Mike Montague

Thanks to all who continue to contribute their great area photographs to the "Barrie - One more reason why I live here" photo pool in Flickr.

OTTAWA – Tax policy discourages the sale of income property and impedes a chain reaction of economic stimulus and job creation – elements that could greatly contribute to a commercial real estate market recovery and community redevelopment. A new Altus Group economic study prepared for The Canadian Real Estate Association (CREA) found that income property sales generate sizeable economic activity in a number of industries, and support job creation.

The study estimates, between 2006 and 2008, the typical multi-unit residential income property transaction in the Greater Toronto Area, Greater Calgary Area and Greater Vancouver Area generated a total of $287,850 in ancillary spending. It also found that 53 jobs were created for every 100 transactions.

“Income property sales generate a substantial amount of spin-off spending,” says Peter Norman, Senior Director, Altus Group. “They create opportunities for trades people in renovations and repairs; fees for professionals; income for industries that produce construction materials; and tax revenue for all levels of government.”

Unfortunately, many income property owners are reluctant to sell and reinvest because of the capital gains tax and recaptured capital cost allowance.

“The tax system provides a powerful incentive to retain income properties with large accumulated gains at the expense of more productive opportunities,” explains James McKellar of York University’s Schulich School of Business. “The consequences are underutilized, energy-inefficient and boarded up buildings across the country. It restricts work opportunities in redevelopment and impedes creation of additional rental housing in built-up areas.”

“The tax system encourages us to hold onto our property,” according to George Kirkland Jr., an owner of a multi-unit residential property in St. John’s Newfoundland. “After paying the tax, we would not have enough money left to purchase a similarly valued property and realize the same level of income.”

The commercial real estate market deteriorated significantly in 2008, as a result of the global recession, and has yet to show signs of recovery. A recent report by CB Richard Ellis Limited illustrates commercial real estate market transaction volumes declined by 51 percent, year-over-year, from $10 billion midway through 2008 to $4.9 billion midway through 2009. In the first half of 2009, the number of commercial real estate transactions also decreased sharply year-over-year, dropping 38 per cent to 1,569 at mid-year 2009 from 2,542 transactions at mid-year 2008.

“Allowing tax deferral on income property reinvestment would provide a needed kick-start for the ailing commercial real estate market,” says CREA President Dale Ripplinger. “The spin-off activity from income property sales would help strengthen other sectors hard-hit by the economic downturn, and the resulting renovations and redevelopment would help revitalize communities across the country.”

There is widespread support for allowing tax deferral on income property reinvestment, including the National Trade Contractors Coalition of Canada, the Canadian Construction Association, the Canadian Federation of Apartment Associations and REALpac – the Real Property Association of Canada.

The complete study from Altus Group Economic Consulting is available in PDF format at www.crea.ca or by sending an email to info@crea.ca.

For further information, please contact:
Alyson Fair
Publicist, The Canadian Real Estate Association
613-237-7111 ext 2284
afair@crea.ca

As we reached a point early in 2008 where Canadian news media began to report that we too were now seeing the symptoms of recession in our own economy, Realtors began to wonder how bad it might get and just what the business of Real Estate was about to endure.

My expectations were that in the event of a full blown recession we were going to begin seeing homes listing far faster than they could sell and the result of that increased inventory would drive down the price of homes in general.

Well we never really saw that happen here in Ontario. Instead what we saw was many would be buyers and sellers adapting a wait and see position. Buyer activity slowed towards the end of 08 and was late to pick up again in 09. By June of 09 sold signs were appearing with more frequency on dated listings all around the Barrie area and buyers were now taking advantage of the record low interest rates on mortgage money being offered.

In many ways our recession here in Canada felt like the winter pre storm warnings we are used to getting every year that threaten to see us buried under a paralyzing layer of heavy snow but instead give us a light dusting.

That isn't to say we got off scott free. The majority of sales activity now and for all of this year has been homes selling under $300,000. In the past 30 days there have been 284 residential sales registered with the Barrie Association of Realtors, only twenty percent or 59 of those sales were of homes over $300,000. There are as of the time of this post, currently 833 active detached listings which are at or above the $300,000 mark and 632 listed in the more active range below $300,000.

We still have an active first time buyer market that is responsible for much of the activity in the lower price range. Homes above $300.000 generally sell to those who have built up equity from a previous home purchase to work with. With the scent of recession still lingering, far fewer are trading up, though this is one of the better times financially to make such a move.

So where are the bargains? Well it isn't in the first time buyer range, these homes are still selling within reasonable time frames at healthy list to sell price ratios. Townhouses continue to increase in value as are condo's and detached homes in this range. The bargains are to be found in the higher priced homes.

If you have out grown your starter home but are waiting on the final seal of approval from the media that the economy has fully recovered you have to ask yourself why. If job uncertainty is an issue for you then holding tight on that move up to a more expensive home is understandable.

Otherwise you are likely in a home that has continued to appreciate in value on through the past year, mean while the higher priced homes you have your sights on are taking far longer to sell which in many cases is going to puts you in the drivers seat at the negotiating table. Many sellers in this range are anxious just to make a deal. A sacrifice on price is going to appear more attractive to many than chancing another six months on the market before the next offer comes, more so if that home is and will be sitting vacant until it sells.

If you want to know were to look for the hidden bargains the $300k plus market is where you are most likely to find them..

In addition, and even of greater financial significance to you is the fact that interest rates are still at all time lows right now. A rise of just one percentage point on a $300k mortgage means a difference of about $200 each and every month which works out to over $12,000 for just the first five year term on a 25 year mortgage! Again that's just a one percent difference.

