Ottawa Might Be Raising The Minimum Downpayment

OTTAWA -- The federal government is ready to clamp down further on mortgage rules if the boom in the Canadian housing market turns into a bubble, says Finance Minister Jim Flaherty.

In an exclusive interview with Canwest News Service and Global National, Mr. Flaherty said the government is closely monitoring the red-hot housing market for signs that it is reaching "irrational" levels.

The reality is we have low mortgage rates . . . so we can expect some upward pressure on housing," he said. "That's OK, as long as it doesn't become a bubble. We're watching that.

If necessary, the government is prepared to further tighten the conditions under which the Canada Mortgage Housing Corporation insures mortgages, the finance minister said.

In July 2008, amid the fallout from the subprime mortgage crisis in the United States, the Finance Department announced that CMHC would shorten the maximum amortization period that it will accept to 35 years from 40, as well as require a down payment of at least 5% of the value of the home. The new rules, which came into effect in October 2008, effectively made it more difficult for prospective homeowners to receive government-backed mortgages.

If we have to, we'll do what we did last year and limit the rate of amortization further than we already did, and require higher down payments, said Mr. Flaherty.

His remarks come as some leading private-sector economists warn that the housing market might be getting ahead of itself amid a relatively modest recovery. In a recent report, Bay Street economist David Rosenberg estimated that housing prices are overvalued by as much as 15 to 35%. This week, the Canadian Real Estate Association reported that sales of existing homes spiked 73% year-over-year in November, while the national average sale price rose 19%.

"If being 15% to 35% overvalued isn't a bubble, then it's the next closest thing," said Mr. Rosenberg, chief economist for investment firm Gluskin Sheff.

In recent weeks, Bank of Canada governor Mark Carney has expressed concern about the amount of debt that Canadian households have been racking up since the central bank cut its benchmark lending rate to near zero. Mr. Flaherty also wants to remind Canadians that the easy money won't last forever.

"Interest rates are at historic lows. They are naturally going to go up," said Mr. Flaherty. "People have to make sure that the mortgage on their home that they've put on today will be affordable at higher interest rates in the future."

The discussion of a potential housing bubble shows how much the economic climate has improved since the end of 2008, when it was still unclear how the world would pull out of the global financial crisis.

Looking back, Mr. Flaherty said the turning point was a meeting of the G7 finance ministers and central bankers in October 2008, where, after "a lot of finger-pointing by the Europeans at the Americans," they agreed to backstop the world's financial system.

"We were in a situation, where the markets might not open on Monday, where banks were failing in Germany, in the United Kingdom, in the United States," the finance minister recalled. "It was quite scary,"

In January's federal budget, Mr. Flaherty announced the government would pump $61-billion in public funds into the economy over two years, the biggest stimulus package in Canadian history.

Mr. Flaherty once again predicted that next year's budget will consist largely of the second year of the stimulus plan.

"Some of the stimulus items can be tweaked, certainly, but Canadians ought not to expect any major new spending programs," he said. "It may be kind of a boring budget, but boring is just fine in 2010."

The Conservatives have repeatedly promised not to raise taxes or cut transfers to the provinces or individuals to eliminate the deficit, which is projected to hit $56-billion this fiscal year. Instead, the government plans to rely on economic growth and possibly spending restraint to make up the shortfall.

In a recent editorial, however, two former senior Finance officials, C. Scott Clark and Peter Devries, wrote that "any credible budget will have to include tax increases."

Mr. Flaherty disagrees.

"The easiest thing in the world to do is raise taxes. What it does mean is you don't have to have discipline in government spending. And Canadians know that there's wasted government spending -- some degree of it."

New Study says tax harmonization would slam door on new home buyers

Ontario’s new homebuyers would face a massive tax grab under the proposed harmonization of the federal GST and Ontario PST, a new report released today concludes.

The report on the implications for sales tax harmonization on new home buyers in Ontario was written by veteran housing analyst Frank Clayton, PhD, of Canada’s largest independent real estate consulting and advisory firm Altus Group, for the Building Industry and Land Development Association (BILD). BILD is the Greater GTA affiliate of the Ontario Home Builders’ Association.

The report looked at nine Ontario municipalities and three different home types. It revealed tax increases for single detached homes ranging from $8,957 (Windsor) to $17,049 (Ottawa) in markets outside the GTA, and from $24,566 (Mississauga) to a whopping $46,676 (Toronto) within the GTA.

“All told, harmonization of PST and GST without any offsetting measures by the provincial government would rip $2.4 billon dollars out of the pockets of new home buyers, slamming the homeownership door shut in the face of many Ontarians,” said Stephen Dupuis, President and CEO of BILD.

