Office: 165 Pretoria Avenue, Ottawa ON. K1S 1X1
The impact of the B-20 mortgage rule changes by OFSI which come into effect in January will, along with supply issues, limit national home prices in the year ahead.
That’s the forecast by Royal LePage which expects a 4.9% rise in price appreciation across 53 key Canadian cities by the end of 2018 to $616,919.
“It is prudent that policy makers introduce measures that help protect the housing market from runaway price inflation,” said Phil Soper, president and CEO, Royal LePage. “However, natural supply and demand forces will always triumph over regulatory tinkering. Attempting to use public policy to steer property prices in huge, rapidly growing cities like Toronto and Vancouver is like a tugboat trying to turn into an ocean liner. Consistent, measured policy can have a positive impact. Just don’t try to turn the market on a dime or you risk sinking the ship.”
Soper added that the continued tight supply in some markets will continue to drive prices higher once the initial impact of the OSFI stress tests moderates, while those with softer demand will struggle to adapt to the affect of the tightened mortgage rules.
Prices in the GTA are forecast to outperform the national average with a 6.8% increase to an aggregate $901,392 with condos fuelling the rise.
The Greater Montreal Area will see the second highest growth at 5.5% to $408,285.
Greater Vancouver will see a 5.2% price rise to an aggregate $1,353,924.
“We are watching how the new OSFI stress test will impact the Greater Vancouver market,” said Randy Ryalls, general manager, Royal LePage Sterling Realty. “Low inventory will continue to put upward pressure on prices. However, with the introduction of the stress test, as well as other factors such as potential interest rate hikes, price growth will likely be limited to mid-single digits.”
The price rise forecast for Ottawa is 3.2% to $458.208; Calgary up 2.3% to $494,109; Edmonton up 1.5% to $382,180; Winnipeg up 4% to $315,120; and Halifax up 2.5% to $326,975.
by Steve Randall
14 Dec 2017
‘Zombie’ deeds have sparked a tricky legal debate.
If a homeowner signs a deed to a house or other parcel of land during his or her lifetime, can it be registered after death to avoid the government’s 1.5 per cent probate fee?
Many real estate lawyers believe that this is a legitimate method of estate planning. But now Jeffrey Lem, the province’s director of titles in the Ministry of Government and Consumer Services, has ruled that these documents are no longer eligible for registration. If discovered, they will be rejected.
Lem calls these documents “zombie deeds,” which are land transfers registered after the death of the grantor. They are no longer allowed in Ontario’s land registry.
Although some lawyers have been using zombie deeds for years, the practice first gained judicial approval in the Ontario Superior Court case of Winarski v. Sproul.
During her lifetime, Ann Sproul owned a 54 per cent interest in a house in Toronto. Her son, James, owned the other 46 per cent of the house.
In November 2002, Ann signed a deed transferring her interest in the house to James. She gave it to her lawyer, but when he tried to register it, there was a minor title problem. Her lawyer called James and asked him to look into it but James did nothing and the transfer was not registered during Ann’s lifetime.
In her will, Ann’s estate was left to her children Marilyn and James in equal shares.
After Ann died, Marilyn claimed that the unregistered deed of the home in her brother’s name was invalid, and their mother’s 54 per cent share of the house should be divided equally between brother and sister.
James took the position that the entire property belonged to him.
The case came before Justice Laurence Pattillo in Ontario Superior Court in 2015. He ruled that the deed was valid, despite the lawyer’s failure to register it during Ann’s lifetime.
When Ann unconditionally delivered the deed to her lawyer, the judge ruled that it was a valid gift to James and was not part of her estate. James did not have to share the house with his sister.
The Winarski case suggested that a legitimate way of avoiding the payment of Ontario’s 1.5 per cent estate tax on a property is to sign a deed and deliver it unconditionally to the recipient or a lawyer for registration after death.
In order to qualify as a Winarski transfer, the transfer and delivery of the deed has to be unconditional and irrevocable and stated to be a gift.
And though the government says zombie deeds of this type can no longer be registered in Ontario, without any other indication it’s registered after death, the land registry office will not be able to tell it’s a zombie deed. But if it is obvious the deed is registered post-death, it will be bounced by the land registry.
If any Ontario lawyer is holding any “live” zombie deeds in his or her files, and they are documents which meet all the Winarski tests — and no death certificate or other evidence is registered on title to indicate post-mortem registration — my view is that the deeds are still valid in law.
