4 1

for more detailed GTA statistics: REALTYSTATS.CA/5A2X

416-931-4161James Metcalfe BROKER

www.OurHomeToronto.com | Service@OurHomeToronto.com

REAL ESTATE UPDATE

Royal LePage Real Estate Services Ltd.Johnston & Daniel Division, Brokerage

477 Mount Pleasant Rd., Toronto, ON M4S 2L9

FEBRUARY 2013

The average price of a resale home in the GTA in January was $482,648 - a 4.3% increase versus the January 2012 average price of $462,655. Price growth varied by market segment, as follows: single-detached homes (+4.7%), semi-detached homes (+6.5%), townhomes (+4.0%) and condo apartments (-1.2%). The MLS® Home Price Index (HPI) Composite Benchmark Price was up by 3.8% over the same period. These results support the thesis that there will be enough competition between buyers to support continued growth in home prices in 2013. Expectations are for average price growth to be in the 3-5% range this year.

From a volume perspective, the month of January witnessed a 1.3% decline in sales (4,375 transactions versus 4,432 in January 2012). While slightly down versus last year, the actual rate of decline was much less than what was experienced in the back half of 2012. This suggests that some buyers, who put their decision to purchase on hold last year due to stricter mortgage lending guidelines, are once again becoming active in the market. Volume growth varied by market segment, as follows: single-detached homes (+0.7%), semi-detached homes (-1.1%), townhomes (-2.3%) and condo apartments (-5.1%).

GTA RESALE HOME SALES8 9 10 11 12

GTA Resale Home Sales

MARJAN MAY SEP NOVJUL

3,000

1,500

4,500

6,000

7,500

9,000

10,500

12,000201320122011

GTA AVERAGE RESALE PRICE8 9 10 11 12

GTA Resale Home Sales

MARJAN MAY SEP NOVJUL

201320122011

$400,000

$540,000

$420,000

$440,000

$460,000

$480,000

$500,000

$520,000

One interesting change in the mortgage market of late is the fact that the major banks are becoming much more honest and upfront about their advertised rates. In the past, they were notorious for advertising “special offers” that were, in reality, far above their best rates. This approach was essentially playing people for fools.

It is in the bank’s best interest to end the practice of artifi cially high advertised rates. At the heart of the issue is the credibility of the banks and the fact that the consumer is now more educated than ever. Institutions that engage in suspect advertising and business practices will be ferreted out by the consumer and will be penalized in the long run.

Of course one of the major reasons behind the increased market knowledge of the consumer has been the advent of online rate comparison sites. It is now easier than ever to compare the mortgage offerings of major institutions with a few quick keystrokes.

Having said that, the consumer is also becoming aware that absolute rate is not the sole thing they should be searching for. Many are prepared (and rightly so) to pay a rate premium for increased fl exibility (e.g., liberal prepayment privileges, portability privileges, etc.). How much of a premium is really the question. In most cases, a premium of 10-20 basis points is what the market will bear for increased prepayment fl exibility.

Given the trend of major banks to be more reasonable in their upfront pricing, it will defi nitely become a different market. Major bank displayed rates will be closer to brokers and discount lenders and consumer negotiations will begin at a lower rate.

As usual, your client referrals are both highly valued and much appreciated. Until next time, take care!

“A bank is a place that will lend you money if you can prove that you don’t need it.” – Bob Hope

“Have you ever noticed that anybody driving slower than you is an idiot, and anyone going faster than you is a maniac?” – George Carlin

“The secret of staying young is to live honestly, eat slowly, and lie about your age.” – Lucille Ball

“What’s another word for Thesaurus?” – Steven Wright

SELLING A CONDO? BEWARE THE TAXMAN

3

If you are considering taking out a reverse mortgage, it is important to ensure that you understand fully how they work and that you carefully weigh the advantages and risks.

How they workA reverse mortgage is a loan that is available to homeowners 60 years of age or older. If you have a spouse or other co-owner, the age requirement applies to both of you. A reverse mortgage is an advance of money provided by a lender that is secured by the existing debt-free equity that you have in your home. The amount of the loan provided under a reverse mortgage is usually up to 40 per cent of the current value of your home. The amount you can borrow depends on your age, the current interest rate and the value of your home. Generally, the older you are, the larger the loan you will be able to receive. If there are existing outstanding loans secured by your home at the time your reverse mortgage funds are advanced, you may fi rst be required to use these funds to pay off those existing debts.