BILD Chair Leith Moore added that the proposal for GST/PST harmonization couldn’t come at a worse time and runs completely contrary to the Province’s efforts to stimulate spending and jobs.

"There's no point putting the gas pedal to the metal from a stimulus standpoint while braking equally hard with the other foot, but that's what harmonizing the sales tax on housing amounts to," Moore said.

Meanwhile, Ontario Home Builders’ Association president Frank Giannone said harmonization is a “poison pill” for housing. “Housing is the only product that keeps on paying property tax after it is consumed. So to cripple the new home buyer market at this time not only damages the provincial economy, it also hurts governments in terms of revenues. In addition, the HST would also add additional tax to future renovation projects, and we all know tax increases drive consumers into the underground economy and into cash deals. It makes no sense,” he said.

Dupuis explained that builders are not fighting harmonization, but fighting for fair treatment of housing under a harmonized sales tax regime.

“The reason housing gets hit so hard is that it is the biggest of the big ticket items and it’s not currently directly subject to PST, for good reason,” he said.

“As matters currently stand, builders are paying an average of two per cent PST embodied in the price of each new home and they’re prepared to keep on paying at that rate, notwithstanding all the other taxes, fees and levies they must endure.

“What home builders are not prepared to do is to sit idly by while home buyers are hammered to the tune of $2.4 billion due to harmonization. That's not on," Dupuis concluded. (CREA 11/03/09)

First Time Home Buyers, Then and Now

Last winter, when Canada’s housing market had cooled and it seemed the only real estate news was bad news, Royal LePage CEO Phil Soper said the market recovery would be lead by first-time buyers.

"Like stalled credit, the cycle of buyers and sellers grinds to a halt when first-time buyers disengage," said Soper. "It’s like sand in the gears of the real estate market."

But then came what’s been called "the perfect storm" for first-timers: houses became more affordable and interest rates dropped to near historically low levels. And first-time buyers came back to the market.

By March, Re/Max reported that "entry-level purchasers are now the engine driving home-buying activity in almost every major centre in Canada." Elton Ash, regional executive vice-president for Re/Max of Western Canada, said, "Canadian markets from coast-to-coast are ripe for a reawakening as the weather warms up. First-time buyers seem more acclimatized to economic factors, even though the barrage of bad news continues to flow. Those who are secure in their jobs, have accumulated good down payments, and have acceptable credit ratings are continuing to venture forward, undeterred by tighter lending criteria."

In May, Soper said, "First-time buyers are back in force this spring, and with them the beginning of the market recovery. While these consumers appreciate government incentives such as tax credits, greater Registered Retirement Savings Plan deduction limits and rebates on home renovations, it is markedly improved affordability that is proving to be the powerful drawing card."

Re/Max correctly predicted that the activity at the low end of the housing market would kick-start sales in the mid and upper levels of the market as well, to the point that now it looks like 2009 will be one of the best years on record for resale real estate in Canada.

So first-time buyers are getting credit for helping the country avoid a longer real estate slump, which has prompted some companies in the financial services industry to take a closer look at what first-timers are thinking about these days. According to a TD Canada Trust study, there is a "marked difference" between the attitudes of today’s 18-34 year-old buyer and that of people aged 55+ when they were first-time buyers of the same age.

Just over half of today’s first-time buyers say they feel financially ready to buy a home, while only 37 per cent of the other generations felt ready when they made the decision to buy. However, more than a third of today’s buyers say they couldn’t buy a home without the help of their family (compared to 16 per cent of those 55+), and 27 per cent of the 18-34 year-olds said they received money as a gift or borrowed from friends and family to buy their home. Only 10 per cent of the older generations had financial help from friends and family.

For those 55 and older, paying off the mortgage was the top priority after moving in, but only 49 per cent of the new generation of first-timers cites it as the top priority. Renovation work may be top of mind, because 48 per cent of new first-time buyers are purchasing houses that are more than 21 years old, and 35 per cent said they intend to renovate them.

When shopping for a mortgage, younger buyers shop around more. The older generations tended to stick with their own bank where they were already customers (62 per cent), compared to 36 per cent of the 18-34 group.

"There are so many different options available now, and easier access to information with the use of the Internet, that it’s no wonder today’s first-time homebuyer shops around a bit more," says Chris Wisniewski of TD Canada Trust. "Thirty years ago when people were looking for financing, they usually had limited choices. Now there are many options to explore with your bank including a variety of fixed-rate mortgages, variable-rate mortgages, and even green mortgages for buyers who want to lessen their footprint on the environment." Most of the recent first-timers bought a home in the city (64 per cent, compared to 50 per cent of the 55+ group), and most bought a house rather than a condo, even in the city.

About a third of the 18-34 year-olds ended up paying more for their home than they initially planned, while just 18 per cent of the older generations said they spent more than they intended.

