The battle to unlock the housing market – Canadian Real Estate

The battle to unlock the housing market

The battle to unlock the housing market

The battle to unlock the housing market Thomas Dannenberg for the Globe and Mail

In the U.S., you can find and bid on a house using an iPhone. So why is it that in Canada, much of the information prospective home owners need is a tightly held secret, unlocked only by real estate agents?

Steve Ladurantaye

Globe and Mail Update (correction included)

One day in 2002, a self-professed computer nerd named Glenn Kelman scratched his head. Why was it, he wondered, that he could get more information about a $20 book for sale at Amazon.com than he could for a $500,000 home listed on the national Multiple Listing Service?

Later that year, Mr. Kelman founded Redfin.com. He describes the site as a cross between Century 21 and E*Trade. A more pointed description would be to call Seattle-based Redfin a dart aimed at the heart of the real estate industry. Internet-savvy companies like Redfin are breaking MLS’s lock on listings data, which the industry uses to ensure that consumers buy and sell houses the traditional way: through real estate agents who are paid hefty commissions.

The move hasn’t endeared Redfin to the real estate industry.

“I get death threats,” Mr. Kelman says. “I gave the finger to an industry that only exists to charge a commission on the most important buying decision you’ll ever make. We save people money by automating most of the process.”

The battle to free real estate data is well advanced in the United States. Now, it is coming to a head in Canada as the technological attack on the old order is bolstered by both industry rebels and government: The federal Competition Bureau accuses the industry of dampening competition and consumer choice. To consumers whose houses often sell in a few days – but still net agents tens of thousands of dollars in commissions – Canada’s real estate boom has made MLS’s monopoly on information seem all the more anachronistic.

Like sectors such as travel and retailing before it, the multibillion-dollar Canadian real estate industry is finally facing a reckoning with the Internet’s power to make data free and open.

The watchdog intervenes

“There is a lack of information and a lack of transparency in this industry that simply does not exist in any other industry,” says Bill McMullin, an industry dissident who owns Halifax-based ViewPoint Realty. “The real estate industry may be uncomfortable with this, but once you automate a lot of that data, you circumvent the need for a realtor. Things are changing, and they are changing quickly.”

In 2009, 465,251 homes changed hands on the Realtor.ca system, at an average price of $320,333. Owned by the Canadian Real Estate Association, the database amasses listings from Canada’s 101 local real estate boards. Only registered real estate professionals can obtain key data such as selling prices, and only they may use the site to connect buyers and sellers.

CREA tightened its access policy in 2007, after rival real estate websites such as Toronto-based Housing123.com emerged. The interlopers downloaded data from MLS and enhanced it to draw consumers to their own services.

But the clampdown backfired, catching the attention of the federal Competition Bureau, which told the CREA that its rules “restricted consumer choice and limited the scope of alternative business models.” The bureau questions whether consumers should continue to be forced to employ a registered real estate agent to represent them throughout the entire listing and sale process on MLS, including the shepherding of all offers and counteroffers.

In a letter written last October, CREA said it hoped to resolve its differences with the Competition Bureau by Christmas. The bureau says it is willing to wait for a negotiated settlement, but it will move unilaterally if necessary. CREA says it needs more time to figure out what to do next.

“We’ve had a number of meetings with the bureau and are trying very hard to understand their concerns and come to a mutually acceptable solution,” says Katherine Kay, outside counsel for CREA.

Any resolution is apt to erode real estate agents’ traditional gatekeeper status. One possible resolution would allow a seller’s name and address to appear on a listing so they can be contacted directly by potential buyers. A bigger step would be to allow homeowners to list their homes on MLS for a small fee, then negotiate the sale of their homes without the help of an agent. As the process becomes commodified, consumers stand to benefit in lower transaction costs.

The American Way

The transformation of the real estate industry in the United States was spurred by a 2007 Department of Justice order to relax restrictions on how brokers could use MLS information. The change seeded dozens of companies that created feature-rich websites offering à la carte services as an alternative to the traditional commissioned agent.

House hunters can find and bid on a home using one of dozens of Web-based applications. A single map can show which houses are for sale, the area’s crime rate, average test scores at the local elementary school and the location of the nearest Starbucks.

