Brian Madigan LL.B.

September 2008 ~ First Half Performance

By Brian Madigan LL.B.

I thought that you might want to see some of the numbers for Toronto and vicinity real estate. This is simply the first half of the month. It is noteworthy because of the significant stcok market crash in every major market around the world.

The numbers set out simply compare September 1 through September 15 in 2006, 2007 and 2008. You might remember that 2007 was a record breaking year. 2006 bwas far more typical.

September 2008 ~ First half

Sales

Here is the actual volume of sales just for the first half of September 2008.

GTA

2008 .....2,726 sales
2007..... 3,236 sales
2006 .....2,913

You will note that the numbers are off slightly for the GTA.

The decline:
16% compared with 2007
6% compared with 2006

City of Toronto

23% compared with 2007
11% compared with 2006

905

11% compared with 2007
4% compared with 2006

Prices

GTA

$366,158 average price of housing in the GTA first half of September 2008
$364,364...... 2007
$335,208.......2006

City of Toronto

$386,524.....2008
$384,796.....2007
$343,561.....2006

905 Region

$354,395......2008
$350,698......2007
$330,005.....2006

The percentage of asking price that Sellers receive for their homes has also remained consistent. The list to sale price ratio is 98 per cent, which is the same as 2007.

26,299 properties are listed for sale an increase of 26 per cent from 2007 when 20,841 homes were available.

The difficulty with these numbers is the fact that they all compare with numbers published over one year ago.

In August 2008, the average price was $364,886. The price in the first two weeks of September is $366,158. So, that is actually an increase. However, a resurgence in prices is always to be expected in September, so this is not surprising.

It will be critical to view the direction over the last two weeks of September which would take the world stock market crisis into consideration.

Brian Madigan LL.B., Realtor is an author and commentator on real estate matters, Coldwell Banker Innovators Realty
905-796-8888
www.OntarioRealEstateSource.com

Power Negotiating for Realtors

By Brian Madigan LL.B.

Sometimes, too much is too much! A realtor's ability to negotiate a particular transaction is often based upon the client's bargaining position. Often, this is overlooked.

Naturally, if the client is in a very strong position, then few, if any, concessions will be granted. A client in a weaker position will have to offer some concessions in order to get the deal done.

The problem most commonly encountered is the failure on the part of the negotiator to realize and appreciate their own client's bargaining position.

Let's assume that the client wishes to rent a small storefront of about 300 square feet in a good location in a rather large and thriving commercial plaza to sell newspapers and various confectionary items.

The location is right across the hall from one of the anchor tenants, so traffic is virtually guaranteed. The landlord, a major owner of commercial retail space has a standard form lease which has been drafted to suit its circumstances.

The difficulty from the perspective of the newspaper stand operator will be to have any serious changes made to the landlord's standard form lease. Possibly, an anchor tenant might be able to negotiate, but not someone looking for 300 square feet.

However, day after day, agents will seek to negotiate substantial terms contained in the standard lease form. This is usually undertaken recognizing that some of the provisions are rather one sided, which is of course true. But, it's still not negotiable. It's not in the best interest of the landlord, and it's often foolhardy. It would be far better to review the document carefully, and determine whether the document in its entirety is acceptable.

So, what happens? The agent spends countless hours drafting significant concessions. Finally, the offer is submitted. Time passes and the agent inquires about the status. Actually, there is no status. The landlord will not sign it back. The landlord will not even incur the expense of having their lawyer's look at it.

The deal dies! It didn't have to, but the newsstand operator is now off to another location. Facing similar circumstances, the client will likely have similar results. No deal.

Finally, the client either fires the agent, or they both "give in" and sign something that a landlord will accept.

The problem at the outset was an inability to determine the client's bargaining position. This happens to many new agents who are inexperienced. Rarely, does it happen to a seasoned professional. And while they may get good marks on an exam, they are not getting good marks from their clients.

Brian Madigan LL.B., Realtor is an author and commentator on real estate matters, Coldwell Banker Innovators Realty
905-796-8888
www.OntarioRealEstateSource.com

Sales by Non-Residents

By Brian Madigan LL.B.