A different survey, by Genworth Financial Canada, highlights the real reason why first-time buyers are motivated to buy. Eighty-four per cent of first-timers agreed with the statement that "owning a home provides a greater sense of emotional well-being and security."

Eighty-five per cent said that even though homeownership may mean more work and effort, they would rather own than rent. Eighty-eight per cent in the Genworth survey said they would feel more financially secure owning their own home.

Canada's Remarkable Housing Rebound

Economists are running out of superlatives to describe the rebound in Canada’s housing market, in which sales are up over 60% from earlier this year. “The speed and magnitude of the rebound in sales activity is remarkable," says the Canadian Real Estate Association (CREA). Association president Dale Ripplinger says, "The difference in the resale housing market now, compared to the beginning of the year, is night and day."

"The Lazarus-like rise in sales has halted the slide in prices “ says Douglas Porter, deputy chief economist at BMO Capital Markets. "The turnaround in Canadian housing this year might be the single most surprising turnabout we've seen in any economic indicator I can think of. The extent of it is nothing short of amazing,"

Most economists were caught by surprise, and most of them have had to revise their real estate forecasts for this year. CREA predicted in May that MLS sales in Canada would drop by 14.7 per cent this year compared to 2008. Now, it says sales will decline by just 0.4 per cent. The association also says prices will rise by 1.5 per cent this year. Canada Mortgage and Housing Corp. (CMHC) also has a revised forecast, and is calling for a small drop in sales activity and sales.

In the Toronto market over he past three months, resale activity has been much stronger expected, and the sales rate has been raised very substantially.

So what happened? Why is housing leading Canada's economic recovery?

"Low interest rates are boosting sales by returning homebuyers to the market who dropped out last year," says Gregory Klump, CREA's chief economist. "Buyers are also shifting purchase decisions forward as they take advantage of attractive interest rates .

With prices and activity down early this year, many sellers decided to take their homes off the market until the situation improved. That created a shortage of listings, and thanks to the law of supply and demand, stopped the slide in prices. In August, it's been reported that 14 per cent of listings in the Toronto market had multiple offers submitted.

"Yes, Virginia, it's a sellers' market again," says Porter. "The biggest, priciest, and previously hardest hit markets are the very cities that are now rebounding most rapidly."

Now, the economists are over their shock and are throwing cold water on the idea that the market can continue to expand at this rate.

Klump says that since buyers moved their purchases ahead to take advantage of low mortgage rates, next year will see a more stable market.

The strong pace seen in the second quarter of this year reflects, in part, activity that was delayed in the previous two quarters and is not likely to be sustained," says CMHC. "The level of sales will move back to be closer in line with improving economic conditions."

Only Porter at BMO Capital Markets seems to be hedging his bets in predicting the boom times are over. "Record-low borrowing costs and the mounting sense that the worst of the economic storm has passed are the key ingredients in the remarkable turnaround," he says. "We keep saying that further gains will be harder to come by, but the market keeps churning out those gains."

Why Pricing Your House Right is So Important

Perhaps the greatest influence in getting your home sold quickly is entering the market with a home that's priced correctly.

Over-priced homes won't get favorable attention; they lose out to the ones that are reasonably priced.

All sellers are looking for the highest price for their home. That's why some sellers want to start at the highest point, maybe even asking a higher price than what they really believe they can get -- the continued readjustment of price can be a humbling ride down to finding the reasonable price to sell the home.

Still dropping the price sounds like an okay strategy, some sellers think.

Here's the problem, especially in today's current market conditions where numerous sellers are competing for fewer buyers -- adjusting price down may come too late and cost the seller less in gain than if the home were priced correctly from the start.

The majority of buyers use buyers' agents to assist them with purchasing a property. Buyers' agents will help the buyers find a home that's right for them. If their buyers are interested in a particular home and it is priced too high (based on comparable properties sold) then the buyers' agents will find their clients similar more reasonably priced homes to view in the same area, plus they don't want to insult you.

As a seller's property that's over-priced continues to sit on the market the listing loses its newness. There are typically fewer new listings than existing listings. Agents pay a great deal of attention to what's new on the market. Homes that are priced correctly generate attention, activity and a sale; over-priced homes, on the other hand, sit for long periods, are passed over, and ultimately result in a price reduction.

If a seller has an over-priced home on the market and then chooses to drop the price it sometimes goes overlooked. Because it's not a new listing it'll need a little more attention to get agents and buyers to notice that this same home is now being offered for less.

Flyers, emails, ads, etc. have the challenge of enticing buyers and agents who wouldn't give it a look at the higher price -- to come see it now. Not an impossible battle, but again, the listing is no longer new and may be less appealing even with the price reduction.