Traditional mortgage vs. reverse mortgageWith a traditional mortgage or secured line of credit, you must have an adequate income verses debt ratio in order to qualify for the loan. Traditional mortgages also require that the borrower make regular bi-weekly or monthly payments. A reverse mortgage is different in that it pays you and is available to you regardless of your current income. With a reverse mortgage, the interest on your loan accumulates and the equity that you have in your home decreases over time. The accumulated debt is not required to be paid off until such time as you die, sell your home or it is no longer your principal residence. However, you are still required to continue paying your property taxes, insurance, utilities and other costs associated with maintaining your home.

Advantages vs. pitfallsReverse mortgages have the following advantages:

• You are not required to make regular payments;• You can receive cash for the value of your home without having

to sell it.• The money is a tax-free source of income (unless the money is

used to invest and produce income, in which case some or all of that income would be taxable).

• The money received under a reverse mortgage does not affect Old Age Security (OAS) or Guaranteed Income Supplement (GIS) benefi ts.

• You can determine the manner in which you receive your reverse mortgage funds. For example, you may receive a lump-sum of cash, regular advances or a combination of both.

The disadvantages associated with taking out a reverse mortgage include:

• Reverse mortgages are subject to higher interest rates than other types of mortgages and loans.

• The equity in your home will decrease over the years as the interest on your reverse mortgage accumulates.

• There are signifi cant fees associated with initiating a reverse mortgage, including an application fee, a home appraisal fee and legal fees. Homeowners may also be required to take out mortgage insurance.

• You may be charged a repayment penalty for selling your home or moving out within three years of obtaining a reverse mortgage.

• Upon your death, your estate will be required to repay the accumulated debt within a certain period of time. However, the time required to deal with the estate may exceed the time permitted to repay the debt, which could cause problems for your estate.

• Since the loan and interest will need to be repaid upon your death, there will be less money in your estate to leave to your children or other benefi ciaries. In many cases, repayment is made by selling the home and then turning over the proceeds (or a portion of them) to the bank.

When you sell a property that isn’t your principal residence and make a profi t, half of the amount is taxable. This is the so-called capital gains tax and it’s pretty straight forward, but every situation is different. It all depends on how the Canada Revenue Agency views the transaction.

Real estate agent Romano Giusti bought a condo on Richards Street in Vancouver in November 2006 and re-sold it in June 2007 for a profi t of $30,831. When he fi led his tax return, he paid no tax on the profi t, saying it was his personal residence.

The CRA re-assessed this return and discovered that Giusti had bought and sold seven condos in seven years. He argued that he intended to make the Richards Street condo his personal residence, but changed his mind because of the street noise, irresponsible renters and pets in the building. So, he moved.

Giusti appealed and lost. In a case heard on January 25, 2011, Judge G.A. Sheridan found that Giusti was fl ipping houses and so was not entitled to the principal residence exception. He also penalized Giusti.

For most people, if you make a $30,000 profi t, you only would pay tax on $15,000. In this case, the court found that because Romano was in the business of buying and selling homes, he had to pay tax on the entire profi t.

Here are some things the court and CRA will look at in deciding whether a profi t is a capital gain or income:

1. The nature of the property sold;2. The length of the period of ownership of the property;3. The frequency or number of other similar transactions by the

taxpayer;4. Any work done to make the property more marketable or to

attract purchasers;5. The taxpayer’s motive or intention at the time he acquired

the property.

The fact that Romano was also a real estate agent did not help him, since most of his business income related to commissions on real estate contacts.

The key factor in most court cases is the number of deals that you have done over the last few years. If there are not many deals, it is unlikely that it will be called a capital gain so the profi t will be tax free. Still, if you are not sure, it is better to obtain tax or legal advice before you sell any property, to make sure that you are fi ling properly.

Adapted from an article contributed by June Wright. June is a lawyer with the law firm Nelligan O’Brien Payne. Please visit them at nelligan.ca.

PROS AND CONS OF REVERSE MORTGAGES

2 This article was contributed by Mark Weisleder, a Toronto-based real estate lawyer. Please visit him at markweisleder.com.

PERSONALFINANCE

CONDOCORNER

SELLING A CONDO? BEWARE THE TAXMAN

3

If you are considering taking out a reverse mortgage, it is important to ensure that you understand fully how they work and that you carefully weigh the advantages and risks.

