It’s always best to be cautious, and we agree with any consensus that it’s not good to jump the gun and proclaim the Real Estate Market in Canada as having come through the storm very little if any worse for wear. But we continue to see signs and real economic indicators that suggest the real estate market is going to continue to be one that’s on solid footing in Canada and that’s good news for everyone. Realtors are perhaps more likely than anyone to understand the ways people value the equity in their homes greatly, and that is of course often true because their homeowners themselves.

However, the ongoing Global Pandemic has take a real bite out of commercial real estate holdings, and investors in REITS (real estate investment trusts if you’re not familiar with the acronym) are taking a bit of a beating as the expression goes. What differentiates the residential real estate market from the commercial one is that the nature of homes being shelter means a degree of consistency with the supply / demand of things that doesn’t exist the same way for commercial.

Here at Real Estate Leads our online real estate lead generation system is an excellent way for realtors to be put more directly in touch with people who want to buy homes, pandemic or no pandemic, because they really genuinely need a place to live and raise families. But with the way the economy has slowed so much because of the lockdowns and other related influences, there’s nothing to counter the reduced demand for commercial space.

So what can we all be reading into this? Let’s consider that.

Back to the Regular Roar – For Homes at Least

Canada’s private real estate market is back in full swing again freezing briefly because of COVID-19, but its stock market equivalent isn’t enjoying the same revival. There’s no debating that home sales and prices in the nation’s biggest cities have rebounded sharply and everyone is very happy to see this. Even if we just look at Toronto, the average selling price for homes made a near 17% leap in July over the previous year, and more relevantly the national home price index climbed 7.4% itself.

That’s made many a homeowner looking to sell quite happy, but for investors who are getting their property exposure through equities it’s not such a rosy outlook at all. The iShares S&P/TSX Capped REIT ETF (which trades under XRE for the TSE) is down a full 23% this year, excluding dividends, and that has it underperforming its U.S. and global counterparts. As much as many would wish otherwise, the Canadian ETF is on pace for its worst year since the global financial crisis of 2008.

Too Long, Too Early

All of that is a result of too much exposure in the wrong places. Canada’s commercial real estate sector did extremely well in the decade after the financial crisis, with global investors jumping at every chace to invest in urban office buildings and bidding up on them like it was no big thing.

Strong consumer spending was making shopping centres valuable, and that always boost production of consumer goods in manufacturing too.

But there’s a degree of interference at play in the declines of commercial real estate values in Canada, and especially in Toronto if you speak to those in the know there. They say the rental system in Ontario has shifted the balance of power in favour of tenants, making problems that existed long before the pandemic worse, and then there’s how many building owners and landlords are not claiming CECRA emergency commercial rent relief from the feds with the idea that eventually getting tenants will mean getting better value when renting the properties.

But either way, what we have now is the coronavirus pandemic having reversed the outlook for both office and retail, causing heavy losses for large Canadian Real Estate Investment Trusts. We are now starting to see a shift towards online commerce too, and that forecasts badly for the Commercial real estate industry too.

What we are seeing with this is that many REITs are now looking to engage is some measure of global diversification of assets, and that does make a lot of sense given the nature of world of commerce nowadays and the interconnectedness of countries and economies. But it’s a slow go to realize the benefits of that and we can likely assume that REIT investments are going to be in tough for a good long while.

Now of course if you’re a realtor who has investors on the commercial side too then you may want to foresee some resultant dips in that side of your business, and plan accordingly. Whether or not that means you focus more on the residential real estate side of the equation is up to you, but that’s probably a pretty smart bet for the foreseeable future.

Sign up with Real Estate Leads here and receive a monthly quota of qualified, online-generated buyer and / or seller leads that are delivered to you – and only you – for the region of any city or town in Canada where you’re working as a real estate agent. It’s a great way to get the most out of your client prospecting efforts and build your real estate business with maximum speed and efficiency!

 

 

One of the realities of home ownership in Canada, however, is that municipal governments lean heavily on property ownership as a means of squeezing taxes out of those individuals. Whether those funds are spent with a degree of propriety and to the greater benefit of the communities is another question, but one thing we can say for certain is that there’s no avoiding the taxman when you’re a home owner, and property taxes on the land the homes are built on are always going to increase.