Obviously, the longer an over-priced home sits on the market, typically the more financial stress the seller begins to feel. If the seller has purchased a new home or must move to another city, suddenly the desperate seller syndrome sets in and lowball offers may have to be accepted due to financial circumstances.

Pricing a home correctly initially is vital -- otherwise the "we-can-always-drop-our-price" strategy could become a costly and humbling lesson in the end.

Moving Expenses Can Be Tax Deductible

Did you know that you can deduct eligible moving expenses from employment or self-employment income you earn at your new location if you move and establish a new home to be employed or carry on a business?

I’ve been told by some accountants and tax advisers, that many people forget that they can claim these deductions or, they are unclear as to how they apply.

According to Canada Revenue Agency (CRA) website, you can also deduct moving expenses if you move to study courses as a full-time student at a college, university, or other institution offering post-secondary education. However, you can only deduct these expenses from the part of your scholarships, fellowships, bursaries, certain prizes, and research grants required to be included in your income.

The rules say that your new home must be at least 40 kilometers closer to your new place of work or educational institution. You must establish your new home as the place where you ordinarily reside. For example, you have established a new home if you have sold or rented (or advertised for sale or rent) your old home.

The website has a useful link on the front page that you can follow to establish your eligibility for these deductions.

July MLS Sales Highest in 5 Years

The number of Listings Sold in July 2009 has increased 17% over the number of sales in the same month last year. There were 544 new listings in July '09 compared to 668 in July '08. At the close of the month there were 2177 active MLS listings compared to 1948 in July of last year.

Consumer confidence appears to have returned to the Peterborough housing market, fueled no doubt by low interest rates resulting in increased affordability. Sales in Peterborough Co for July were the highest in the last five years. First time home buyers led the charge with the residential sales of homes listed between $150,000 -$250,000 accounting for over 50% of the increase. The number of new listings has decreased from last year so sellers who are well priced should have an increase in activity and a shorter timeperiod on the market.

WHY BUYERS NEED A BUYERS AGENT

As I sit ruminating this evening about real estate in our wired world, I ask myself, why do prospects need Buyer’s representatives anymore?

With the constantly evolving technology of our highly accessible MLS® system, savvy Buyers, can seek out and find listings at the touch of a computer or cellphone keyboard, which meet their criteria in their quest for their perfect abode. Indeed, they know what they’re looking for even better than we do, as they in fact, live with their hopes and dreams every moment of every day. We, on the other hand, do not.

So then, the question I put to you is: where do we, as real estate professionals, fit in with respect to Buyer representation?

We are happy to search the MLS® database for listings - we look at them constantly throughout the day as it is, but technically you don’t NEED us for that job. What you do need is representation, and this is a far more important role than that of listings-researcher.

You, as a Buyer, need us to help you through the legal and sometimes frustrating process of buying a home - that place to call your very own - or not. That’s right; sometimes we’re going to tell you that a house is not right for you.
Early on in the offer process, we’ll pull together pricing information for you. We’ll establish what other homes of similar size, age, amenity and utility have sold for recently, in order to make a comparison with the home you wish to buy. This is critical information for you to have so that you don’t overpay for the house.
Part of your offering-price strategy will include understanding the factors that affect property values. We’ll give you location information so that you’re clear on the various nuances of your chosen neighbourhood or area – whether it’s good, bad or has future potential.
When we find the right place, we’re there to write an airtight contract and then to negotiate it on your behalf, face to face if we can, with the Seller and his/her representative. We give a voice and often a verbal picture to your side of the offer and the negotiating table. That’s what we do many, many times in a year, so we’re good at it. Really good. Then, when that magical meeting of the minds takes place between buyer and seller, aided in no small part by your buyer representative’s tenacity and skills, and you get an accepted offer on the home of your dreams, we’ll rejoice with you. But not for long, because our work is far from complete.

Next, we’re there at the ready with advice that is focused on what is ultimately the best outcome for you. We’ve got experience and education in financing issues, in insurance issues, in inspection issues, in condominium issues, just to name a few. Wells don’t shock us - we shock them. We’ve seen more things go down a toilet then you can imagine, and we’ve got the `poop` on septics. We’ll insist on a home inspection, and possibly a WETT inspection, and then we’ll help you determine what things are worrisome, what things are critical, what things aren’t even worth discussing and what things are blowing smoke. We’ll steer you away from harmful structures. We’ll fight for you (and sometimes with you) if it’s the right thing to do, for you. We’ll see you through to closing and we’ll pass along tips and advice that we’ve gathered for decades.

In Ontario, we have a form to establish this relationship in writing - to clearly set out the terms. But what it all boils down to is this: when you buy one of the most financially valuable assets you’ll likely ever own, you need a buyer’s representative to be in your corner: right where you need us - and right where we should be.