At Zillow.com – created by the founders of travel site Expedia.com – consumers are flooded with information. Not only do they see a home’s complete sales history and average tax bill, they can find out the assessed value of each house on the street and other neighbourhood information, such as how many married couples live on the block.

At Mr. Kelman’s Redfin, commissioned agents are replaced with salaried (and registered) agents. Consumers are expected to do most of their own legwork, and to deal with an agent only if they hit a roadblock.

“Our agents aren’t paid to make it rain,” Mr. Kelman says. “They are paid to serve the customers who want to be served. Ninety per cent of the cost of real estate is finding customers, and the Web can do that for us.”

While Redfin does charge commission – about 3 per cent – it gives half of the payment back to the customer when a deal closes. Thus the average cost on a $500,000 sale is $7,500, compared to a traditional commission of $25,000.

Mr. Kelman says his privately-held company posted its first monthly profit in June and is generating $20-million (U.S.) of revenue a year.

While American consumers are using their phones to scope out houses they drive by, the best Canadians can hope for is CREA’s low-tech mobile website, which provides the phone number of the relevant agent for a property. And that only works if you know the property’s six-digit Multiple Listing Service number, which someone whizzing past in a car would not. A more feature-rich version is expected to be in place by summer.

Consumers can get selling prices, room measurements and a couple of snapshots for a property on the official industry portal, Realtor.ca. But the most valuable market intelligence – such as what the property sold for in the past, and recent sale prices in the neighbourhood – is kept out of the consumer’s reach, forcing prospective home buyers to call an agent. CREA and its affiliates are strict about keeping it that way: Even agents who simply want to repackage such real estate data online into more user-friendly formats as a marketing tool have found themselves slapped down by local real estate boards.

Paul Darrow for the Globe and Mail

Bill McMullin of Viewpoint Realty in Bedford, N.S.

The Canadian Roadblock

The real estate industry’s lock on information is one reason why the process of buying and selling a home in Canada has changed little since online real estate listings began in 1996, even as other customer-service-intensive industries such as travel and tourism have seen radical technological transformations. An estimated 90 per cent of all home sales in Canada are still done in the traditional manner.

If the Competition Bureau gets its way, consumers would be able to pay a flat fee to an agent to have their home listed, and then choose how involved the agent would be through the rest of the process.

But even before the CREA settles with the Competition Bureau, some smaller brokers are brazenly defying local real estate associations by providing consumers with richer data than the associations allow.

Mr. McMullin, of Halifax’s ViewPoint Realty, has spent close to $1-million on the company’s feature-rich website – he’s downloaded all of his region’s listings onto his server, and then enhanced them with previous sale prices and maps. The service far surpasses what’s available on realtor.ca, and he’s counting on it to win him customers in a competitive market.

He’s navigating tricky territory – in the past several years, local real estate boards have shut down several brokers who have attempted to repackage data without permission. The industry won a key court ruling in Ontario in December against Toronto-based Fraser Beach. The judge said the upstart company’s use of data violated the standard agreement between brokers and real estate boards. He added that he wouldn’t speculate on whether the industry engages in anti-competitive behaviour by keeping its own members from using the data as they wish.

Lawyer Lawrence Dale, who represented Fraser Beach, said the judge’s decision effectively established that the industry’s rules are restrictive. “In the United States, the government found that these identical rules were anti-competitive and the Department of Justice had them removed,” he said following the decision.

In another new model distinct from the likes of Housing123, Ottawa’s Ziglu Real Estate Brokerage employs traditional real estate agents, but charges a flat fee to get someone’s listing on MLS. The agents then take a barebones approach to the process, leaving the consumers to do the bulk of the legwork.

Ziglu charges half the commission of most realtors, and the company plans on dropping it altogether if the Competition Bureau gives consumers more access to MLS.

“We’re obviously counting on the bureau to come through and allow people to order specific real estate services in the same way they’d order a pizza,” says Ziglu’s founder, Gilles Ménard. “Right now we still have to represent the seller through the process, but we’re expecting changes. Our whole business model is based on high volumes and low prices.”

A market too small?

There’s a good reason the Canadian industry is fighting to keep its listings system exclusive, says Phil Soper, chief executive officer of Brookfield Real Estate Services, a subsidiary of Brookfield Asset Management Inc. that owns real estate brokerages Royal LePage Real Estate Services Ltd. in Canada and Real Living Real Estate LLP in the United States.

