Buoyed by strong demand and low interest rates, Canadian house prices continue to rise. In the year to end-June 2011, the national house price index rose by 4.52% (1.37% inflation-adjusted), according to Teranet-National Bank of Canada.
Even stronger price-rises are suggested by the latest Canadian Real Estate Association (CREA) figures, which report that average homes prices were up 9.3% on the year, to CA$361,181 (US$369,068).
Prince Edward Island (13.1%) and Yukon (11.7%) saw the highest annual house price rises during the year to end-July 2011. They were followed by Ontario (10.4%) and British Columbia (10%). The Northwest Territories was the only region which experienced a house price fall during the period (27.6%).
The previous 3 years in summary:
• House prices rose 4.06% in 2010 (1.66% inflation-adjusted)
• House prices rose 5.24% in 2009 (3.87% inflation-adjusted)
• House prices fell 0.57% in 2008 (-1.71% inflation-adjusted).
In July 2011 sales were 12.3% up from a year earlier, according to CREA. The total number of newly listed homes rose by just 1% in July 2011 from the previous month. There was 6.1 months of housing inventory, suggesting a balanced market.
Market-calming measures have been one response to Canada’s continued house price rises:
• A new sales tax, the Harmonized Sales Tax (HST), was implemented in British Columbia and Ontario. New houses will be subject to an additional 5% General Sales Tax on top of the Provincial Sales Tax at 8% in Ontario, and 7% in British Columbia
• New mortgage policies implemented since April 19, 2010, have made it more difficult for borrowers to qualify for mortgages with loan terms of four years or less.
• In addition, Nova Scotia has also recently hiked its HST by two percentage points.
The Canadian housing market is projected to remain stable during the remainder of the year, butwith the average MLS price rising modestly.
The average MLS price is projected to reach CA$367,500 (US$375,525) by end-2011, and then rise 1.3% to reach CA$372,400 (US$380,532) in 2012, according to the Canada Mortgage and Housing Corporation (CMHC). In 2011, housing starts are forecast to drop 3.5%, according to CMHC.
Even stronger price-rises are suggested by the latest Canadian Real Estate Association (CREA) figures, which report that average homes prices were up 9.3% on the year, to CA$361,181 (US$369,068).
Prince Edward Island (13.1%) and Yukon (11.7%) saw the highest annual house price rises during the year to end-July 2011. They were followed by Ontario (10.4%) and British Columbia (10%). The Northwest Territories was the only region which experienced a house price fall during the period (27.6%).
The previous 3 years in summary:
• House prices rose 4.06% in 2010 (1.66% inflation-adjusted)
• House prices rose 5.24% in 2009 (3.87% inflation-adjusted)
• House prices fell 0.57% in 2008 (-1.71% inflation-adjusted).
In July 2011 sales were 12.3% up from a year earlier, according to CREA. The total number of newly listed homes rose by just 1% in July 2011 from the previous month. There was 6.1 months of housing inventory, suggesting a balanced market.
Market-calming measures have been one response to Canada’s continued house price rises:
• A new sales tax, the Harmonized Sales Tax (HST), was implemented in British Columbia and Ontario. New houses will be subject to an additional 5% General Sales Tax on top of the Provincial Sales Tax at 8% in Ontario, and 7% in British Columbia
• New mortgage policies implemented since April 19, 2010, have made it more difficult for borrowers to qualify for mortgages with loan terms of four years or less.
• In addition, Nova Scotia has also recently hiked its HST by two percentage points.
The Canadian housing market is projected to remain stable during the remainder of the year, butwith the average MLS price rising modestly.The average MLS price is projected to reach CA$367,500 (US$375,525) by end-2011, and then rise 1.3% to reach CA$372,400 (US$380,532) in 2012, according to the Canada Mortgage and Housing Corporation (CMHC). In 2011, housing starts are forecast to drop 3.5%, according to CMHC.
Analysis of Canada Residential Property Market »
RENTAL YIELDS
Last Updated: Jan 16, 2012
Toronto is not the best place in Canada to buy for rental returns, but it has been a great investment! For medium and large apartments in Toronto, i.e., apartments of 120 square metres (sq. m.) and 200 sq. m., there has been a drastic increase in average prices per sq. m..
In our survey last year, the average square metre price of these medium and larger apartments was US$6,500. Now, it is US$8,500. A 120-sq m apartment in Summerhill, Forrest Hill, Rosedale, Moorepark, Lawrence Park, East York, Harbourfront, The Annex, Midtown or Yorkville, sells for about US$8,000 per square metre, in contrast to last year’s US$6,000. That’s a whopping 33% increase in property value. This increase is not explicable by any currency change, since the Canadian dollar has only moved slightly against the US$ during this particular time-period.