In a struggle between a court ruling and a government’s administrative policy, my view is that the court approval should always prevail.
Time will tell how this plays out.
Please see Court Case: Winarski v Sproul
Bob Aaron is a Toronto real estate lawyer and frequent speaker to groups of home buyers and real estate agents.
He can be reached by email at firstname.lastname@example.org, phone 416-364-9366 or fax 416-364-3818.
While the release of the National Housing Strategy represented the first fully detailed road map for the federal government’s efforts to address the real estate market’s long-running concerns over affordability, a real estate professor pointed at one major hitch in this strategy.
“What’s in the policy for Canadians trying to buy their first homes in high-priced markets like Toronto and Vancouver? Very little,” Jane Londerville of the University of Guelph wrote in an analysis for The Canadian Press.
This is the federal level’s abdication of its responsibility to use the instruments in its disposal to make home ownership more accessible in red-hot markets, Londerville stated.
“The provinces and local governments have control over many factors that affect affordability. But it’s wrong to assume that there’s no federal role in ensuring affordable and responsible home ownership,” she argued. “The federal government can affect the ability to buy a home through mortgage insurance, financial regulation, interest rates and tax policy.”
And while the strategy had its strong points such as a new portable housing benefit that would be of great help to those in unstable housing situations, “Ottawa should also put any new or pending changes to mortgage and financing rules on hold, including the January 2018 change requiring stress-testing of uninsured mortgage loans at approximately two per cent above the rate negotiated by the borrower.”
This is to accommodate other potential federal-level solutions, as “there needs to be a recognition that affordable housing and housing affordability are different and require different policy responses.”
“Now that the government has announced a comprehensive plan for assisting the affordable housing segment of the housing market, it’s time to turn its attention to helping people buy homes.”
For instance, the government could consider revisiting current tax policies that concern home ownership.
“One option would be a means-tested tax credit to defray the costs associated with a home purchase. Another option would be to allow prospective home owners to contribute to a Tax Free Savings Account with means-tested matching contributions from the government for the purpose of saving up for a larger down payment,” Londerville suggested.
By Ephraim Vecina
As Alberta, B.C. and Ontario have borne witness to market corrections over the last couple of years, residents have held their collective breath hoping they’ll be able to enter the housing market. But will they? Royal LePage’s CEO Phil Soper says they will, with time.
“In Alberta there was a housing correction in 2015, in B.C. it was in 2016, and Ontario in 2017. In each of these cases, home prices flattened right out, so it’s going to get better for home-ownership in the most expensive places because incomes and salaries will have a chance to catch up to rising home prices, and that’s what market corrections do,” he said. Soper alluded to a study commissioned by Royal LePage and conducted in tandem with Leger Marketing, in which 87% of millennials expressed desire to own a home one day. Barring another astronomical spike in housing prices, their desires should come to fruition. “With 87% wanting to own a home, a lot of people are saving and eventually will be moving into ownership, but they have to live somewhere in the meantime, so they will be focused on renting,” Soper added.
However, while joining the ranks of homeowners hasn’t been an easy task in recent years, it’s been nearly as cumbersome to find rental accommodations. The increased cost of ownership pushed people into the rental market, but there’s a pronounced scarcity of rental lodgings, particularly in Toronto and Vancouver.
“There really isn’t a widespread movement of a material number of people moving from ownership to rentals in Canada simply because we don’t have the rental accommodations to accommodate them,” said Soper. “The rental vacancy rate is 0.9% in Vancouver. The other challenge in Ontario with the newly instituted rental control policy, that’s province-wide, is there will be fewer purpose-built projects coming on stream. Many that were on stream at the beginning of the year have been cancelled. While we would see more people looking at renting, it’s not a very plausible alternative in our biggest cities.” Alternative living arrangements are on the rise. Some are typical, like living with a roommate, and some atypical, like multiple families sharing a home, whether rented or owned Soper says the challenges facing Toronto and Vancouver don’t differ from New York’s, London’s, Mumbai’s nor Shanghai’s, but he noted that the ranks of long-term property investors are being filled by legitimate entrepreneurs. “Entrepreneurs, small business landlords who might own as few as one unit or half-a-dozen, have been filling in the gaps,” he said. “It’s a form of RSP for these people; it produces a steady stream of income, and over their working years they pay off the mortgage and have an asset they can sell and retire on. We have many, many of these people in Canada who are essentially buying condos and renting them out because there’s a demand for accommodation.”
By Neil Sharma, Real Estate Professional magazine