June Sales 2009

THE PRESIDENT OF THE PETERBOROUGH REAL ESTATE BOARD
WAS PLEASED TO ANNOUNCE THAT SALES FOR JUNE 2009
WERE UP 2 SALES COMPARED TO JUNE OF LAST YEAR

THERE WERE 583 NEW LISTINGS IN JUNE 2009, COMPARED
TO 662 IN JUNE 2008. AT THE CLOSE OF JUNE 2009
THERE WERE 2253 ACTIVE MLS LISTINGS COMPARED TO
2540 IN JUNE 2008."

ALTHOUGH OUR SPRING MARKET HAD A SLOW BEGINNING,
CONSUMER CONFIDENCE WOULD APPEAR TO BE RETURNING.
OUR LISTING INVENTORY IS STILL DOWN RESULTING IN
MULTIPLE OFFERS FOR COMPETITIVELY PRICED HOMES.
AFFORDABILITY DUE IN PART TO LOW BORROWING COSTS
HAS PLAYED A KEY ROLE IN SUSTAINING A HEALTHY
MARKET. OUR COTTAGE MARKET IS SLOWLY IMPROVING
AS WELL. PETERBOROUGH’S DIVERSE ECONOMY AND
LIFESTYLE OPPORTUNITIES CONTINUE TO ATTRACT NEW
RESIDENTS TO THE AREA. WE ANTICIPATE THAT SALES
WILL STEADILY IMPROVE THROUGHOUT THE REMAINDER
OF THE SUMMER MONTHS.

Closing Costs

Buying your first home is an exciting process. You determined how much home you can afford, you saved your down payment, you and your REALTOR® found the perfect home and your offer was accepted. While the purchase price of your home is the largest cost you will encounter, there are other costs to prepare for when buying a home.

It's a good idea to budget some extra cash to cover the cost of obtaining a mortgage and "closing" your real estate transaction. Here are some of the extra cost items you should consider:

Appraisal Fee
Mortgage lenders will usually loan a percentage of the home's purchase price or the market appraisal of the property, whichever is lower. The appraisal is either done by someone on the lender's staff or by an outside professional approved by the lender. The cost of the appraisal is most often the responsibility of the home buyer.


Application fee
Find out whether or not your lending institution charges to process your mortgage application. In many cases, if you are dealing with a bank that you have other accounts with, they will waive the application fee.

Land survey fee
Lenders require a plot plan or survey of the property you intend to buy. On properties located in subdivisions in urban areas, lenders will often accept an existing survey, depending on when it was done. However, if there is no existing survey, be prepared to pay a substantial fee for a new survey.


Home inspection fee
Many homebuyers choose to have a home inspection done prior to finalizing their offer to purchase. Some lenders require a professional home inspection as well.


Legal fees
You will need to pay your lawyer to arrange your mortgage as well as for "disbursements" such as title search, drawing up the title deed and preparing and registering the mortgage.


Land transfer tax
This tax is payable by anyone* who purchases property in Ontario. A REALTOR® or lawyer can help you calculate how much tax you will pay on your purchase.

*first time home buyers who have never owned property before are exempt

GST
If you are buying a new home, you will be required to pay Goods and Services Tax on the price of your home. GST does not apply to most resale homes.

Insurance
There are several types of insurance that may be required when buying your home. If you are arranging a "high-ratio" mortgage (less than 25% down payment) you will need to purchase mortgage insurance. This insurance is usually just added to your mortgage. Mortgage lenders require you to carry fire and extended coverage insurance that exceeds the amount of the outstanding balance of the buildings. Other insurance you may want to consider include title insurance and life insurance.


Other costs
You will likely have to make property tax adjustments and interest adjustments on utility bills, heating oil etc. Ask your REALTOR® to explain these additional costs so you have no surprises on closing day.

Maintenance and utility costs
Finally, be sure to budget for heating, electricity, water and any immediate renovations you may have planned. It's a good idea to put aside any spare cash and contribute regularly to a maintenance fund so you will be prepared for any repairs or upgrades you need to make along the way.

Real Estate News from Queens Park May 2009

Government Amends Mandatory Home Energy Audits

While the Ministry of Energy and Infrastructure has yet to completely clarify a number of issues relating to the amendment,the Government of Ontario has amended the mandatory home energy audit section of the Green Energy Act to allow buyers to waive the mandatory home energy audit requirement. The Act has not yet passed 3rd and final reading in the legislature.

The amendment replaces the requirement for the seller to make information reports or ratings related to energy efficiency of the home available to any prospective homebuyer, with a new requirement that a seller must provide to the prospective homebuyer prior to an offer being accepted.