Now looking at it from the realtor’s perspective, investor clients who can afford multiple properties in desirable city locations are obviously the exact type of clients they’d want to be working with as often as possible. But what you’ll find – and again not surprisingly – is the biggest investors will be choosing to work with well established and well renowned realtors who have made a name for themselves in that city.

It takes time – and a lot of listings sold – in order to become one of those individuals and that’s why our online real estate lead generation system here at Real Estate Leads is such an excellent choice for realtors who want to make a name for themselves in this way and to start by being put directly in touch with buyers and sellers who are genuinely considering making a move in the local real estate market sometime in the near future.

Being in the know about the industry and how investors can work within it is also going to be very beneficial for realtors who are looking to establish themselves as true experts and ones worthy of the bigger name clients and the like. With that understood, here are tips you can share with investor clients that can allow them to pay less taxes on their investment properties.

Less is Preferable

Taxes can always potentially cut into the profits on any investment and in real estate those cuts can be large and prohibitive. Investors who come to understand the complexities of the modern tax landscape can enjoy significant tax savings. Here are two tax strategies that can be used by Canadian investors.

Strategy 1 – Create a Tax Deductible Portion of the Mortgage

This first strategy involves making part of the client’s mortgage tax deductible. Investors in Canada are allowed to transfer the proceeds from a home mortgage loan over to a loan used to buy a rental property, and that loan is then tax deductible.

So if they were, for example, to purchase an investment property for $500,000 with a mortgage for $400,000 in year one. Then when that investment property’s market value has increased and the mortgage is paid down the property could be refinanced, or sold. We will then assume that in year 5 the investment property is sold for $600,000 and a total profit of $100,000 plus the proceeds of paying down in the mortgage for another $35,000. Then after fees and capital gains tax are paid, $90,000 is realized from the sale. These funds could then be directed to paying down the mortgage on your principal residence. If that mortgage is set up to allow a re-advance, the $90,000 can then be earmarked for re-investment. So with the interest on the $90,000 portion of the home mortgage being tax deductible it could be used to purchase the investment.

By having your client arrange their investments this way they’d create no additional risk and it would start to save taxes, the funds of which could be directed to further paying down the home mortgage or investing elsewhere depending on their prerogatives.

Strategy 2 – Enabling investors to reduce taxes by setting up a Company or Family Trust

While it’s natural to aim to take advantage of all of the best tax planning strategies available, there is nearly always a minimum level of income or asset base that is required before the accounting and legal cost of setting up those planning options become worth the tax savings.

This is where you can make them aware of the of the ‘Section 85’ roll over. What this is is a tax deferred roll over in Section 85.1 of the Tax Act which allows a Canadian to transfer real estate holdings and other kinds of investments into a company while not paying any recapture or capital gains tax at that time. For a family aiming to grow their investment holdings and managing those assets for the next generation, what the section 85 roll over allows for is deferring taxes at the outset. When this opportunity is taken advantage of it can allow a family trust to be created.

This trust can then be used for long-term management of the ownership of the new holding company. The last thing we’ll add in regards to this is that investors should seek professional advice from a CPA (Chartered Professional Accountant) or tax lawyer before beginning into real estate investors tax strategies of any sort.

Sign up for Real Estate Leads here and receive a monthly quota of qualified buyer and / or seller leads that are delivered to you exclusively for the region of any city or town in Canada where you’re working as a real estate agent. You’ll be the only realtor who receives these leads, and what that means is you have the first crack and convincing these genuine prospective clients that you’re a good choice to be providing them with professional guidance as they either buy or sell a home.

There’s nothing even remotely rosy about all the fallout from the economic slowdown brought on by COVID, and experts are saying we’re only seeing the start of it. It’s true that there is much cause for pessimistic projections about how the economic turmoil is going to reach out and mess with people’s lives completely beyond their control, but one news bite that came from the Bank of Canada a little more than a week ago really caught our attention.

