Municipalities share in land lift values through high rezoing fees, according to a Fraser Institute survey

Kenneth P Green, Ian Herzog and Josef Filipowicz
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While you cannot leave a property to your spouse without paying tax, there is an avenue available where a bequest can avoid the clutching hands of the U.S. Internal Revenue Service.

“A marital deduction is available for assets which pass to a spouse who is a U.S. citizen,” Robert E. Ward, J.D., LL.M., of Ward Chisholm P.C. “Generally, assets must pass directly to the spouse, either as a bequest or as a result of co-ownership – as tenants-by-the-entirety or as joint tenants with rights of survivorship. However, bequests to certain types of trusts for the benefit of a spouse may also qualify.”

For those Canadians who aren’t married to U.S. citizens – and there are quite a few of us – there is more than one way to skin a cat and avoid the U.S. estate tax.

“In order for a bequest to a non-citizen spouse to qualify for the marital deduction in computing the U.S. estate tax,” says Ward, whose background of expertise includes tax law, business planning, estate planning, international taxation and tax planning and foreign trusts, “the bequest must be made to a special type of trust that satisfies the requirements of section 2056A of the U.S. Internal Revenue Code – referred to as a “Qualified Domestic Trust” or “QDOT”).”

While taking this route will avoid the tax man – it will only do so for a short period of time.

“The marital deduction and the QDOT defer rather than avoid U.S. estate taxes,” says Ward. “In both cases, the assets passing to or in trust for the benefit of the decedent’s spouse will be subject to U.S. estate taxation when the spouse dies.”

The net estate is subject to U.S. estate taxes computed at rates of 18 per cent to 40 per cent under the current law.

But all is not lost.

There are credits which may reduce the tax due after the U.S. estate tax liability is computed on the value of the decedent’s assets net of deductions.

First, the estate is entitled to an estate tax credit for foreign taxes paid at the time of the decedent’s death (such as Canada’s tax on deemed dispositions at death).  Second, there may be special circumstances which give rise to special tax credits.

“For example, the decedent’s estate may include property received within 10 years of death which was previously subject to a U.S. estate tax,” says Ward. “Third, regardless of the availability of any other credits, the estate of every non-U.S. person who owns U.S. situs assets is entitled to an estate tax credit of $13,000.”

This results in an exemption of the first $60,000 of U.S. situs assets from U.S. estate taxation at the death of the non-U.S. person.

Also, there can be some relief from estate taxes provided by the Tax Treaty between Canada and the U.S. – but that can provide a false sense of security.

First, computation of the denominator is based upon U.S. estate tax principles (the total fair market value of the Canadian resident’s worldwide assets).

“The denominator will include not only the Canadian resident’s bank accounts, brokerage accounts, all forms of real and personal tangible property,” says Ward, “it will also include the death benefits payable under policies insuring the life of the Canadian resident, as well as the account balances in the retirement and savings plans of the Canadian resident, such as RRSPs, RRIFs, TFSAs, and RESPs.”

The numerator in the equation is the fraction is the total fair market value of U.S. situs assets owned by the Canadian resident.

Copyright © 2015 Key Media Pty Ltd

Ever-widening price gap between houses and condos and within detached home market hindering move-up buyers, says report

Joannah Connolly
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Vancouver is seeing the biggest home price gap increases in the country – not just between condos and houses, but also within the detached home segment, according to a CIBC World Markets report issued September 16.

The report said that the price gap is “widening the fastest at the highest end of the market – a fact that might reflect the impact of foreign investment activity in that space.”

Report author Benjamin Tal, deputy chief economist at CIBC, said, “The greatest challenge facing the hot Toronto and Vancouver housing markets is the continued asymmetrical price appreciation where for the past decade, the prices of more expensive properties are rising faster than less expensive properties.”

The report said that this “asymmetrical price appreciation” has been most prominent in Vancouver over the past decade, where the price of luxury homes has climbed nearly four times the rate of those in the lowest price range.

“Our research suggests this may have major implications for home owners looking to move up who now find they are priced out of this segment of the housing market,” added Tal.

Tal also observed the dangers of referring to average prices when assessing the real estate market.

He said, “The increase in the average house price masks a widening gap between the surging prices of detached properties and relatively muted increases in the price of condo units.”

The report added that although Canadian household debt is rising at an increasing pace, this is largely driven by increased mortgage borrowing, which over the past year accounted for 80 per cent of Canadian household debt.

Tal also found there was no notable rise in the pace of credit growth over recent months, suggesting that the Bank of Canada’s recent interest rate cut to record lows did not lead to a spike in personal borrowing.

The report added that while household debt levels in Canada are climbing, delinquency rates continue to decline, and are currently at their lowest levels since 2009.

“Even as Canadians take on higher debt levels, it’s clear the vast majority are paying their bills on time,” said Tal.

© 2015 Real Estate Weekly

John Tenpenny
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Investing in Toronto’s condo market isn’t the only choice available to foreign buyers, so a new trend is seeing the real estate industry go to them, with lucrative results says one agent.

Along with marketing their projects through brokers with ties to China, Toronto condo developers and agents are also travelling overseas themselves in hopes of raising awareness of Toronto as an attractive real estate market, both for investors and for families who might be planning to immigrate to Toronto.

The idea that many investors from China are looking for a quick flip is something quite out of touch with what Matt Elkind, an agent with The Condo Store Realty, experienced on recent trips to Shanghai and Tapei.

“Here many investors are concerned with how much they can flip their condo in a short amount of time, whereas the impression I get with the Chinese money is that it is more permanent money. They’re buying these properties to hold for the long term,” says Elkind, who is also the founder of Connect Asset Management. Many prospective buyers also have a connection to Toronto or Canada, he adds.