Ontario Introduces New Mining Act

Proposed changes to Ontario’s Mining Act would address conflicts that have arisen between mineral exploration companies and surface rights holders who do not hold the mineral rights on their lands.

For instance, the proposed Mining Act would:
• Withdraw mining rights in southern Ontario where surface rights are privately held, while respecting existing claims and leases. In Northern Ontario, private land holders could apply for such withdrawals but granting withdrawals would first consider criteria such as mineral potential;
• Broaden the list of lands not open to staking;
• Require enhanced notification of private land owners, after claim-staking and prior to exploration;
• Introduce new exploration provisions such as a graduated regulatory regime for exploration;
• Introduce a map staking system that would eliminate the need for prospectors to enter onto
property to stake mining claims. Map staking would be phased in beginning in southern Ontario.
If passed, the proposed legislation would also support a vibrant minerals industry that would help many communities realize their economic and social aspirations.

Study Shows Importance of MLS Sales to Ontario's Economy

The resale housing industry in Ontario generated more than 84,065 jobs and an average of $9.3 billion annually in various economic spinoffs in the period from 2006 to 2008, according to a study prepared for The Canadian Real Estate Association by Altus Clayton.
The report says each residential MLS® transaction generated an average of $47,575 in additional consumer spending in the period from 2006 to 2008. This included the purchase of furniture and appliances, moving costs, renovations, services, and taxes. By comparison, from 2004 to 2006 the average transaction yielded $33,243 in additional consumer spending.

Mortgage Penalities

If you are thinking of selling your home or remortgaging be aware that some banks are charging huge penalties.

Some lenders are charging mortgage prepayment penalties in the $10,000-$20,000 range.

Interest rates have dropped precipitously in recent months. Most lenders will charge a penalty that is the greater of 1) three months mortgage interest, and 2) an interest rate differential calculation. (Remember banks never lose money!)

If you are thinking of selling, call your bank and determine your penalty. I would suggest you ask for that in writing as any Realtor listing your home will want to be sure you have that information. A Realtor can not get this information for you as privacy laws forbid obtaining someone else mortgage information.

Peterborough MLS President's Report on Sales March 2009

Barbara Criegern, the president of the Peterborough & Kawarthas Association of Realtors says: "The number of March 2009 sales show a decrease compared to March 2008. 178 sales were reported in March 2009 compared to 232 reported in March 2008.
There were 623 new listings in March 09, compared to 619 in March 08. At the close of March there were 2071 active MLS listings compared to 1850 in March 08."

The president also states: "That while sales are down slightly from last year, Peterborough still has a relatively stable real estate market. In fact sales are up 30% from February. Incentives offered to 1st time Buyers include a land transfer rebate of up to $2000., the ability to borrow $25,000 from your RRSP and renovation tax credits from the Federal government and historically low interest rates. There are many reasons to buy in the currant economic climate.

We Are anticipating improved sales activity throughout the spring market. . .and beyond

OREA News & Queens Park Updates April 2009

CMHC Launches Campaign to Help Homeowners

The Canada Mortgage and Housing Corporation (CMHC) launched a consumer outreach campaign to help borrowers understand the importance of working with lenders to find manageable solutions if they are facing financial difficulties in repaying their mortgage loans.

The campaign includes consumer information on the options available to homeowners who may be having difficulty meeting their mortgage payments. This information is also being provided to government partners and credit counseling organizations.
For more information on the campaign click
http://www.cmhc-schl.gc.ca/en/corp/nero/nere/2009/2009-03-26-0800.cfm


The Green Energy Act Referred to Committee

Bill 150, the Green Energy Act, 2009 and its requirement for mandatory home energy audits on the sale or lease of residential buildings has passed Second Reading in the Ontario Legislature and has been referred to the Standing Committee on General Government for further review. The Committee will hold public hearings on the Bill April 6, 8, 20 and 22 in Toronto and in London, Ottawa, and Sault Ste. Marie the week of April 13, 2009.

OREA will appear before the Committee on April 22nd to voice REALTOR® opposition to section
2(1) of Bill 150 requiring mandatory home energy audits on residential properties.

OREA is also working with the Sault St. Marie Real Estate Board, the London & St. Thomas Association of REALTORS® and the Ottawa Real Estate Board to ensure that when the Committee holds hearings on Bill 150 in their communities, local boards are prepared to voice REALTORS®’ opposition to the damaging effects of mandatory home energy audits.

In addition, senior officials of OREA and the Toronto Real Estate Board recently met with George Smitherman, the Minister of Energy and Infrastructure, to express REALTORS®’ opposition to mandatory home energy audits. In the meeting, the Minister indicated that he plans to go forward with the concept of mandatory home energy audits. However, the Minister did offer to work with organized real estate to make sure mandatory energy audits were implemented in a practical manor.