How they workA reverse mortgage is a loan that is available to homeowners 60 years of age or older. If you have a spouse or other co-owner, the age requirement applies to both of you. A reverse mortgage is an advance of money provided by a lender that is secured by the existing debt-free equity that you have in your home. The amount of the loan provided under a reverse mortgage is usually up to 40 per cent of the current value of your home. The amount you can borrow depends on your age, the current interest rate and the value of your home. Generally, the older you are, the larger the loan you will be able to receive. If there are existing outstanding loans secured by your home at the time your reverse mortgage funds are advanced, you may fi rst be required to use these funds to pay off those existing debts.

Traditional mortgage vs. reverse mortgageWith a traditional mortgage or secured line of credit, you must have an adequate income verses debt ratio in order to qualify for the loan. Traditional mortgages also require that the borrower make regular bi-weekly or monthly payments. A reverse mortgage is different in that it pays you and is available to you regardless of your current income. With a reverse mortgage, the interest on your loan accumulates and the equity that you have in your home decreases over time. The accumulated debt is not required to be paid off until such time as you die, sell your home or it is no longer your principal residence. However, you are still required to continue paying your property taxes, insurance, utilities and other costs associated with maintaining your home.

Advantages vs. pitfallsReverse mortgages have the following advantages:

• You are not required to make regular payments;• You can receive cash for the value of your home without having

to sell it.• The money is a tax-free source of income (unless the money is

used to invest and produce income, in which case some or all of that income would be taxable).

• The money received under a reverse mortgage does not affect Old Age Security (OAS) or Guaranteed Income Supplement (GIS) benefi ts.

• You can determine the manner in which you receive your reverse mortgage funds. For example, you may receive a lump-sum of cash, regular advances or a combination of both.

The disadvantages associated with taking out a reverse mortgage include:

• Reverse mortgages are subject to higher interest rates than other types of mortgages and loans.

• The equity in your home will decrease over the years as the interest on your reverse mortgage accumulates.

• There are signifi cant fees associated with initiating a reverse mortgage, including an application fee, a home appraisal fee and legal fees. Homeowners may also be required to take out mortgage insurance.

• You may be charged a repayment penalty for selling your home or moving out within three years of obtaining a reverse mortgage.

• Upon your death, your estate will be required to repay the accumulated debt within a certain period of time. However, the time required to deal with the estate may exceed the time permitted to repay the debt, which could cause problems for your estate.

• Since the loan and interest will need to be repaid upon your death, there will be less money in your estate to leave to your children or other benefi ciaries. In many cases, repayment is made by selling the home and then turning over the proceeds (or a portion of them) to the bank.

When you sell a property that isn’t your principal residence and make a profi t, half of the amount is taxable. This is the so-called capital gains tax and it’s pretty straight forward, but every situation is different. It all depends on how the Canada Revenue Agency views the transaction.

Real estate agent Romano Giusti bought a condo on Richards Street in Vancouver in November 2006 and re-sold it in June 2007 for a profi t of $30,831. When he fi led his tax return, he paid no tax on the profi t, saying it was his personal residence.

The CRA re-assessed this return and discovered that Giusti had bought and sold seven condos in seven years. He argued that he intended to make the Richards Street condo his personal residence, but changed his mind because of the street noise, irresponsible renters and pets in the building. So, he moved.

Giusti appealed and lost. In a case heard on January 25, 2011, Judge G.A. Sheridan found that Giusti was fl ipping houses and so was not entitled to the principal residence exception. He also penalized Giusti.

For most people, if you make a $30,000 profi t, you only would pay tax on $15,000. In this case, the court found that because Romano was in the business of buying and selling homes, he had to pay tax on the entire profi t.

Here are some things the court and CRA will look at in deciding whether a profi t is a capital gain or income:

1. The nature of the property sold;2. The length of the period of ownership of the property;3. The frequency or number of other similar transactions by the

taxpayer;4. Any work done to make the property more marketable or to

attract purchasers;5. The taxpayer’s motive or intention at the time he acquired

the property.

The fact that Romano was also a real estate agent did not help him, since most of his business income related to commissions on real estate contacts.

The key factor in most court cases is the number of deals that you have done over the last few years. If there are not many deals, it is unlikely that it will be called a capital gain so the profi t will be tax free. Still, if you are not sure, it is better to obtain tax or legal advice before you sell any property, to make sure that you are fi ling properly.

Adapted from an article contributed by June Wright. June is a lawyer with the law firm Nelligan O’Brien Payne. Please visit them at nelligan.ca.