“The returns in our market have not been as good as those in Asian markets and all the money coming here is a flight to safety or has an educational component.

“On my Tapei visit, the most asked question was ‘How close is the project to a university.’”

There is also a different cultural attitude towards real estate, says Elkind. “They see real estate as inter-generational. For example when someone dies, instead of trying to sell the property for a profit, they honour the gift from the deceased and will try to purchase property around it.”

Despite what seems to be increased Chinese interest in Toronto’s real estate, not all developers are convinced that foreign investors represent much of a growth market for the city’s condo industry. They point to the U.S. as the top source of foreign investment and some developers have no plans to aggressively court Chinese buyers.

Copyright © 2015 Key Media Pty Ltd

TheRedPin
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Condos on Bay Street sell for an average of $40,000 more than units along Yonge. It’s just one of the facts we found by studying real estate along Toronto’s key intersections.

Last year, 58 storeys up from the corner of Bay and Adelaide, a new record was set in the Toronto real estate market. The priciest condo in all of Canada (fittingly located in the Trump International Hotel and Tower) was listed on the market for a staggering $33 million. 

A few blocks north at Yonge and Gerrard, another landmark was achieved.

Aura, which stands at a towering 78 storeys, became the tallest residential condo tower in Canada. A record that could potentially be beat by The One – a proposed 80 storey tower that would rise at Yonge and Bloor as Canada’s second highest structure, behind only the CN Tower of course.

All three intersections have a lot of common. They’re all ideally located in the downtown core, receive among the highest rates of foot traffic in the city, connect directly to subway and serve as anchors for Toronto’s urban development.

Toronto’s growth has long tied to a handful of key intersections, a pattern evident in the city’s past.

That got us thinking and itching to delve deeper into how real estate plays out in Toronto’s bustling intersections. We rounded up a list of the 28 busiest, condo-heavy and historic street corners and studied how real estate activity played out over the last year.

Average prices for all 1 and 2 bedroom condos sold within a 5 minutes walk of the city’s major intersections have been mapped out. To view median prices of units, simply click on the arrows under each pin: View map here.

Top Facts

• 24 of the 28 intersections covered in this analysis receive the highest daily pedestrian traffic in the city – each with a pedestrian count of at least 17,000
• Over the last year, condo apartments located within five minutes walking distance of these intersection sold for an average of $537,702 – nearly $150,000 more than the city-wide average during the same period ($398,858)
• There are an estimated 40% more one bedroom condos versus two bedrooms units around Toronto’s major intersections
• Condos on Bay Street sold for an average of $40,000 more than units along Yonge

Most expensive intersections:

TheRedPin, Inc. – Copyright 2014

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CondoNow
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If you’ve ever entertained the idea of buying a new condo-pre-construction, you have undoubtedly heard of something called “Platinum Access”.

For those who have not, here’s a short synopsis.

When a new condo development is put on the market, most developers will “Launch” by releasing for sale ONLY a restricted number of units in the building. All offered for sale at special “introductory pricing”. This is normally referred to as “1^st  Allocation”.

Sounds great right? Well, here is where the “Access” in Platinum Access comes in to play.

Most of the time, these units can ONLY be purchased through an “exclusive” short list of the “Top Producing” Real Estate agents in the city, knows as “Platinum Agents”

Why do developers do this? It’s all about sales numbers.

Theory being…these agents have a proven record of strong selling abilities in general, so by default they should also be great at selling newly launched pre-built condos. Opening up their black books, bringing a quality list of potential buyers that will jump at the chance to snap up these coveted units.

What this means for most of Joe Public however is that access to theses early released units, that are often the best suites, with the best views and best pricing is simply not available. By the time the general public has direct sales access, these units have long been sold out.

Thankfully for Joe Public however, this level of Platinum Access to 1^st Allocation is now directly available through a brand new online channel, CondoNow.com.

With approximately 4000 referral agents strong, CondoNow has established a buying power presence that developers are now fully embracing.

This gives any CondoNow referral agent and their respective clients direct, early access to the 1st allocations of these previously unavailable new development units.

A recent example of this new approach to Platinum Access can be found at the Pier27 Tower development, launched last week in Toronto.

With easy online and mobile access, detailed information on every development in the city, the ability to search and compare several developments side by side, and Platinum Access to 1^st allocations, CondoNow has created a long overdue simplification and democratization to the new condo buying process.

Benefiting developers by creating a direct and convenient path to communicate, market and sell new launches.

Benefiting qualified real estate agents and wanting buyers alike by providing the access and allocation to units they simply could not previously attain going direct.

Further supporting the age-old idiom once again. There is indeed power in numbers.

Copyright © 2014 CondoNow Inc.

Steve Randall
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A poll of 40 economists by Reuters revealed that the financial experts are not forecasting any rise in interest rates until 2017.

The economists believe that, although there is a chance of a further reduction in rates by the Bank of Canada, it is also unlikely if the economy is picking up from the technical recession.

The growth in the second half of 2015 is by no means agreed on by those polled, however. There are, of course, many unknowns, not least of all oil prices, which may mean a change to BoC policy along the way.

Copyright © 2015 Key Media Pty Ltd

Home sales in Greater Vancouver this summer were way above the 10-year average. Here’s an infographic with bitesized stats broken out

REW
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MLS home sales in Greater Vancouver this summer were between 25 and 30 per cent above the 10-year average, according to Real Estate Board of Greater Vancouver (REBGV) figures released September 2.

Resale transactions were up 21.3 per cent annually in August and prices up 12 per cent compared with August 2014.

Want to know more details and a breakdown by property type and area? Our useful infographic below gives you just that.

For the full story and analysis, click here.

© 2015 Real Estate Weekly