Category Archives: Real Estate

It’s not a bubble – It’s a devastating storm

Real estate lawyer, closing costs

I believe it is everyone’s right to have a safe and affordable home to raise a family.  The reality in today’s economy is quite the opposite.  I see people making desperate decisions to buy a home out of their price range for fear that they won’t be able to afford anything similar if they wait.  They are maximizing their credit cards, borrowing more from parents and cutting back on certain activities for their children just to make ends meet.

I had recently quoted Benjamin Tal, Chief Economist with CIBC World Markets, who spoke of a generation that is going to “inherit inequality”.  I won’t event attempt to explore the depth of the subject, but suffice it to say that there is a growing demand on rental units.  Just yesterday, I had a client that is selling her home because she can’t afford to live in it.  Yes, she intends to bank the little amount of equity she will get out of selling her home and rent.  I see this trend more and more.

The implication of what Tal was saying is that, if you are not a home owner now that you may not likely be a homeowner in the near future given the trend of skyrocketing home prices.  And, today’s Globe and Mail article about Ontario pushing Ottawa for some form of tax on speculative buyers or increasing the capital gains tax is a sign that governments recognize the seriousness of the problem.

Just think, you have people buying properties based on speculation of profiting, low inventory of homes on the market and first time home buyers trying to get into the market.  How does a first time home buyer compete with an investor with very little homes for sale?

Don’t get me wrong.  I don’t criticize investors.  After all, they have children for whom they want to provide a home and ensure a financial nest egg for themselves.  I get it.  But, if average people can’t afford to buy their own home and must turn to renting, that will put a corresponding strain on all levels of government, primarily provincial and municipal, to provide affordable housing.  It is a storm brewing like no other.

Ironically, I know that builders are in tune with this growing demand for rental housing units and have already started building a mix of condominiums and rental apartments.  The only issue is that market pricing remains an issue because demand is growing for good rental units.

My question is whether all levels of government can create a unified strategy in concert with builders whereby builders have the right incentives to build affordable rental units for growing families?  A grand idea perhaps, but if it works, would this not be a more cost effective alternative to managing government deficits and pressure to keep increasing tax revenues?  Just saying……

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Burlington, Hamilton, Milton, Mississauga, Guelph

What does Trump have to do with home ownership in the GTA?

Benjamin Tal, Deputy Chief Economist with CIBC World Markets, made a spectacular presentation to kick off the Landpro conference today at the Paramount Centre in Vaughn.

Tal spoke about the economy and real estate outlook for the GTA.

Tal started with Trump’s election and ended with the rise of housing prices, the trend towards a reduction in the number of CMHC insured properties and the need for “purpose built” developments (aka the need for more rental units).

Taking liberty with Tal’s insightful analysis, he believes Trump will only last 1 term as President because his expressed and demonstrated approach to creating more “jobs” (his mantra) is inconsistent with the economic realities occurring in the USA and the world.  He called Trump “inflationary” and predicted that Trump will fail in creating more jobs and trade.

Tal pointed out that the manufacturing sector in the US is outperforming Canada which should be the exact opposite given our much lower dollar.  But overall, manufacturing jobs have been falling long before China entered the WTO.

The number of American workers receiving disability benefits in 2016 outnumbered the number of production workers.  Government tax cuts reduce revenue which increases government borrowing.

Canada’s share of low paying jobs is rising.  And although there is an availability of good jobs, Tal said employers can’t find workers with the right skill sets to perform those jobs.

Canadian manufacturing is near full capacity and needs investment to lift exports.

From 2015 to 2025, there will be approximately $800 billion in the transference of wealth in the form of inheritances which Tal labelled as “inheriting inequality”.   This is tied to an individual’s ability to buy homes at their current prices and future prices.

The Bank of Canada’s real motive in keeping interest rates low is to support our weak dollar and not necessarily to promote private home ownership.

Rising home prices in Toronto are forcing people to look further and further away from City centre to find homes within their price range.  Although low interest rates continue to promote new home ownership, the high cost of homes coupled with the new federal mortgage rules constricting the number of CMHC insured homes, Tal predicts will create an increased demand for rental units.

Sorry Tal if I butchered your fantastic presentation – it was refreshing and insightful.

Article by Real Estate Lawyer Karmel Sakran »

The Principle Residence Exemption is under attack

Until recently, when you sold your principle residence you did not have to declare it on your tax return and you were not at risk of paying income tax on its increase in value from the original purchase price.

As of October 3, 2016, the federal government requires you to report the sale of your principle residence to determine a pattern of whether the principle residence exemption should be disallowed.