On the other hand, the average square metre prices of small apartments in Toronto remained steady at around US$7,000.
Overall, rental yields in Toronto have fallen from an average of 5.71% in 2011, to 4.70% now. Rental income levels remained steady for most apartments, with the exception of 120 sq m apartments, which now rent for US$3,000 per month, slightly down from last year’s average monthly rental income of US3,300 per month.
In Montreal, house prices have dropped, as have monthly rental incomes. Square metre prices of apartments in Le Plateau-Mont-Royal and Ville-Marie dropped by an average of 20% from last year, while average rental incomes dropped by 13%. Average rental yields increased to 7.19%, from an average of 6.06% last year.
In Vancouver, a downward trend, but much less strong, also seemed visible. Unfortunately, our Vancouver sample size did not allow us to come up with monthly rental income and rental yields data.
In our survey last year, the average square metre price of these medium and larger apartments was US$6,500. Now, it is US$8,500. A 120-sq m apartment in Summerhill, Forrest Hill, Rosedale, Moorepark, Lawrence Park, East York, Harbourfront, The Annex, Midtown or Yorkville, sells for about US$8,000 per square metre, in contrast to last year’s US$6,000. That’s a whopping 33% increase in property value. This increase is not explicable by any currency change, since the Canadian dollar has only moved slightly against the US$ during this particular time-period.
On the other hand, the average square metre prices of small apartments in Toronto remained steady at around US$7,000.
Overall, rental yields in Toronto have fallen from an average of 5.71% in 2011, to 4.70% now. Rental income levels remained steady for most apartments, with the exception of 120 sq m apartments, which now rent for US$3,000 per month, slightly down from last year’s average monthly rental income of US3,300 per month.
In Montreal, house prices have dropped, as have monthly rental incomes. Square metre prices of apartments in Le Plateau-Mont-Royal and Ville-Marie dropped by an average of 20% from last year, while average rental incomes dropped by 13%. Average rental yields increased to 7.19%, from an average of 6.06% last year.
In Vancouver, a downward trend, but much less strong, also seemed visible. Unfortunately, our Vancouver sample size did not allow us to come up with monthly rental income and rental yields data.
TAXES AND COSTS
Last Updated: Sep 05, 2011
Rental Income: Gross rental income is subject to a fixed 25% tax, withheld by the tenant.
However, nonresidents can elect to pay under the section 216 of the Income Tax Act, wherein they will be liable to pay tax on their net income at progressive federal rates. Nonresidents electing under section 216 are also liable to pay 48% surtax.
Capital Gains: Only 50% of the capital gains are liable to tax. Capital gains are computed by deducting the costs incurred in selling and purchasing the property, capital expenditures, and such costs as additions and improvements in the property.
Inheritance: There is no inheritance or estate tax in Canada.
Residents: Canadian residents are subject to Canadian income tax on their worldwide income. Income is taxed at the federal level and at the provincial level.
However, nonresidents can elect to pay under the section 216 of the Income Tax Act, wherein they will be liable to pay tax on their net income at progressive federal rates. Nonresidents electing under section 216 are also liable to pay 48% surtax.
Capital Gains: Only 50% of the capital gains are liable to tax. Capital gains are computed by deducting the costs incurred in selling and purchasing the property, capital expenditures, and such costs as additions and improvements in the property.
Inheritance: There is no inheritance or estate tax in Canada.
Residents: Canadian residents are subject to Canadian income tax on their worldwide income. Income is taxed at the federal level and at the provincial level.
BUYING GUIDE
Last Updated: Jul 02, 2007
Total costs and taxes for buying properties amount to around 4.7% to 11% of the value of the property. Transfer Tax differs in each province, ranging from 0.5% to 2%. Typically, real estate agent's commission is 7% on the first CA$100,000 of the sale price and 3% on the remainder, plus 6% Goods and Services Tax (GST). Total roundtrip costs are higher for new and renovated houses because of the additional 6% GST.
LANDLORD AND TENANT
Last Updated: Feb 06, 2008
Canadian tenancy institutions are pro-tenant.
Rent: The initial rent can be freely negotiated in all provinces, except in some provinces like Quebec, where initially negotiated rents can be appealed if they are higher than a rent charged by the same landlord for the same apartment within the previous 12 months.
