if your client wants to leave their property to a disabled child, a trust can be beneficial to ensure that the property is transferred to specific family members when the disabled child dies. Similarly, a trust can be useful in a blended family situation to control how, when and to whom the property is distributed after the surviving spouse dies.
A corporation can’t access the PRE, so any capital gains realized on the sale of the principal residence would be taxable to the corporation at high income tax rates (e.g., 50.17% in Ontario for 2020). In addition, personal use of a corporately owned property by the shareholder would be considered a taxable benefit to the shareholder. This could result in double taxation, as the taxable benefit included on the shareholder’s personal tax return is not deductible to the corporation and there is no step-up to the cost base of the property owned by the corporation. For these reasons, owning a principal residence through a corporation is usually the least tax-efficient approach.
If your client personally owns a rental property, the net rental income would be added to your client’s net income for the year and taxed at their marginal tax rates. In addition, net rental income is also considered “earned income” for the purposes of calculating RRSP contribution room. If your clients are not currently generating the maximum RRSP contribution room through other sources of “earned income,” the added income could be a benefit of owning rental property personally.
If rental expenses are greater than the net rental income in a year due to rental vacancies, the net rental loss may also be deductible against your client’s other sources of income. The deduction would provide tax savings and reduce the cost of maintaining a rental property during a poor rental market. This is generally allowed for real estate operations that are predominantly commercial in nature as opposed to personal or recreational. If the Canada Revenue Agency determines that your client is not primarily carrying on the rental operations to make a profit, then rental expenses either may not be deductible or the deduction may be limited to the extent of rental income generated from the property.
In terms of broader non-tax considerations, personally owned rental property is subject to creditor and spousal claims against your client. If this is a concern, personal ownership of the rental property may not be ideal.
If the corporation is not carrying on an active real estate business, any rental income earned inside a corporation is considered passive income and would generally be subject to high income tax rates (e.g., 50.17% in Ontario for 2020). This flat tax rate applies to every dollar of rental income earned inside the corporation and may be much higher than the graduated tax rates your client would have paid when earning the rental income personally. As such, your client may have lower after-tax dollars to reinvest and grow their investments in the corporation.
Passive rental income earned inside a corporation may affect your client’s access to the small business tax rate if their corporation is an active (non-real estate) business. In some situations, your client may decide to own real estate property used in a business through a corporation separate from the active business corporation. This can allow your client to use different ownership structures in each corporation to maximize income-splitting and tax-planning opportunities.
Unlike with personal ownership, net rental losses earned inside the corporation can’t be used to offset other sources of income by the shareholders. As a corporation is a separate entity for tax purposes, these losses are locked inside the corporation and can only be used by the corporation.
Despite the unfavourable tax consequences, a corporation provides some non-tax advantages. For example, a corporation will generally protect your client’s personal assets in the case of any lawsuits or creditor claims against the corporation. In Ontario and B.C., a corporation may allow your client to avoid probate fees or estate administration taxes on the rental property through the use of a secondary will.
However, using a corporation involves annual accounting and tax filing costs which may be greater than the one-time probate fees on the rental property.
Your client may consider owning rental property through a trust. There are various types of trusts available and each has unique requirements and tax implications.
Unless certain income attribution rules apply, rental income earned inside a trust would generally be subject to the highest marginal tax rate (e.g., 53.53% in Ontario for 2020), and rental losses realized in a trust can’t be allocated to trust beneficiaries and must be used by the trust itself. In most situations, the rental income may be allocated and distributed to a trust beneficiary so that it is taxed at the beneficiary’s marginal tax rates.
A trust is commonly used as an estate planning tool to minimize probate fees because the rental property owned by the trust would not fall into your client’s estate when they die. A trust can also provide protection against creditors and spousal claims. Similar to the option of a corporate ownership, your client should consider the costs involved in setting up and maintaining a trust to determine whether the potential benefits outweigh the costs.
There are various options available when deciding on the ownership of real estate property. It is important for your clients to understand the options available and obtain professional advice to determine which option works best for them.
Etobicoke real estate broker combines new office with café amid pandemic – Toronto.com
Winnipeg real estate agent barred after selling First Nations' property below market value to family members – CBC.ca
A Winnipeg real estate agent who sold properties for three First Nations in Manitoba has been temporarily barred from the profession, after a disciplinary case found she sold her clients’ properties to companies controlled by members of her own family at prices below fair market value.
Sarah Pao was disciplined by the Manitoba Securities Commission over the sale of properties owned by Long Plain First Nation, Sandy Bay Ojibway First Nation, and Birdtail Sioux First Nation.
Pao has been barred from the real estate profession for 10 years and has to pay $20,000 in costs, under a Nov. 17 order by the commission.
The settlement agreement with the commission says that many of the properties bought by numbered companies owned and operated by Pao’s immediate family were later “resold for significantly higher prices.” She also acted as agent in reselling the properties and collected more commissions.
She did not disclose to the First Nations that the numbered companies purchasing the properties were owned and operated by her immediate family members, the settlement says.