According to the Minister of Finance, Bill Morneau, the federal government wants to target “perceived abuses of the PRE” or, in other words, to target individuals that flip homes for profit as a source of taxable income.

And, despite the fact that the federal government established a number of legislative measures and CRA administrative changes (all of which I leave to your accountant to explain), the fact is that there remains much uncertainty on who will not qualify for the PRE.

The biggest difficulty for CRA is that making a “profit” (being the growth or increase in equity) has always been a natural aspect of home ownership.  We use the increased equity to “upsize” and even to “downsize” and bank the excess.  The point is that we have always used our home as a source of advancement and retirement.

The financial environment for homeowners is now uncertain.  Homeowners are now faced with the prospect of having to justify why they are entitled to the increased equity from the sale of their home and why they qualify for the principle residence exemption.

How will CRA determine when the growth or equity from the sale of a home constitutes taxable income?

Will someone’s intentions and personal reasons factor into the equation?  If so, what personal reasons will qualify?  I didn’t like the neighbourhood?  The school?  The neighbours?  Change in employment?  Or, I simply changed my mind about the home?

How much profit is too much before it becomes taxable income?  $10,000?  $100,000.00?

How long must a person or family live in the home before it’s sold?  Six months?  Six years?  And how much renovation is too much?  Interior non-structural improvements?  A one room addition?  Demolition and complete re-construction?

I find it difficult to imagine regulations that will define all these questions into an objective application for all situations.

As an aside, those that claim the PRE means that they are not entitled to claim or deduct the substantial costs associated with buying or selling a principle residence, like:

  • realtor and legal fees;
  • land transfer tax;
  • title insurance;
  • mortgage interest and pre-payment penalties;
  • relocation costs;
  • repairs and improvements/renovation;
  • municipal taxes;
  • development costs;
  • and more.

And, you are not eligible to claim the H.S.T. rebate when it’s your principle residence.

The fact is that there is an imbalance of power between CRA and taxpayers. I suspect that many taxpayers will be forced to settle and pay tax against some or all of the growth/increased equity generated from the sale of their home just to get CRA off their backs.

It is a murky area that may inhibit one’s right to mobility and investment in one’s own home.  Trying to capture a few “perceived abusers” will risk eroding pride of home ownership and cause harm and harassment to a greater number of well-intentioned individuals.

So what if a person makes a living flipping homes?  If it is their principle residence, why should they not qualify for the principle residence exemption?  I say leave the principle residence exemption alone, subject only to the authenticity of one’s residence.

Real Estate Lawyers for Burlington, Hamilton, Milton, Mississauga, Guelph »

“WHY” the new stress test lending requirements?

 

stress-test

The federal government, bless their heart, have implemented a financial stress test for homebuyers effective October 17, 2016.

Qualifying for a mortgage has always been a “stress test” for borrowers but we never called it that.  The federal government tweaked their lending rules in four substantive ways:

  1. Banks now have to assess mortgage applicants against the Bank of Canada’s five-year fixed rate (currently 4.64%);
  2. No more than 39% of your total household income can go towards your housing costs such as utilities, property taxes, mortgage and home insurance;
  3. You must have a minimum credit rating of 600; and,
  4. Amortization must not exceed 25 years.

In the past, homebuyers could qualify under the bank’s five-year variable rate (currently under 3% for most financial lenders).  Now, of course, the new lending rules mean that many new homebuyers or high ratio borrowers will have to wait until they have a larger down payment or consider buying a cheaper home.

Quite frankly, the new lending rules are most unfair to first-time homebuyers.  Others before them got away with much more lenient lending rules and, as a result, were able to buy their new home.  That doorway has now been closed.

Why the new lending rules by the federal government?  Many know that the federal government, through the Canada Mortgage and Housing Corporation (“CMHC”), insures high ratio lenders.  Those are individuals that put less than 20% and more than 5% down on the purchase of a home.

The federal government has legislated a $600 billion limit on the total dollar amount of its mortgage insured loans and, the current balance of CMHC insured outstanding loans sits at $523 billion as of 2016 Q2.  The upper cap of $600 billion is almost maxed out.

In looking at the CMHC Mortgage Loan Insurance Highlights 2002 – 2016 Q2 https://www.cmhc-schl.gc.ca/en/hoficlincl/homain/stda/data/data_005.cfm, it appears to me that the federal government wants to stabilize the risk to itself and to homeowners from the volatility of the market.

Although there are several CMHC indicators which remain consistent (such as the average loan to value ratio of CMHC insured homes remaining between 53% to 55%), the soft and unpredictable economy coupled with other CMHC indicators suggest borrowers are being more aggressive in their borrowing habits.  In my view, this trend is concerning to the federal government.