As anyone who’s been reading our weekly posts will know, we’ve been quite adamant in our insistence that the Canadian real estate market is going to weather the storm much better than many have forecasted it will. And that’s been borne out so far, with markets in many regions of the country proving to be plenty resilient. The downturns have been there no doubt, and what’s a competitive business for realtors is even more so now. This is what makes our online real estate lead generation system here at Real Estate Leads such a valuable resource for anyone who’s not well established in the business.

But if we look at the role of a surprisingly strong housing market in the way its protecting some Canadians from financial devastation it really can be construed as a ‘feel somewhat good’ story, if you will. These days nothing is a particularly feel ‘good’ story in the big picture of things, but we do take the opportunity to highlight news which does point to the resiliency of the housing market in Canada

Home Prices Recovery a Big Help

The extensive and far reaching recovery seen recently in the Canadian housing market is really good to see, and that’s true no matter what your interest in it is. But what’s really good to see is how prices coming back to what the should be is becoming a significant factor in keeping households liquid despite COVID-19 ravaging incomes, investments and the like.

The Government has been suitably proactive in slowing insolvency growth and everyone has been pleased to see industry initiatives like financial aid and mortgage payment postponements. The Federal Liberal Government is very aware of what the Real Estate Industry means for the country’s prosperity, both nationally and on the individual Provincial level too.

And all of this course makes no mention of the fact that many good, hardworking Canadians have considerable investment in the equity of their homes and that needs to be respected on all levels. People work very hard to be able to afford a home and all of that hard work and sacrifice should be protected and allowing them to continue to have that investment in their future.

Mortgage Deferrals Especially Timely

Making it so that homeowners can lawfully defer payments on their mortgages has been a really needed move, and one that obviously has been well received by both homeowners and others concerned about the strength of both economies and communities. It allows people to adapt to changes in their working arrangements while at the same time not absolving them of their responsibilities to lenders.

Those mortgage payments will be made in the future, but in the here and now it both keeps families in homes and allows the value in those homes to grow in the way it should in order for there to be a healthy real estate market in Canada. One that rewards homeowners, contributes to CDPs both Federally and Provincially, and has a positive trickle down effect for EVERYONE who works in relation to the housing and real estate industries in some capacity.

Good Growth in Mortgage Segment

These developments have been joined by noticeable growth in the mortgage segment, plus a more modest uptick in household debt. The last part of that is particularly telling AND positive, because while debt at face value isn’t a good thing if more people are taking it on to afford housing it means they are not in as dire straits as they might have been otherwise.

Data from the central bank showed that overall mortgage credit stood at a record high of $1.68 trillion in May with a 6% annual increase, while household credit was at $2.29 trillion with 3.6% year-over-year growth. That people are willing to assume this is a good sign for the continued health of the real estate industry, and for those who rely on its vibrancy to provide them with a living.

Realtors among the many of those different types of interest groups, but also for homeowners themselves who may – among many other different scenarios – be open to remortgaging a home to keep them afloat rather than consider bankruptcy because the protected value in the home allows them to do that.

Sign up with Real Estate Leads here and receive a monthly quota of qualified, online-generated buyer and / or seller leads that are delivered to you – and ONLY you – and based in the region of any city or town in Canada where you are working as a real estate agent. It’s a dynamite way to supercharge your prospecting efforts, and many other realtors like you truly can’t recommend it enough.

 

Much of the talk these days in real estate in this country is how as the Province’s move into different stage of reopening there’s bound to be some economic bounce back that will help to buoy the market as it makes its own recovery of sorts. All of that is fairly well founded, and good news as well although it’s tempered somewhat by the fact that it appears the 2nd wave of the virus is well on its way and may lead to further shut downs and all the economic turmoil that will come with round 2 of that.

Nonetheless, we’ve been like many others in the know who’ve stated that the plummeting of home values in this country was a false alarm, and both data and projections from industry insiders have borne out the fact that no, we’re not going to see the housing market take any type of major fall anytime soon, global pandemic or not.

