By Cathy Treviño, Broker Assoc, CIPS, TRLP, SFR
The exclusive designation for a member of the Canadian Real Estate Association is the trademark REALTOR®. It symbolizes a commitment to competence, service and professional conduct. In the quest for these high standards, REALTORS® in Canada have been bound together by a Code of Ethics since 1959. Selling real estate in Canada is very similar to the United States in that they have specific designations and associations.
Canada also has a trade association similar to ours. The Canadian Real Estate Association (CREA) is one of Canada’s largest single-industry trade associations, representing more than 100,000 real estate brokers/ agents and salespeople working through more than 100 real estate boards and associations to help consumers with their residential and commercials needs.
A great starting point for anyone looking to buy a property in Canada is to consider these suggestions:
- Increasing numbers of people are choosing Canada as the location of their second home, attracted by its spectacular scenery, laid-back lifestyle, political and social stability. Easier travel and increasing coverage by low-cost airlines are also considerations, as is the fact that Canada’s international home market is still young, and developers seeking to attract U.S., British and Asian buyers therefore have to provide good value. Canada is also said to have weathered the global recession better than almost any other developed economy in the world, the government having put money aside when times were good and there was a budget surplus for 12 years. Residential property is generally cheaper than in the U.K. and U.S., which makes it an attractive investment for buyers looking to purchase a second home or emigrate permanently.
- Look for popular locations. Throughout the years Canada has grown introducing the low-cost transatlantic services which have led to an increase of interest in the western areas. Purpose-built resorts are also shown to becoming popular. Eastern Canada is generally cheaper than comparable ones in the west. Traditionally, Montreal has had the lowest residential property prices of Canada’s major urban areas but with recent changes are not increasing rapidly, so this may be a great place to consider investing. The U.S. is 40 minutes to the south, and Boston and New York are only six hours by car and one hour by air. Vancouver, British Columbia is Canada’s westernmost province and is one of the most beautiful with glorious mountains, lakes, rivers and beaches and offers the most temperate climate and some of the friendliest people. The Rocky Mountains are a great tourist destination and property tends to be expensive, so a great alternative is Canmore in Alberta where the 1988 Olympics were held. Home prices are relatively low, but increasing and it is close to Calgary, a young city with a strong first-time homebuyers market. Resorts in Canada are the world’s tenth most popular tourist destination. Year-around skiing is a strong factor in helping extend the rental season and attract a wider range of purchasers.
- Buying property can vary throughout Canada, so get to know the rules and regulations. In British Columbia, New Brunswick, Newfoundland, Nova Scotia, Ontario and Quebec, for example, there are no restrictions on foreign ownership, provided you spend less than six months per year in Canada. However, in Banff, which is located within a national park, only businesses and employees of the park can own property and even they can do so only through renewable 42-year leaseholds. Each province has a different limit on the amount and kind of land that a can be owned. Unless buying from a developer, buyers are required to register with a REALTOR®.
- Familiarize yourself with the purchase process. The purchase process is very similar as a U.S. transaction where the commission is typically paid from the seller and the buyers are recommend to work with an agent who will represent them and draft up an offer, collect earnest money and proceed forward like here in the U.S.
- Transaction costs in Canada vary from province to province and usually comprise between 4.7 and 11 percent of the property price. A Goods and Services Tax (GST) of 7 percent and a Provincial Sales Tax (PST) of up to 10 percent are usually included in the asking price of new homes. Alberta is the only province that does not levy PST. In other areas, a GST can be combined with an 8 percent provincial retail sales tax to form Harmonised Sales Tax (HST) of 15 percent. Subject to certain conditions, GST and HST can be reduced or avoided, so buying costs do vary between provinces. Buyers should allow up to $2,000 for legal fees, a survey and insurance and a purchase tax between .5 percent to 2 percent of the price.
- When financing your purchase you will need to consider all your options. Cash is always best if you can afford to do so, but most people will need to finance the purchase of their home. You can do this with a Canadian lender and several providers will lend funds up to 80 percent of the purchase price for second home the amortization.