Looking at some CMHC statistics and specifically, CMHC insured households:

  • the average loan amount per household prior to 2015 sat around $140,000 and increased in 2015 to $175,000; that’s an average increase of $35,000 insured per household;
  • the number of insured households per quarter:
    • 2013 Q1 – 52,000;
    • 2013 Q3 – 114,000 (highest prior to 2016 Q2);
    • 2014 to 2015 Q4 range of 50,000 to a high of 91,000;
    • 2016 Q1 dropped to 63,700 households; then,
    • 2016 Q2 dramatic spike to 117,500 newly insured homes (highest ever).

When you consider the recent spike of $35,000 in the average dollar amount insured per household and the highest jump ever in 2016 Q2 to 117,500 of insured households, these raise huge concerns for the federal government.  Clearly, first-time homebuyers are caught up in the buying frenzy and bidding wars.  With the stagnant low interest rates, people are making more and more aggressive bids, including high ratio borrowers which is likely contributing to the overall increase in the average insured amount per household.

When you also consider the borrowing trend of high ratio borrowers insured by CMHC/federal government alongside a recent report (http://www.huffingtonpost.ca/2016/07/21/canada-economic-outlook_n_11108646.html) that downgraded Canada’s economic growth forecast to 1.4% for 2016, plus the fact that the Bank of Canada is hard pressed to increase its lending rate, the federal government stepped in to tighten its lending rules for high ratio (and low ratio) borrowers.

In the event the “bubble bursts” in the housing market, the symptom will be the decline or attrition in housing prices while the substantive socio-economic impact will be families losing their home.  This is what, I suspect, the federal government wants to avoid.

Article written by Karmel Sakran

Oct. 19, 2016

The Housing Market….

Real Estate Lawyer, closing costs

The other day, I heard a report on CBC that housing sales are down an overall 3%, primarily due to the B.C. housing market.  Although this is a very busy time for real estate deals, the number of deals our office is handling is leveling off compared to same time last year.

In my unqualified opinion, housing prices are not declining.  Instead, they are stabilizing which means that the gross competition and bidding wars experienced in recent past is now tailing off.  As an aside, two months ago, I was successful in having CMHC reverse a refusal to extend coverage by presenting them with a 3rd party valuation substantiating the fair market value at $80,000 over list.  This saved the deal and ensured that the client did not lose their $10,000 deposit.

The new reality is that the recent boom and fierce competition has helped many, who held onto their home, to increase their equity intended for retirement.  Good for you and good for the many that got into the housing market before the boom.

Interest rates?  Again, in my unqualified opinion, I don’t see a large shift over the next 24 months.  Interest rates are tied to multiple economic factors but the simplest I see is that our economy is still transitioning to the new reality of high tech – we are not entirely there yet.  In fact, I have a lot to say about this growth area but that is for politicians and economists to solve.  I enjoy leaving this for “nice” dinner conversation.

Happy owning!

Karmel Sakran

GREEN GERMANN SAKRAN CANADA DAY RUN 2016

Thanks to all the runners, donors and volunteers, we raised $2,500 for the YMCA Strong Kids Campaign!

It was a fun way to start Canada Day and everyone had a blast.  The kids did the 1km run first with all adults waiting for the 5km start.

Here is a short video of the action.

 

 

Spirituality on the Go Train

On Monday morning, I walked into my office and found a cover letter and article addressed to me from a long-time dear acquaintance and client, Rev. Maureen (“Moe”) Anderson.  Moe’s letter captivated me – she describes her role as a Spiritual Care giver and how she recently had the experience of saving a man’s life on the Go Train.  With Moe’s consent, I have posted her letter to me and her fascinating article – I will let them speak for themselves.  Enjoy!

CASC/ACSS

Canadian Association for Spiritual Care / Associationcanadienne de soins spirituels

June 4,2016

Dear Karmel,

I hope that this letter finds you well!

As you know, I’m always crazy busy and into a variety of projects. I’m writing to you in my capacity as Co-chair for the National Convention of the Canadian Association for Spiritual Care to be held at Deerhurst Resort in April of 2018.

The Canadian Association for Spiritual Care is the National multi-faith organization committed to the professional education, certification and support of people involved in spiritual care, counselling, education and research. We provide education programs for people who are preparing to become professional providers of Spiritual Care in a variety of institutional and community settings.

I agreed to co-chair this committee because I know that this annual convention is a lifeline for the people who work across the country, many of whom work as the sole person in their institution facing traumatic situations every day. I am one of the lucky ones. While I attend to several deaths a day and many distraught family members, I have a team of spiritual care professionals at the University Health Network. The vast majority of my colleagues do not have that kind of support within their workplaces and so it is my passion to try and make this convention as accessible as I can by soliciting support from generous community donors.

