MANSION GLOBAL QUOTED JIM BURTNICK IN ONE OF THEIR RECENT ARTICLES ABOUT BUYING A PROPERTY IN TORONTO.
Originally published on February 18, 2017. By Ariel Ramchandani
Toronto, a diverse and cosmopolitan city, is popular with buyers from all over the world.
“Toronto is known as the most multilingual and multicultural city [in Canada],” said Jim Burtnick, of the Torontoism team of Sotheby’s International Realty. “There are six Chinatowns and everybody and anybody coming here will feel pretty absorbed into the community.”
“Toronto is Canada’s largest city, with a well-deserved reputation for a high quality of living, low crime, generally favorable weather, vibrant arts and cultural institutions and a multitude of ethnically-diverse neighborhoods,” said Paul Johnston, a Toronto broker with Right at Home Realty.
The city has many perks to offer an international audience, according to Mr. Burtnick.
A lot of people are coming here for the stability of the banking system and for the education. Luxury real estate is taking off here and international high-net-worth individuals have it on their radar as a safe, stable, welcoming country in a world that is much more volatile.
International interest in Canada as a whole is so high that the country’s other major international city, Vancouver, cracked down on foreign buyers by imposing a 15 per cent tax on them last year.
Here’s How to Buy
Mr. Burtnick describes the process of a foreigner buying in Toronto as being “pretty straightforward.”
You don’t have to be a citizen here but you have to have your money here, and it is easily transferable in today’s global economy,
Mr. Burtnick said. Funds should be available in North America for when you are ready to make a purchase. (Note: Many Canadian banks have branches in the U.S.)
Once you choose a home, you can expect to pay a 10% deposit. Deposits are generally staggered, usually over the course of 18 to 24 months (for example 5% on signing a deal, 5% in 60 days, 5% in 180 days, 5% in 365 days, and so on), Mr. Burtnick said.
These deposits are held “in trust” and are guaranteed 100% refundable should a project not proceed.
If you need financing, make sure you are already pre-approved by a bank that has branch locations in Canada. “For properties valued at over $1 million Canadian dollars, domestic purchasers are required to have at least 20% equity in the property,” said Mr. Johnston. “ A foreign purchaser will usually [need] 35% equity.”
He cautions that lenders are a bit more conservative in Canada. “Canadian banks have historically been much more cautious lenders than our American counterparts, and the federal government has maintained oversight and instituted minimum lending standards to reduce the risk of correction across Canada,” Mr. Johnston said.
Be prepared to pay the land transfer tax, which ranges depending on the purchase price:
“Land transfer tax is punishing, as in Toronto we are taxed twice: provincially and municipally,” Mr. Johnston said.
In Toronto, the tax is paid to the city and to the province of Ontario, on closing. The Toronto Real Estate Board provides a calculator for assessing your land transfer tax.
There is also a 1% annual tax based on 1% of the value of the property. If you are selling, there is a withholding tax paid on closing, according to Mr. Burtnick.
If you are planning on renting your property out, there is a withholding tax on rental earnings. “That withholding is generally 25%, although it can be minimized or recouped depending on an individual’s specific tax position,” said Mr. Johnston.
Mr. Burtnick stressed that unlike other countries, like England, where buyers are often leasing the land from the government, in Canada, “you own your property outright.” The agreement of purchase is a binding contract.
Both brokers stress the importance of working with a professional. “As with any transaction, surrounding yourself with the right team is essential when buying real estate in Toronto,” said Mr. Johnston. “In addition to tax advice, the expertise of a qualified real estate lawyer is very important, and engaging the services of an agent who is actively engaged in the market—and the type of property you are seeking out —will put you ahead of the game.”