REALTORS® explained to the Minister that we respectfully disagreed and would take all action necessary to defeat the proposal.

In the coming weeks OREA will be issuing a ‘Call for Action’ on the issue of mandatory home energy audits in the Green Energy Act to continue to inform MPPs that mandatory home energy audits are bad for homeowners and bad for real estate.

Manditory Home Energy Audit

The Ontario Real Estate Association (OREA) supports the government’s Home Energy Audit Rebate Program that encourages homeowners to voluntarily assess the energy efficiency of their home. Like all responsible Ontarians, REALTORS® want to see a greener, healthier environment for future generations and we believe energy efficient housing can play an important role in achieving those goals.
Unfortunately, a mandatory system of energy audits, as envisioned under Bill 150, The Green Energy Act, 2009 has a number of serious implications for sellers, low and moderate income Ontarians, seniors, first time home buyers and thousands of other Ontarians who own their own home or business.
OREA’s POSITION

Mandatory home energy audit reports will have serious cost implications for home sellers. Those with less than ideal energy audit ratings will face pressure from homebuyers to either spend thousands of dollars to improve the energy rating of their home or lower their sale price. Many middle and low income Ontarians simply cannot afford the cost of financing home energy retrofits.

Those sellers who can afford expensive retrofits will want a premium sale price. As the cost of housing rises, fewer and fewer low and moderate income Ontarians will be able to find affordable housing. Government policy should promote affordable home ownership to low and moderate income Ontarians, not hinder it.

Seniors will also be disadvantaged by mandatory home energy audits. Most Ontario seniors rely on the equity they have built in their homes for retirement. Mandatory home energy audits will force homeowners who are seniors to complete energy retrofits at a tremendous cost to their retirement savings or lower the value of their home in order to compete with newer ones.

Mandatory home energy audits will adversely affect first time home buyers. The majority of homes that will not score well on home energy audits are resale homes. Resale homes, on average, are more affordable for first time homebuyers. If homeowners decide that energy retrofits are necessary in order to sell their home, how will first time home buyers, who statistically have smaller than average down payments, be able to pay the increased sale price?


Ontario REALTORS® agree with the principle of energy efficiency for homes expressed in the Government of Ontario’s proposed mandatory home energy audit, but they say that the additional costs will hurt homeowners, especially in these economic times.

“This mandatory government regulation will impose a significant cost on home sellers. As with most Canadians, we don’t believe in green at any cost,” said Gerry Weir, President of the Ontario Real Estate Association. “It’s not the initial cost of these audits that concerns us,” he said. “Rather, the results of these audits will be used by home buyers as bargaining chips to significantly reduce the final selling price.

“Today’s economic downturn is a terrible time to introduce this measure. Home sellers are already worried about lost equity in their homes. A move like this, which will reduce their value even further, will not help them in any way,” Mr. Weir said.

REALTORS® favour government encouragement of energy efficiency in homes through expanded tax breaks and other measures.

In addition, REALTORS® point out that there is no one standard for energy audits. Different firms arrive at different assessments of the same house. “EnerGuide ratings of an existing home can and do vary between energy auditors, depending on the assumptions they make and the extent of data they collect on the building’s actual construction,” Mr. Weir said.

Furthermore, since there is no regulation of energy auditors, a conflict of interest can arise if a contractor conducts the audit. There is a natural inclination for that contractor to find problems that he can offer to repair for the homeowner.

Many details of the energy audit proposal have not been released. For instance, the government has not said if an energy audit will be required if a property is transferred between family members. Nor have they said how long an energy audit will be recognized as valid. For example, if a homeowner sells within one year of buying a property, will the previous energy audit be recognized?

Harmonizing the PST and GST

The original post was made early on the morning of the budget. . .obviously a bit late to protest. Have changed the title and left parts of it as it explains how it effects real estate. Some details of the budget at the end of this article.

Yesterday, Premier McGuinty combined the five percent federal Goods and Services Tax (GST) with the eight per cent Provincial Sales Tax (PST), to create a single Harmonized Sales Tax (HST).

On the surface, this may seem like not a big deal, but the key point to remember is that these two taxes are not levied in the same way, so many things that are currently only subject to one tax, would, under this scheme, start paying both taxes.

Unfortunately, home buyers and sellers would be one of the hardest hit groups under this proposal, which is why the real estate industry is strongly opposed to it.

Currently, the purchase price of re-sale homes is not subject to PST or GST (unlike new housing, which is subject to GST), and it is not expected that the proposed HST would change this, but it would add significant tax to the many services that home buyers and sellers rely on, such as moving costs, legal fees, home inspection fees, mortgage insurance premiums, title insurance, and Realtor commissions.