Rev. Moe Anderson Spiritual Care Professional Co-Chair
Canadian Association for Spiritual Care National Conference

P.S. I thought that you might enjoy reading one of my blogs where I helped save a man’s life!

Spirituality on the Go Train

You would think that someone from Spiritual Care would not have trouble answering the questions, “How do you work spiritually at work?” when the Wellness Coordinator asks, however, I was stumped until the Friday night GO train ride home.

For those of you that regularly ride the GO train, you know that it is a bit of a strange environment. You can ride with the same people for many years and never actually meet them. At the end of the day, the cultural norm on the top deck of the train is quiet and silence but the alarm went for “Code 1033,” the code for a medical emergency and this time the emergency was in my car. I went down to investigate and a man had collapsed on the floor, not breathing, rapidly turning blue. Someone had started CPR and I took over compression as she tired. Others arrived as well. I heard the GO train personnel inquire who everyone was and it turns out we had someone from palliative care, someone who delivers babies, a dermatologist and me, a spiritual care provider.

I thought of all those family meetings where it was unknown what time the patient collapsed and how long he had been down for, so I looked at my watch. The time was 4:23. A minute into compressions and I was tiring already. How did I not know how tiring CPR was? I had watched the ICU team do CPR for hours, switching off every few minutes, never realizing how hard the work was and being reminded in the moment how important teamwork is. We began to switch off between trying to find a pulse and doing chest compressions. He was turning that awful colour between life and death. Someone found a defibrillator and the baby doctor prepared to deliver a shock as she ripped open his shirt at 4:26. We heard her say “clear” and then he jumped underneath us. I heard the palliative doctor ask someone to find his name in his wallet and she began to talk to the patient. Talking to a dying patient is usually my job, but today, I heard someone else giving the spiritual care while we continued chest compressions stopping periodically so the palliative doctor could see if his heart was beating. Suddenly he began to breathe. A cheer went up and we turned him on his side but the victory was only short lived. He stopped breathing again and we rolled him back to continue CPR. At 4:29 we gave him a second shock. In that second moment when we called “clear,” I looked up and I saw the faces of the people that I normally speak to- scared, overwhelmed by what they were seeing, panicked but I couldn’t provide the spiritual care it was someone else’s job to offer comfort and support. I placed my hands on his chest taking my turn at compressions from the dermatologist and this time I felt his heart punch back at my hands and beat to life again, like when I was pregnant and I felt the baby kick from within. It was like his soul was letting me know he was still there. The doctors confirmed he had pulses, stronger pulses this time. Rolling him onto his side again it was 4:34. His colour returned, his eyes fluttered open. Oxygen arrived from somewhere and paramedics arrived on scene just as he was waking up. There was a sense of exhilaration that together we had saved this man’s life- the woman who went running through the train looking for doctors and found the strange collection of people to help, the person who donated her scissors to cut open his shirt, those of us that pounded on his chest and shouted in his ear to keep breathing, those that held elevators and doorways, went running for the defibrillator or just silently prayed- together- a crazy team that journeyed together differently today.

As I reflected on the events, I realized that in many ways the hospital is a strange collection of strangers, a collection of people journeying together, never knowing what the day will bring.

I realized that being in rounds and family meetings had made me the accidental student as I heard over and over again what made the different at the beginning of a cardiac arrest to the final outcome. We must all be accidental students in our journey together, always learning from one another. Today, I reflected on all the people that I watch day in and day out use their hands to work to save a patient. How differently it felt to put my hands on a patient for medical treatment than to hold a hand to comfort. How lost for words I am to describe the feeling of seeing another human being shocked and pounded back to life and to have been a small part of that.

Today as we journey together, I’m reminded once again of the precious commodity of time that is given to each one of us to make each moment count. After he was taken away by EMS a woman, in tears, explained, that the man collapsed after seeing her struggling up the stairs with her suitcase feeling panicked at being caught in rush hour. Seeing her struggle, he carried her suitcase up to the platform. She worried that the act of kindness may have cost him his life- perhaps it saved him because it put him in just the right place. I am more.deeply aware that we are strange strangers on a journey but we don’t have to be estranged from one another, especially in crisis.

So today as I think about what Monday will bring I hope that I can live in deeper spiritual appreciation and with deeper reverence and awe for all those who place their hands onto their fellow sojourners in care. I hope that I can live with heightened awareness and hope for the strangers and companions that are all around. I hope that I can see with more compassion the struggles that each person carries in their work. In the end, to work spiritually is to remember that we journey together.