Nor did she disclose that “she herself had a financial interest as a covenantor [a person who is liable for repayment of a mortgage loan and mortgage obligations] on the mortgages of the purchasing numbered companies,” it says.
She did not list the properties for sale on the Multiple Listing Service (MLS) when being sold by the First Nations, “and in general did almost nothing to market the properties for her First Nations clients or to advise them of their fair market value,” the settlement says.
Long Plain First Nation’s housing authority filed a lawsuit in 2016 in connection with the real estate transactions against Pao, her employing broker — Coldwell Banker Preferred Real Estate — and other defendants.
“We are quite pleased with the decision of the Manitoba Securities Commission,” Long Plain Chief Dennis Meeches told CBC News. “This decision really sheds light on … our reasoning for filing this claim some years back.”
The Securities Commission regulates real estate salespeople in Manitoba under the Real Estate Brokers Act. Pao was first registered in 2010, but her registration was suspended in 2016.
42 properties sold
The case against Pao involved the sale of 42 properties located in Brandon, Winnipeg, Virden, and Portage la Prairie in 2013 and 2014.
The three First Nations paid Pao a total of $202,594 in commissions as their agent, the settlement says.
It says the First Nations had recently acquired the properties “for nominal fees as a result of a federal government program.”
“Each of the First Nations had an immediate need for money and was looking to the sale of the properties for funds needed,” the settlement says. “Sarah Pao was aware of the First Nations’ financial distress and their immediate need for money from sale proceeds.”
Three properties in Virden, in southwestern Manitoba, were sold by Long Plain in 2013 and purchased by a company with directors who are family members of Pao. She was not acting as a sales agent for those three properties but she was involved with the mortgage, the settlement says.
It says the purchase prices were 66 per cent of the appraised values.
Pao later acted as salesperson for Long Plain on nine other properties located in Brandon and Winnipeg. Those properties were also sold to companies with directors who were family members of Pao, and at prices far below appraised values, the settlement says.
At one point, the Brandon land titles office questioned the fair market values stated in the transfers for three properties “as being too low,” the settlement says. Pao’s relative involved in the purchase signed a new document restating the market values to match the assessed values.
Pao acted as agent for both the buyer and seller for some of the Long Plain properties, and she was paid commissions totalling $39,600.
Property assessed at $181K sold for $99K
For Sandy Bay Ojibway First Nation, in 2013 and 2014 Pao acted as agent for the sale of 20 properties that were all purchased by a numbered company incorporated by a relative, the settlement says.
In each case, there were no other offers to purchase presented and the properties were not listed on MLS, the document says.
It shows that, for example, one Sandy Bay property on Pritchard Avenue in Winnipeg had an assessed value of $181,000 but it was sold for $99,000 in 2013. The following year it was resold for $214,900.
The purchase prices on the Sandy Bay properties were well below the assessed values, and in several cases, the Brandon land titles office rejected the land transfer documents because “the sworn fair market values were too low,” the settlement says. Subsequently, a new document was filed at the land titles office with revised figures matching the assessed values.
Sandy Bay paid a total of $96,444 in commissions to Pao, who in some cases acted as agent for both seller and buyer, the settlement says. In some cases there were no listing agreements for the properties.
Pao acted as agent in the sale of 10 properties for Birdtail Sioux First Nation in 2013 and 2014 — all purchased by a numbered company controlled by Pao’s relative.
As with the other two First Nations, the settlement says the purchase prices were well below appraised values, and again, the land titles office questioned those prices.
The Birdtail Sioux commissions paid to Pao totalled $66,550.
She was also a covenantor on the purchaser’s mortgage in each case, the settlement says.
Pao’s lawyer, Richard Buchwald, told CBC News his client declines to comment on the settlement.
Coldwell Banker, her employing broker at the time, also declined to comment.
Defence denies properties sold below fair value
The settlement says Pao acknowledges she committed faults under the Real Estate Brokers Act, such as failing to complete listing agreements for some properties, failing to disclose her relationship to immediate family members indirectly buying an interest in properties, and failing to have offers to purchase completed properly.
The property sales led Sandy Bay Ojibway First Nation to file a lawsuit in October 2019 against Pao and other defendants, including members of her family who were involved, as well as Coldwell Banker.
Pao’s defence to that lawsuit says she was retained by Sandy Bay for the “specific purpose of selling the properties in bulk transactions as quickly as possible.”
Her defence statement alleges the client, Sandy Bay, was aware the properties involved were in “deteriorated condition” and a “state of disrepair,” meaning potential purchase prices would be lower, and the market for them would be limited to buyers who could renovate them for resale.
Pao’s defence also alleges she and her co-defendants discussed with Sandy Bay the idea of listing the properties on MLS, but her client wanted to proceed instead with the sale of the properties in bulk transactions without the listings.
It also denies the properties were sold at lower than fair values, and says Sandy Bay received advice from independent legal counsel on the sale prices of the properties.
Both the 2016 Long Plains lawsuit and the Sandy Bay lawsuit are still before the courts.
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