With a great database comes great responsibility, he says. An advantage of the traditional system is that anyone using MLS has an agent to help them through what can be a confusing process.

“Most of that information needs to be taken in the proper context and protected from mistakes,” he says. “With a central system, you are protecting the customer’s listing – it is in the hands of people who constantly update their skills.

“Anyone who suggests that somehow organized real estate is protectionist, and created a model that others can’t make a living at by charging lower fees, is saying something completely false,” he adds. “The problem is they can’t attract high-performance salespeople and still make a buck – the best agents will make the best money and want to work where that is possible. The only reason someone would compete on price is because they can’t compete on service.”

As well, there’s a reason a high-traffic site such as Redfin has only just turned its first profit – there is little money to made offering cut-rate services. The model may not work in a market as small as Canada’s, according to Mr. Soper.

“You look at something like Zillow and it can function with 0.2 per cent market share,” he says. “In Canada, you can’t keep your doors open with numbers like that. It’s like that in all our industries – we have a handful of real estate companies, a handful of banks. That’s because just to exist, you need a pretty big chunk of market share.”

The upstarts disagree – and are anxiously watching the Competition Board for clarity on which services they can offer. Redfin considered entering Canada last year, Mr. Kelman says, but decided to wait until the regulatory issues were resolved. Meanwhile, Mr. McMullin wants to sell his tech services to the big brokerages, and Ziglu expects a crush of customers the minute it can start to hive off portions of a transaction.

Most people in the industry realize they are losing their monopoly on information. Royallepage.ca, long a leading real estate site in Canada, has fallen behind a site that only dabbles in listings – kijiji.ca, a free online classified service similar to Craigslist.

“Some in my industry feel that it will be a disaster if and when the rules change,” Mr. Soper says. “Yet as we debate, Kijiji grows in popularity. That doesn’t mean the world doesn’t need realtors – it means the world needs better agents who are trustworthy and knowledgeable and can walk them through what is usually one of the most financially significant transactions of their lives.”

Editor’s note: An earlier online version of this story and the original newspaper version incorrectly stated that the industry won a court ruling against realtysellers.com. The court ruling was against Fraser Beach. This online version has been corrected.

For more on Canadian real estate, visit: www.TorontoRealEstateAccess.com

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Canadian GDP builds up steam – The Globe and Mail

Canadian GDP builds up steam

Victor Marquez, an assembler at Standen's Limited in Calgary, grinds a heavy truck spring.

Victor Marquez, an assembler at Standen’s Limited in Calgary, grinds a heavy truck spring. Chris Bolin for The Globe and Mail

Gross domestic product expanded 0.4 per cent in November, marking third consecutive month of growth

Ottawa Globe and Mail Update

Canada’s economy expanded for a third straight month in November, as mining, energy and wholesale trade helped pull the country further out of recession.

The 0.4-per-cent growth in the month, reported Friday by Statistics Canada, was more than economists expected. The federal statistics gathering agency also revised October’s growth figure up to 0.3 per cent, from the initially reported 0.2 pert cent. September’s reading was also revised up a tenth of a percentage point.

November’s data indicates the economy – which grew just 0.4 per cent in the third quarter – is on track to meet or exceed the Bank of Canada’s 3.3 per cent growth estimate for the final three months of 2009, economists said.

“It’s certainly an indication that the economy picked up a lot of steam in the last quarter,” said Millan Mulraine, an economics strategist at TD Securities in Toronto. “We didn’t see it coming; we never thought it would be at this level so early.”

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Even a flat reading for December would yield a pace approaching 4 per cent annual growth for the October-through-December period, Mr. Mulraine and economists such as Doug Porter of BMO Nesbitt Burns said.

Mining, and oil and gas extraction and wholesale trade accounted for about 60 per cent of economic growth in November, Statistics Canada said in its monthly report on Canada’s gross domestic product.

Construction rose for a fourth straight month, expanding 1.1 per cent largely because of a 2.5-per-cent increase in the residential sector. The country’s hot home resale market led to a 0.7-per-cent increase in output from real estate agents and brokers, Statistics Canada said.

An Investor’s Guide to Understanding the Economy:

Also, “strong activity” in the bond market and a spike in sales of mutual funds pushed the finance and insurance sector up 1.2 per cent.