Tenant Security: The contract cannot be terminated by the landlord within the duration of the fixed-term lease (usually one year), except for cause (e.g., tenant's non-payment of rent, tenant conducting illegal activity, and so on).
Subleasing needs a written permission from the landlord but this permission may not be unreasonably withheld. However, the landlord can insist on screening the prospective new tenants and may reject them on the basis of financial risk.
Rent: The initial rent can be freely negotiated in all provinces, except in some provinces like Quebec, where initially negotiated rents can be appealed if they are higher than a rent charged by the same landlord for the same apartment within the previous 12 months.
Tenant Security: The contract cannot be terminated by the landlord within the duration of the fixed-term lease (usually one year), except for cause (e.g., tenant's non-payment of rent, tenant conducting illegal activity, and so on).
Subleasing needs a written permission from the landlord but this permission may not be unreasonably withheld. However, the landlord can insist on screening the prospective new tenants and may reject them on the basis of financial risk.
ECONOMIC GROWTH
Last Updated: Sep 15, 2011
Modest economic growth
A surprise contraction hit Canada’s economy in Q2, shrinking it by an annualized 0.4%, a sharp reversal from the 3.6% GDP growth seen in Q1 2011. Goods exports fell 10.4%, while imports increased 10%. But a rebound is expected in the second half of 2011, with full-year economic growth projected at 2.4%, according to the Royal Bank of Canada (RBC).
Canada’s key interest rate was raised three times in 2010 to 1% in September 2010. It had been at record low of 0.25% from April 2009 to May 2010.
Canada’s current account deficit widened more than expected in Q2 2011 to CA$15.3 billion (US$15.6 billion), up 51% from CA$10.1 billion (US$10.3 billion) the previous quarter, according to Statistics Canada. The country’s current account has been in a deficit for three years now.
Robust consumption and housing spending saw Canada’s economy growing 3.1% in 2010, after shrinking 2.7% in 2009. The country has had average GDP growth of 3% p.a. from 1992 to 2007.
In July 2011, inflation eased to 2.7%, down from 3.7% in May, according to Statistics Canada. Canada’s inflation was 1.78% in 2010, and 0.3% in 2009. Declining mortgage interest rates, and the introduction of the Harmonized Sales Tax (HST) in Ontario and British Columbia on July 1, 2010, helped push down inflation. In addition, Nova Scotia recently hiked its HST by two percentage points.
In 2010, unemployment was 8%, down from 8.3% in 2009 and 6.2% in 2008. In July 2011, the unemployment rate fell to 7.2%, its lowest level since December 2008.
Due to improving economic conditions, net migration is expected to increase to 245,900 in 2011 and to 263,350 in 2012.
Canada is the world’s second largest country in terms of land area (9.9 million sq. km.) after Russia. However, its population of 32.3 million is only about a fifth of Russia’s, making Canada one of the least densely populated countries in the world. Canada had a GDP of around US$46,215 per capita in 2010.
Canada’s key interest rate was raised three times in 2010 to 1% in September 2010. It had been at record low of 0.25% from April 2009 to May 2010.
Canada’s current account deficit widened more than expected in Q2 2011 to CA$15.3 billion (US$15.6 billion), up 51% from CA$10.1 billion (US$10.3 billion) the previous quarter, according to Statistics Canada. The country’s current account has been in a deficit for three years now.
Robust consumption and housing spending saw Canada’s economy growing 3.1% in 2010, after shrinking 2.7% in 2009. The country has had average GDP growth of 3% p.a. from 1992 to 2007.
In July 2011, inflation eased to 2.7%, down from 3.7% in May, according to Statistics Canada. Canada’s inflation was 1.78% in 2010, and 0.3% in 2009. Declining mortgage interest rates, and the introduction of the Harmonized Sales Tax (HST) in Ontario and British Columbia on July 1, 2010, helped push down inflation. In addition, Nova Scotia recently hiked its HST by two percentage points.
In 2010, unemployment was 8%, down from 8.3% in 2009 and 6.2% in 2008. In July 2011, the unemployment rate fell to 7.2%, its lowest level since December 2008.
Due to improving economic conditions, net migration is expected to increase to 245,900 in 2011 and to 263,350 in 2012.
Canada is the world’s second largest country in terms of land area (9.9 million sq. km.) after Russia. However, its population of 32.3 million is only about a fifth of Russia’s, making Canada one of the least densely populated countries in the world. Canada had a GDP of around US$46,215 per capita in 2010.
RSS
Global Property Guide on Twitter
Global Property Guide on Facebook
Global Property Guide on Linked In