PROS AND CONS OF REVERSE MORTGAGES

2 This article was contributed by Mark Weisleder, a Toronto-based real estate lawyer. Please visit him at markweisleder.com.

PERSONALFINANCE

CONDOCORNER

4 1

James Metcalfe BROKER

416-931-4161 www.OurHomeToronto.com | Service@OurHomeToronto.com

In accordance with PIPEDA, to be removed from this mailing list please e-mail or phone this request to the REALTOR® Not intended to solicit buyers or sellers currently under contract with a broker. The information and opinions contained in this newsletter are obtained from sources believed to be reliable, but their accuracy cannot be guaranteed. The publishers assume no responsibility for errors and omissions or for damages resulting from using the published information. This newsletter is provided with the understanding that it does not render legal, accounting or other professional advice. Statistics are courtesy of the Toronto Real Estate Board. Copyright © 2013 Mission Response Inc. 416.236.0543 All Rights Reserved. K0191

“YOUR REFERRALS ARE SINCERELY APPRECIATED! THANK YOU!”

Royal LePage Real Estate Services Ltd.Johnston & Daniel Division, Brokerage

477 Mount Pleasant Rd., Toronto, ON M4S 2L9

FEBRUARY 2013

The average price of a resale home in the GTA in January was $482,648 - a 4.3% increase versus the January 2012 average price of $462,655. Price growth varied by market segment, as follows: single-detached homes (+4.7%), semi-detached homes (+6.5%), townhomes (+4.0%) and condo apartments (-1.2%). The MLS® Home Price Index (HPI) Composite Benchmark Price was up by 3.8% over the same period. These results support the thesis that there will be enough competition between buyers to support continued growth in home prices in 2013. Expectations are for average price growth to be in the 3-5% range this year.

From a volume perspective, the month of January witnessed a 1.3% decline in sales (4,375 transactions versus 4,432 in January 2012). While slightly down versus last year, the actual rate of decline was much less than what was experienced in the back half of 2012. This suggests that some buyers, who put their decision to purchase on hold last year due to stricter mortgage lending guidelines, are once again becoming active in the market. Volume growth varied by market segment, as follows: single-detached homes (+0.7%), semi-detached homes (-1.1%), townhomes (-2.3%) and condo apartments (-5.1%).

GTA RESALE HOME SALES8 9 10 11 12

GTA Resale Home Sales

MARJAN MAY SEP NOVJUL

3,000

1,500

4,500

6,000

7,500

9,000

10,500

12,000201320122011

GTA AVERAGE RESALE PRICE8 9 10 11 12

GTA Resale Home Sales

MARJAN MAY SEP NOVJUL

201320122011

$400,000

$540,000

$420,000

$440,000

$460,000

$480,000

$500,000

$520,000

One interesting change in the mortgage market of late is the fact that the major banks are becoming much more honest and upfront about their advertised rates. In the past, they were notorious for advertising “special offers” that were, in reality, far above their best rates. This approach was essentially playing people for fools.

It is in the bank’s best interest to end the practice of artifi cially high advertised rates. At the heart of the issue is the credibility of the banks and the fact that the consumer is now more educated than ever. Institutions that engage in suspect advertising and business practices will be ferreted out by the consumer and will be penalized in the long run.

Of course one of the major reasons behind the increased market knowledge of the consumer has been the advent of online rate comparison sites. It is now easier than ever to compare the mortgage offerings of major institutions with a few quick keystrokes.

Having said that, the consumer is also becoming aware that absolute rate is not the sole thing they should be searching for. Many are prepared (and rightly so) to pay a rate premium for increased fl exibility (e.g., liberal prepayment privileges, portability privileges, etc.). How much of a premium is really the question. In most cases, a premium of 10-20 basis points is what the market will bear for increased prepayment fl exibility.

Given the trend of major banks to be more reasonable in their upfront pricing, it will defi nitely become a different market. Major bank displayed rates will be closer to brokers and discount lenders and consumer negotiations will begin at a lower rate.

As usual, your client referrals are both highly valued and much appreciated. Until next time, take care!

“A bank is a place that will lend you money if you can prove that you don’t need it.” – Bob Hope

“Have you ever noticed that anybody driving slower than you is an idiot, and anyone going faster than you is a maniac?” – George Carlin

“The secret of staying young is to live honestly, eat slowly, and lie about your age.” – Lucille Ball

“What’s another word for Thesaurus?” – Steven Wright