You have to be careful if you're purchasing property from a non-resident. If you don't, you may end up paying their income tax.

As part of every real estate transaction the purchaser should obtain proper evidence in the form of an affidavit that the vendor is "not a non-resident of Canada within the meaning of Section 116 of the Income Tax Act".

The correct way to approach this issue is unfortunately to use the double negative, that is the person is NOT a "non-resident".

There are several categories for tax purposes, including both residents and non-residents. However, the mere fact that a person does not fit within the definition of a "non-resident" does not make them a resident for tax purposes.

When a property is being sold, CRA (Canada Revenue Agency) will not be concerned about the residents. They will pay tax when they file their next tax return. They are concerned about non-residents. So, it is important to either:

1) confirm that the vendor is not a non-resident, or

2) comply with the non-resident rules.


Briefly, the CRA rules are as follows,


You're a non-resident for tax purposes if you:

1) normally, customarily, or routinely live in another country and aren't considered a resident of Canada; or

2) don't have residential ties in Canada; and

a) you live outside Canada throughout the tax year; or

b) you stay in Canada for less than 183 days in the tax year



Residential ties include:

· a home in Canada

· a spouse or common-law partner and dependants in Canada

· personal property in Canada, such as a car or furniture

· social ties in Canada.

Other ties that may be relevant include:

· a Canadian driver's licence

· a Canadian bank account or credit cards

· health insurance with a Canadian province or territory.

So, who's worried about Canada's non-residency rules? Mick Jagger, that's who! He knows these rules better than anybody. Not only that; he knows the UK rules and the US rules as well. For all three nations, 183 days is the key. That's one day over half the year.


Many years ago he left the UK, and paid all tax that was owing. However, unlike most other people he has never quite arrived in his new country. So, wherever he goes he is a non-resident for tax purposes. This enables him to pay much less than he would pay if he were a resident.


Ever wonder why the Stones practice in Toronto for their North American tour? They're counting up the days; that's why. They run the risk of spending close to 183 days in the US, so they have to practice in Canada. And, all this time you thought it was the value of the dollar.


In any event, if you buy Mick's house in Canada, just make sure he's paid his income tax here, or you could be in for a big surprise.


Brian Madigan LL.B., Realtor is an author and commentator on real estate matters, Coldwell Banker Innovators Realty
905-796-8888
www.OntarioRealEstateSource.com

By Brian Madigan LL.B.

Overall there does not appear to be any difference in the markets over the week. Basically, the TSX is up 1%. If you were away on vacation and had no access to the news, you would say "no big deal".

So, we better look at the daily numbers

-515.55 Monday

-27.04 Tuesday

-349.30 Wednesday

+186.88 Thursday

+848.42 Friday

The markets worldwide exhibited a similar pattern, some more than others.

What changed? On Thursday there was a rumour than the US federal government would bailout the banking industry "bigtime", not just one bank here and there, but largely the entire industry. By Friday, came the confirmation. The rumour was true!

The gain on the TSX on Friday was the biggest gain 7.03% in one day, since the recovery following the stock market crash in October 1987.

The bailout will cost the government dearly. This will run in the range of something in excess of a trillion dollars. And, this follows the previous week's bailout of Fannie Mae and Freddie Mac at a cost of about one half trillion dollars. All in all, this financial crisis is costing a lot of money. In addition, there are large insurance companies including AIG which required funds. Within one month's time the US Treasury will have undertaken about $4 trillion dollars in additional expense.

The good news: it appears the the world financial crisis is over. The market has bottomed out, That now means no where but up from here, or at least that's the theory. The important matter is the the world knows the the US government will provide a stop-gap measure to bolster the market. The spillover effect will be the real estate market. It will take some time to work off excess supply in the US, but when we turn to the GTA:

1) there is no excess supply
2) there is no mortgage crisis
3) mortgage rates are attractive
4) financial institutions are well regulated and are financially strong
5) no bailouts are needed

As a result, we should experience growth from here. Present economic indicators would suggest that the GTA real estate market should be moving up from here not down.


Brian Madigan LL.B. Realtor
www.OntarioRealEstateSource.com

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