Bank of Montreal has renewed the mortgage war among Canada’s banks, slashing the posted rate on its five-year fixed mortgage to 2.79 per cent from 2.99 per cent, even as Ottawa and the International Monetary Fund fret over the state of Canada’s overheating housing market.
Toronto-Dominion Bank quickly rushed to match BMO’s rate special, saying it will drop its five-year fixed mortgage rate from 3.09 per cent to 2.79 starting Wednesday.
Canada’s major banks are heading into a renewed mortgage price war in the wake of the Bank of Canada’s surprise decision to cut interest rates. Mortgage brokers reported that Royal Bank of Canada dropped its five-year fixed rate for qualified borrowers to 2.84 per cent over the weekend.
Canada’s major lenders are so far holding off cutting mortgage rates in the wake of the Bank of Canada’s quarter-point interest rate cut, but industry officials predict rates will fall to historic new lows just in time for the all-important spring housing market.
"The gap between condos and houses grew 16 per cent in December compared to a year earlier, hitting a record of more than $251,000. (Low-rise homes consist of houses, including detached and semi-detached houses, townhomes and link homes, while high-rises encompass all condos and lofts.)"
Between the "doom and gloom" prophesies of Finance Minister Jim Flaherty and the media in general about the "over-valued" condo apartment market, the casual observer may have long ago decided that it was just a matter of time before prices would collapse amid a myriad of over-supply. The problem is that actual market results have not borne that out. For example, in the GTA for 2013 year-to-date (January thru July), condo apartment prices are actually up by 1%. So it is encouraging to finally see an article taking the opposite view. According to a report from Genworth Canada and the Conference Board of Canada, the Canadian condo market is doing fine thank you very much and, more importantly, will continue to do fine in the foreseeable future. The report cites population growth, employment growth as well as demographic factors (aging population) as all being key positive factors. Please give it a read - click here.
With tax time looming, many condo investors could find themselves owing a lot more in tax than they thought. That’s because the CRA is apparently cracking down on condo flippers.
Here’s a quick crash course:
If you buy a condo and then sell it after having lived in it as your principal residence for a minimum of 6 months, you are, of course, capital gains exempt. But if you buy it as an investment, you are subject to capital gains tax. So a $100,000 gain at a 46% marginal tax rate will result in a $23,000 tax bill (50% of the gain is taxable). But if CRA decides that you are in the business of flipping condos, your $100,000 profit will be taxed as pure income – meaning that the tax bill will be the full $46,000 in the above example.
So the interesting distinction is between owning a condo as an investment versus being in the business of flipping condos. If you own the condo through the registration period, rent it out for a while and eventually sell it, you will most likely be deemed as being an investor. But if you sell your rights to the property before it's registered (i.e., selling your assignment), you will definitely be regarded as being a "flipper" (meaning that you are in the business of flipping condos). You may want to adopt a conservative approach on this one given the fact that CRA is apparently cracking down on abuses and because there are also hefty fines involved if you are deemed to have mis-filed. For more on this topic, please click here.
The Competition Tribunal dismissed, with costs, the anti-competitive complaint of the Competition Bureau against TREB yesterday. Read about the Tribunal’s decision on REM's Website and The Toronto Star.
This is a major victory for TREB which has maintained that the consumer’s right to privacy should prevent sensitive information such as the sales price history of homes from being openly circulated on the Internet through so-called VOWs (virtual office websites). We applaud this decision for a number of reasons but primarily because the MLS® system was built and paid for by REALTORS® over a very long period of time and, as a result, should not be made available as a “public utility”, even if a minority of REALTORS® want open access to support their particular business model. We believe that, since the MLS® system is an asset of CREA, only REALTORS® as a whole should be able to alter the accessibility of the system. Clearly most REALTORS® do not support the change sought by the Competition Bureau and so the Tribunal’s decision, regardless of how it arrived at it, was the correct one. Comments?
Scotiabank CEO Rick Waugh has become the first banker to critique Finance Minister Jim Flaherty for openly meddling in the mortgage market. While Mr. Flaherty’s concern for the country’s overall level of household debt and its potential impact on our economy is perhaps warranted, we believe that this concern should not manifest itself by interfering in the pricing practices of individual lenders. Both the Bank of Montreal and Manulife Financial were strongly pressured by Mr. Flaherty to suspend their recent 5-year fixed mortgage rate special offers. Our opinion is that the Department of Finance and the Bank of Canada should resort to typical measures of government policy (such as the setting of the central bank interest rate) in exercising their mandate to protect our economy. Moral suasion is one thing but open interference in the price setting or promotional practices of lenders is another matter altogether. What do you think? A few articles on the topic can be found here and here.