Despite the gains, gross domestic product was down 1.7 per cent in November from a year earlier, but that year-over-year gap was almost 3 per cent the month before.

The central bank said in its Jan. 21 quarterly forecast that companies continue to have plenty of excess capacity and predicted the economy won’t be running at full tilt until the third quarter of 2011, in part because of the effect Canada’s strong currency is having on sales to the U.S. and overseas.

Canada’s beleaguered manufacturing industry stalled in November after an anemic 0.1-per-cent gain the previous month, retail trade fell 0.8 per cent after at least five months of increases, and the utilities sector contracted by 1.8 per cent as unseasonably warm weather reduced demand for electricity and natural gas heating.

Meanwhile, the U.S. economy grew a more-than-expected 5.7 per cent in the last quarter of 2009, according to a preliminary estimate released Friday by the Commerce Department in Washington. Though the gain was largely attributed to factories replenishing inventories, should that number hold it would be the biggest quarterly annualized gain in six years.

That bodes well for Canadian growth going forward because it suggests demand for exports to the U.S. could pick up sooner than anticipated as America’s shell-shocked consumers recover further and spend more.

The Bank of Canada says the domestic economy will expand 2.9 per cent this year, a slightly rosier prediction than the 2.6 per cent forecast issued by the International Monetary Fund this week.

For more on Toronto Real Estate, please visit: www.TorontoRealEstateAccess.com

Variable or fixed? Both options have merit

Mortgages

Variable or fixed? Both options have merit

Montreal house for sale.

Whether you prefer to go fixed or variable with your mortgage, there are developments you need to know about if you want protection against rising rates and ways to outsmart your bank.

Let’s start with fixed-rate mortgages, where we continue to see borrowing costs at close to historic lows. Most people go with a five-year term, but there’s a case to be made for choosing terms of seven or even 10 years.

Rubbish, you savvy borrowers are no doubt saying. The premium to lock in for seven years is too high to make it worthwhile.

“There’s not a right or wrong choice,” replies Peter Majthenyi, a mortgage planner with Mortgage Architects in Toronto. “It’s capturing the temperament and risk tolerance of the client.”

These days, those of Mr. Majthenyi’s customers who prefer a locked-in rate are commonly going with 10-year mortgages at 5.3 per cent. That compares with his best rates of 3.79 per cent for a five-year mortgage and 1.95 per cent for a variable-rate loan.

Some homeowners can’t get comfortable with the idea of paying such a large premium to lock in a mortgage for a decade, Mr. Majthenyi said. But there are cases where it makes sense. Example: People who are buying a house in today’s hot market and want some cost certainty as they take on a mega-mortgage and look ahead to years of rising rates.

More on mortgages

With a 10-year mortgage, you’re entirely insulated from the coming cycle of interest rate increases. Over that period, Mr. Majthenyi notes, your income will rise and you’ll pay off a lot of the interest on your mortgage. At renewal time, you should be in a good position to make higher mortgage payments if need be.

The 10-year rate of 5.3 per cent seems high in comparison with current five-year rates, but it’s reasonably attractive if you look at the past decade. The average five-year rate posted by the big banks over that period was 6.78 per cent, according to Bank of Canada data. If we discount that rate by 1.5 percentage points, we get a real-world average, five-year rate of 5.3 per cent.

There you go: 10 years of rate certainty at the cost of five years’ worth over the past decade.

To give the other side of the argument about long-term mortgages, let’s hear from mortgage broker Jim Tourloukis of Advent Mortgage Services in Unionville, Ont. He points out that the higher rate for the 10-year mortgage would potentially cost hundreds of dollars more per month.

“That’s a big insurance premium to pay,” he said. “Peace of mind is important, but you can get that with a five-year mortgage.”

Worried that you’ll have to renew at much higher rates in five years’ time? Mr. Tourloukis said you can work around this by jumping into a one-year mortgage on renewal.

As the economy slipped into recession, we saw short-term mortgage rates at roughly the same level as five-year mortgages. But it’s more typical for there to be big savings in a one-year term. These days, for example, Mr. Tourloukis is advertising a one-year rate of 1.99 per cent, and a five-year rate of 3.74 per cent.