- Be sure to understand the taxation system in Canada as well. Both the federal and provincial governments impose income taxes, which together make up more than 40 percent of total tax revenue. Taxes are progressive, with the wealthy paying a higher percentage of their income than the less well off. Canada has no inheritance tax and therefore it is treated as the disposal of an asset and subject to Capital Gains Tax, currently at 25 percent. Residential properties are subject to annual local taxes of between .5 percent and 2 percent of their value. Non-residents pay federal and provincial income tax on Canadian-sourced income. A non-resident selling a property in Canada must pay Capital Gains Tax of 25 percent levied on a percentage of the profit.
- Be sure to sort out your passports, visas and residency before entering Canada. To enter as a visitor, you must have a standard 10-year passport. Visitors can spend up to 6 months per year in Canada. Permanent resident status give a non-Canadian the right to live in Canada. Those desiring residency must apply for landed immigrant status and this can be a very complicated process and is wise to consult a lawyer specializing in immigration.
Gains of around 2 percent are forecast for British Columbia and Manitoba, and around 1 per cent for Saskatchewan and Quebec. Average home price in the Atlantic region is forecast to hold steady in 2016.
The Canadian Real Estate Association (CREA) reported that national home sales activity was up on month-over-month basis in March 2015.
- National home sales edged up 4.1 percent from February to March.
- Actual (not seasonally adjusted) activity stood 9.5 percent above March 2014 levels.
- The number of newly listed homes rose 1.8 percent from February to March.
- The Canadian housing market remains balanced.
- The MLS® Home Price Index (HPI) rose 5 percent year-over-year in March.
- The national average sale price rose 9.4 percent on a year-over-year basis in March; excluding Greater Vancouver and Greater Toronto, it increased by 2.4 percent.
The number of home sales processed through the MLS® Systems of Canadian real estate boards and associations rose by 4.1 percent in March 2015 compared to February.
March sales were up from the previous month in nearly two-thirds of all local markets, led by Greater Vancouver, Fraser Valley, Calgary and Edmonton. Despite the monthly rebound, Calgary and Edmonton sales came in below the 10-year average for the month of March.
“Low mortgage interest rates are good news for affordability as we head into the spring home buying season,” said CREA President Pauline Aunger. “This spring should see buyers coming off the sidelines in places where winter was anything but mild. Like the weather, all real estate is local and nobody knows your real estate market better than REALTORS®, who remain your best source for information about sales and listings where you currently live or might like to in the future.”
“Greater Vancouver and the GTA are really the only two hot spots for home sales and prices in Canada,” said Gregory Klump, CREA’s Chief Economist. “Price gains in these two markets are being fuelled by a shortage of single family homes for sale in the face of strong demand. Meanwhile, supply and demand for homes is well balanced among the vast majority of housing markets elsewhere across Canada.”
Year-over-year price gains for single family homes in Greater Vancouver and Greater Toronto have exceeded those in other housing markets tracked by the MLS® HPI throughout the first quarter of 2015.
Actual (not seasonally adjusted) activity in March stood 9.5 percent above levels reported in March 2014 and slightly above the 10-year average for the month. March sales failed to lift activity recorded during the first quarter above its 10-year average. First quarter sales were below their 10-year average in most local housing markets.
The number of newly listed homes rose 1.8 percent in March compared to February. The rebound in Greater Toronto more than offset the continuing pullback of new supply in Calgary, where it had climbed sharply toward the end of last year but now stands at a multi-year low.
The national sales-to-new listings ratio was 53.9 percent in March, up from 52.7 percent in February and 50.4 percent in January.
A sales-to-new listings ratio between 40 and 60 percent is generally consistent with balanced housing market conditions, with readings above and below this range indicating sellers’ and buyers’ markets respectively. The ratio was within this range in about 60 percent of all local housing markets in March.
The number of months of inventory is another important measure of the balance between housing supply and demand. It represents the number of months it would take to completely liquidate current inventories at the current rate of sales activity.
There were 6.1 months of inventory on a national basis at the end of February 2015, down from 6.3 months in February and 6.5 months in January. While both the sales-to-new listings ratio and months of inventory measures have tightened at the national level in the past few months, they remain firmly entrenched in balanced market territory. Moreover, both measures of housing market balance indicate that upward pressure on selling prices is subsiding in an increasing number of local markets.