For example, for an average Peterborough home priced at approximately $220,000, a HST could add over $1,000 in upfront taxes on closing costs. This is a substantial amount to home buyers at a time when they can least afford it.

The prospects are even worse for new housing, which is currently subject to a reduced GST of about 3.2 per cent, instead of the usual 5 per cent, on the purchase price.

The housing industry is critical to the economy. Hundreds of thousands of jobs depend on it, both directly and indirectly. For example, a recent study conducted for the Canadian Real Estate Association, found that every re-sale housing transaction results in over $33,000 in spin-off spending on things like renovations, appliances and furniture. By adding significant costs to home buying, a HST risks this type of spending, and runs completely contrary to the Province’s efforts on the economy.

March Budget will take effect 1 July 2010

New homes under $400,000.00 will not pay both taxes. . .sounds better than it is. . .you pay the whole amount of 13% and then are reimbursed 75% of the provincial portion up to $500,000. Still more than now. Now we pay 3.5% (reduced GST) Under the new system home buyers would pay 7% (5% GST and 2%PST)

To help people and families adjust to the new single sales tax, the government would provide permanent tax relief and direct payments:

* 93 per cent of Ontario taxpayers would pay less personal income tax
* Eligible families with an income below $160,000 would receive three payments from the provincial government, totaling $1,000
* Eligible individuals with an income of less than $80,000 would receive three payments totaling $300
o The first payment would arrive in June 2010, the second in December 2010 and the third in June 2011
* The provincial government would also provide:
o Permanent tax relief for people with low and middle incomes through one of the most generous refundable sales tax credits in Canada. This new credit would provide up to $260 per year for each adult and child
o A 16.5 per cent cut in the tax rate on the first $36,848 of taxable income earned by all Ontarians.

The tax, which is being implemented with the assistance of the federal government, will include items not previously covered by the sales tax, such as home heating costs, hydro, water, gasoline, postage, fast food, haircuts, and internet services as well as all the real estate related services mentioned above (moving costs, legal fees, home inspection fees, mortgage insurance premiums, title insurance, and Realtor commissions). Some exemptions include books and childrens clothing and shoes, diapers, and car seats.

Jill Fyffe
Sutton Group All Pro
705-742-7382

Home Owner Grants

The following programs apply to every homeowner, not just new or first time homeowners.

**NEW***
1. Home Renovation Tax Credit will provide a temporary 15% income tax credit for eligible home renovation expenditures for work performed, or goods acquired, after 27 Jan 2009 taxation year to 1 February 2010.  The credit must be claimed for the 2009 taxation year on the portion of eligible expenditures exceeding $1000, but not more than $10,000.   This will provide up to $1350. in tax relief.  See www.cra-arc.gc.ca and click on “Home Buyers Plan” to see all the eligible renovations

2.. Grants for Eco friendly upgrades. This program provided home and property owners with grants up to $5,000. to offset the cost of making energy efficient improvements.  Grants apply to a variety of measures that reduce energy consumption.  Anything from increasing insulation, replacing windows to installing a new furnace. Most service providers have all the details of this grant and can assist you in what is eligible and what is not. Items have a specific credit amount not a percentage of the total cost. i.e. a new window may have a credit of $50.00, regardless if the replacement window cost $150. or $350 dollars.

If you need more information on any of these programs just give me a call.

Jill Fyffe
Sutton Group All Pro

First Time Home Buyer Grants

As of March 2009 there are 3 programs that are available to first time home buyers.

1. The RRSP withdrawal limit has been raised form 20,000 to $25,000. The repayment rules pretty much stay the same. The money withdrawn must be paid back over a period of not more than 15 years. Repayment starts the second year following the year of withdrawals. If you pay back less than the scheduled annual payment, then the amount that isn't repaid must be reported as income on your tax return for that year. i.e. Oct 09 you withdraw 24,000. from your RRSP to finance the purchase of a home. Your 1st annual payment of $1,600.00 (24 divided by 15 years) is due Dec 31, 2011.

2. In the Budget of 2009, a new non-refundable tax credit was introduced for 1st time home buyers. To qualify for this credit you must purchase a qualifying home and neither the home buyer or their spouse or common in law partner can have owned a home in the preceding four years.

3. First time home buyers may be eligible for a refund of all or part of the Land Transfer Tax. The maximum refund amount is $2000. Your lawyer will claim it on your behalf at the time of title registration. To qualify you must be 18 years old, buying a principal residence to live in and must not have owned a home or interest in a home anywhere in the world. In addition your spouse must never have had interest in a home while they were your spouse.

If you need more information on any of these programs please give me a call.

Jill Fyffe
Sutton Group All Pro Realty Inc
748-5600 ext # 1019