Much like the stock market most wait until the frenzy to decide to buy when prices are on the climb once again and interest rates are no doubt adjusting back to their higher levels. Today's posted variable rates are sitting just over 3%. The average rates over the past 25 years in Canada have been between 6 and 7 percent.

My prediction is Barrie's inventory of higher end homes will see healthy value increases over time for the following reasons.

• Barrie has very little undeveloped residential property left within its boundaries
• There is demand from the public and preassure by the province for Barrie to build higher density, lower cost housing on its remaining undeveloped residential lands. https://www.placestogrow.ca/index.php
  
• Central Ontario's economy will continue to grow creating increased demand for quality housing in Barrie.

Do the math. Then decide what its worth to you to make your move.

To keep yourself up to the minute on home lisings in your price range of choice visit HotBarrieListings.com

The final deadline for the federal Home Renovation tax credit is closing in. You have until February 1st 2010 to take advantage.

The Home Renovation Tax Credit applies to eligible expenses of more than $1,000, but not more than $10,000, resulting in a maximum non-refundable tax credit of $1,350 [($10,000 - $1000) x 15%]. The Home Renovation Tax Credit is subject to Parliamentary approval. You can claim a non-refundable tax credit on your 2009 income tax return. This tax credit is based on eligible expenses incurred for work performed or goods acquired after January 27, 2009 and before February 1, 2010. Only agreements entered into after January 27, 2009 and related to a qualified dwelling are eligible.

http://www.actionplan.gc.ca/eng/media.asp?id=1531

MLS® home sales remain strong in August

Published September 15, 2009 Canadian Real Estate Association

National resale housing market sales activity remained up from year-ago levels in August 2009 for the third consecutive month, posting the largest year-over-year gain in more than two years.

According to statistics released by The Canadian Real Estate Association (CREA), a total of 42,483 homes traded hands via the Multiple Listing Service® (MLS®) Systems of Canadian real estate Boards in August 2009. This represents an increase of 18.5 per cent from the same month last year, and the third consecutive year-over-year gain of more than 15 per cent. Sales were 6.6 per cent below the record for the month of August set in 2007.

On a seasonally adjusted basis, national MLS® home sales held steady. At 42,426 units, seasonally adjusted activity came to within six-tenths of one per cent of levels in the previous month. Seasonally adjusted activity in Alberta and Quebec declined, offsetting activity gains in British Columbia. Seasonally adjusted activity still remains 60.8 per cent above the decade-low in January.

“National sales activity in the third quarter is on track for a significant increase compared to the second quarter,” said CREA President Dale Ripplinger. “Low interest rates and affordability continue to attract homebuyers to the housing market. Consumer confidence continues to rise, which bodes well for activity in the coming months.”

Resale activity in August 2009 was up from year-ago levels in about approximately three-quarters of all local markets. Year-over-year gains in Vancouver (117 per cent), Toronto (27 per cent), Calgary (17 per cent) and Montreal (nine per cent) contributed most to the national increase in activity. Aggregate MLS® home sales activity for 25 major markets posted the third consecutive increase from year-ago levels of more than 20 per cent in August.

Demand continues to improve in Canada’s more expensive housing markets, drawing the national average price upward. The national MLS® residential average price rose 11.3 per cent from year-ago levels to $324,779. This is the highest national average price for the month of August.

The MLS® residential average price for the month of August set records in every province except Alberta. A sustained increase in sales activity, including a rebound in activity at the higher end of the price spectrum in some of Canada’s priciest markets, is skewing the national average price upward.

This price trend is similar but more muted for the weighted national MLS® average price, which compensates for changes in provincial sales activity by taking into account provincial proportions of privately owned housing stock. The weighted national MLS® average sale price in August 2009 was up 7.1 per cent year-over-year, but down eight-tenths of a per cent from the previous month.

The weighted average price increase for an aggregate of 25 major markets reveals a similarly muted trend compared to its unweighted counterpart. The major market weighted average price rose 5.3 per cent year-over-year in August 2009, compared to an increase of 11.8 per cent for the unweighted major market average price. The major market weighted average price compensates for changes in sales activity in major markets by taking into account the proportion of privately owned housing stock in each market in relation to the major market aggregate.

The number of new listings coming onto the MLS® market posted the eighth consecutive decline from year-ago levels. New residential listings were down 8.9 per cent year-over-year to 64,167 units, the lowest level for the month of August in five years.

Improved demand is combining with fewer new listings to draw down inventories on the housing market. There were 212,227 homes listed for sale on the MLS® Systems of real estate Boards in Canada at the end of August 2009, down 13.3 per cent from a year earlier. This is the fourth consecutive year-over-year decline in active listings, and the largest decline in more than six years.

Nationally, the number of months of inventory was up slightly to five months in August from 4.4 months in July, but still well below the recessionary peak of 12.8 months in January 2009. The number of months of inventory edged up in most major markets in August. The number of months of inventory is equal to the supply of active listings at the end of the month divided by the number of sales that month. It represents the number of months it would take to sell current inventories at the current rate of sales activity.

The seasonally adjusted dollar volume of all residential MLS® sales set a new record in August 2009, rising 1.5 per cent from the previous month to $14 billion. British Columbia contributed most to the increase, having posted the highest seasonally adjusted dollar volume on record for the province.

“The balance of sentiment making big-ticket purchases pushed into positive territory in August for the first time since early last year,” said Chief Economist Gregory Klump. “Recent cuts to mortgage interest rates will no doubt provide further support for this indicator, which is an important factor underlying the housing market.”

“Activity may be leveling out as we indicated in last month’s revised resale housing market forecast. Average prices dropped sharply over the second half of 2008 and have rebounded since then, so comparisons against year-ago levels are likely to show continued improvement over the rest of 2009.”