The Statistics Canada 2020 Housing Price Index report of last week is yet another voice adding to the argument that neither homeowners or realtors need to start panicking. Now perhaps that applies more to homeowners than realtors though, as what was a very competitive business is poised to get even more competitive as no matter how you slice it there are going to be a LOT of homeowners from coast to coast who’ll decide to postpone putting their homes on the market.

To that end, our online real estate lead generation system here at Real Estate Leads is an excellent way for realtors struggling to generate new clients to put the power of the Internet to work for them and be put more directly in touch with homeowners who are deciding to throw caution to the wind and put their homes for sale. The same goes for prospective homebuyers too.

But back to our discussion of the Stats Can 2020 House Pricing Index.

New Geography for Canadian Housing Demand

Nationwide, StatCan saw that new house prices rose 0.1% from May 2020 and 1.3% from June 2019. The largest single monthly increase for new home prices was in the St. Catharines-Niagara region with a full 1% jump. Other smaller, more affordable housing markets outside of major urban centres like Guelph, Kitchener-Waterloo, and Kelowna out in BC saw similar growth.

The prairie provinces were where the opposite was seen, with a decline in new housing prices led by Edmonton dropping a considerable 0.2%.

The major markets have gone this way this year; home prices in Toronto were flat from May to June, rising only 0.2% year over year. Prices in Ottawa continued to accelerate though, with price increases of 0.2% in June and 10.4% since last year. Vancouver would be most people’s guess as to who’s the biggest gainer, but actually it only grew by 0.1% from May to June and has actually seen its year over year new home price fall by 0.7%.

Montreal had home prices grow 8.1% year-over-year and is on track for a solid 2020 despite all the doom n’ gloom predictions attached to its market just like all the others.

Atlantic Canada featured Halifax’s 0.5% monthly increase in June and 2.3% price increase year over year, while Saint John, Fredericton and Moncton led the charge for New Brunswick’s markets with a combined 2.3% increase year over year. Admittedly, prices were flat from May to June there this year. The only decline was for St. John’s NFLD, shrinking by 0.1% since last year.

Exurbs Starting to Drive the Market

One thing that’s definitely being seen and can’t be ignored is a significant shift towards exurbs as homebuyers who may now found themselves less tied to a desk realize how much more they can get for their money. Not everyone will just march back to the downtown cores of the major cities and as a result many more people will be able to work from home. It’s reasonable to expect then that greater numbers of working adults may be open to living away from major urban centres to get more out of ‘home’.

This potential shift to working from home will see proximity to work take a backseat to personal and lifestyle desire when it comes to a homebuyer’s choices, and this shift will almost certainly introduce vitality into housing markets in areas of the country that previously struggled to attract both homebuyers and developers who’d consider building homes there.

Overall, StatsCan’s new numbers point to a resiliency in Canada’s housing markets for the most part. One that is something a surprise to even the most positive outlook-inclined experts. While people are definitely waiting to see how the rest of the year shapes up, we don’t need to look any further than the white-hot recreational housing markets in Ontario as evidence that homebuyers feel secure enough in their incomes to be purchasing second homes now.

Mortgage Broker Opportunities

Another aspect to this displayed resiliency in Canada’s key housing markets is that it has the potential to be quite good for brokers. Look, we can now fairly convincingly say that the CMHC’s dire forecasts of a 9-18% drop in home prices nationwide aren’t happening. What we have seen and will continue to see is that the circumstances of this lockdown have driven a change rather than a weakening in the drivers of Canada’s housing market. A change that could be an opportunity for mortgage brokers.

Many people will see record-low mortgage rates as a rationale behind see late 2020 as a very good time to buy, and the majority of them will need the assistance of a mortgage broker in doing so.

Sign up with Real Estate Leads here and receive a monthly quota of qualified, online generated buyer and / or seller leads that are delivered exclusively to you and based in the area of any city or town you’re serving as a working professional in real estate. It’s a proven-effective way to get so much more of your prospecting efforts, and we imagine you’ll be like every other realtor who’s gotten on board with us in that you’ll see it as part of a marketing and promotion budget that’s well spent.