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Toronto Loft Conversions

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Modern Toronto Lofts

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Unique Toronto Homes

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Condos in Toronto

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Toronto Real Estate

Toronto Real Estate

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Rents jump 4% despite surge of condos on market

Metro News

Rental demand remains unrelenting across the GTA, and especially in the downtown core, with a record 5,315 condo apartments listed for rent via the MLS system in the second quarter of this year, up 20% from the same time last year, according to research firm Urbanation.

Even that surge of listings couldn’t keep up with demand – much of it from young professionals – and rents climbed 4.1% during the same period to a record $2.35 per square foot.

The fact that condo rentals continue to outstrip actual resale transactions of condo units – just 4,689 condo apartments were sold via MLS in the second quarter – is a sign that “demand for condominiums in Toronto remains very stable,” said Shaun Hildebrand, vice president of the condo market research firm.

“There’s this notion that investors could be bad for the condo market, but what we’ve seen so far is they’ve been providing an essential service – much-needed rental supply to a market that continues to see increasing demand for rental.”

Many condo watchers believe the number of condos coming on the rental market is a strong indicator that investors intend to hold, rather than flip, their units and look to make gains over the longer term.

Comment: Just as they have been doing for years now. People stopped flipping condos a long time ago…

And the upward pressure on rents is expected to ease over the next two years when more than 49,000 new condo units are slated to be built across the GTA. In reality, that number is expected to come in closer to 30,000 given construction bottlenecks.

Comment: Uh huh – did the 28,000 new condos last year alleviate rents any? Oh right, no they didn’t, rents have risen 4.1% since last year. So why would 24,500 new condos per year make a bigger difference? But really, it will only be 15,000… So if 28,000 new units did not bring rents down, cutting the supply by half is supposed to do it? Just think that through for a minute.

But at least some of the current surge in rental condos on the market may reflect a more pressing concern: That if they try to sell their units too quickly, any gains investors have made could be taxed away as part of a Canada Revenue Agency crackdown aimed mainly at those making a quick – and quiet – profit through flipping units.

For months now, agency officials have been targeting condo buyers they suspect of flipping units in the country’s two hottest condo markets, Toronto and Vancouver, warning that they owe capital gains tax and, in some cases, income tax on the gains.

The prime targets are those who bought condos at a discount years ago, before construction even started, and then sold them as so-called “assignments” (units that are flipped to a new buyers before the first buyer actually takes possession.)

Comment: Buying years ago is not a discount! Buy any property 5 years ago and it is worth more today, be it a new condo or a Victorian house from the 1880s. Builders do not give discounts, trust me. It is simply that real estate, condos and houses and everything else, increases in value over time.

The crackdown has placed a black cloud over what had been a burgeoning assignment market, with some realtors advising their investor clients to abandon plans to list their units, hang onto them for at least a year and rent them out in the meantime.

Comment: Which is stupid. RevCan is being willfully blind, mean and greedy. Some people bought 3-5 years ago and their lives have changed. My brother-in-law bought a condo 3 years ago – since then he got married and moved to Vancouver. He had no choice but to rent the unit out, to be safe from RevCan. He did not buy it to flip it, he doesn’t even care to make a profit on it (as long as he doesn’t lose money) – it is just that his life today is VERY different than it was when he bought it. Those are the people being unfairly targeted by the government.

“It’s huge. Part of what we’re waiting for is a resolution from Canada Revenue on how they handle (taxing) assignments,” said one downtown realtor.

“We’re telling our investors – close on your unit and rent it out for a year. Investors who are non-residents – they pay all cash and don’t care (because it’s harder for the Canadian government to retrieve outstanding taxes.) They’ll leave it empty or rent it out.”

CRA spokesperson Sam Papadopoulos was unable to say how many letters have been sent so far to those who have bought and sold condos. He stressed that the agency has clear policies, even around the relatively new practise of selling assignment units, and is simply trying to “ensure compliance with existing legislation.”

Comment: Oh yeah, clear policies that were never enforced until recently. They suddenly realized there was a huge cash grab they were missing out on.

Each situation is being reviewed on a case-by-case basis through reviews of land registry and other records, he said.

“Through the normal process of auditing we have been sending letters to folks who have bought units to ensure that they have declared capital gains or reported it as income in the nature of business,” said Papadopoulos.

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Contact Laurin Jeffrey for more information – 416-388-1960

Laurin Jeffrey is a Toronto Realtor with Century 21 Regal Realty. He did not
write these articles, he just reproduces them here for people who are
interested in Toronto real estate. He does not work for any builders.

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