Now let’s talk strategy for people with variable-rate mortgages, specifically those who took out their loans early in 2009. The financial crisis was still raging back then and lenders were charging the prime rate plus a markup of as much as a full percentage point for variable-rate mortgages.

You can now get a rate of prime minus 0.1 to 0.3 of a percentage point. The net result for some borrowers is that they could chop their rate by a full percentage point if they were to break their current mortgage.

Mr. Tourloukis said it can be cost-effective to do this, thanks to a quirk in mortgage fine print. The penalty for breaking a variable-rate mortgage is three months’ interest – period. With fixed-rate mortgages, lenders charge the greater of three months’ interest or an “interest rate differential” (IRD) that compensates them for interest lost as a result of you breaking your mortgage.

Lots of people have tried to break existing mortgages and been deterred by astronomically high IRDs. Mr. Tourloukis said it’s plausible that someone who took out a $300,000 variable-rate mortgage last May might face a penalty of something like $2,200.

What are the potential savings if you reduce the rate on a $300,000 variable-rate mortgage taken out last spring to current levels? Close to $2,000 per year, assuming you make 26 biweekly payments. With a five-year term, you could be looking at more than $6,000 in cumulative, after-penalty savings if you make your move now.

******

Go long?

You’ll pay a sizable premium to lock in a mortgage for 10 years, but the rate won’t be bad by historical standards and you’ll have total cost certainty on your mortgage for a decade. Here’s a survey of 10-year rates.

Financial Instution Rate (%) Notes
Big banks (posted rates) 6.7-6.95 Discounts negotiable
Coast Capital 5.25 B.C. only
First National Financial 5.35 Available through mortgage brokers
ING Direct 5.35 Offers a 120-day rate hold
President’s Choice Financial 5.4 Not available in Quebec
Westminster Savings Credit Union 5.3 B.C. only
Comparative best 5-year rates 3.74-3.99
Comparative best variable rates 1.95-2.15
Source: canadamortgage.com; mortgage broker websites

TorontoRealEstateAccess.com

Cheapest shipping route across Canada? Try the U.S.

Cheapest shipping route across Canada? Try the U.S.

Mail is processed at the main post office in Chicago.

Mail is processed at the main post office in Chicago. Getty Images

In U.S. border towns from New York to North Dakota to Washington state, a growing number of Canadians are licking U.S. stamps to send what is, in reality, domestic mail

Calgary Globe and Mail Update

For a small but growing number of this country’s eBay vendors, the cheapest path across Canada lies through the heart of America.

Canadians are showing up in increasing numbers at U.S. Postal Service outlets with parcels and letters destined for other provinces – and, in at least one case, a neighbouring town.

The reason? It’s often cheaper to send a letter from Toronto to Vancouver by dropping it off in Buffalo, N.Y., than it is to use the nearest Canada Post outlet.

Enough eBay sellers are now taking advantage of this postage-rate quirk that some U.S. mail outlets credit Canadians with helping them get through the downturn.

And for Canadians peddling their wares online, the U.S. Postal Service has become a conduit for survival.

In border towns across the country, from New York to North Dakota to Washington state, a growing number of Canadians are licking U.S. stamps to send what is, in reality, domestic mail.

“It’s really crazy,” said Teresa Pope, assistant manager of TSB Shipping Plus, a mail service store in Point Roberts, Wash., a stone’s throw from the B.C. border.

“I was shocked the first time I actually shipped for someone [from Canada] who said, ‘I checked it out and it’s actually cheaper for me to drive down here.’”

Though the numbers are still small, as the loonie has risen over the past six months, both Ms. Pope and the Point Roberts postmaster have seen a notable increase in Canadians crossing the border to do exactly that.

Those who do so brush up against customs rules, which require taxes and a $5 fee for anything worth over $20, and potential delays, since mail that crosses the border inevitably ends up slow to arrive. For that reason, some eBay sellers don’t go this route.

“I think that’s stupid,” said Pierre LeBel, a Belleville, Ont., stamp seller who conducts about 12,000 online transactions a year. He argues that the potential for unexpected customs costs could damage eBay sellers’ reputations. Canada Post’s basic rate also offers package tracking and basic insurance, unlike the U.S.

But the savings south of the border are compelling enough that many sellers take advantage of it, and online talk of the mailing discounts has brought growing interest.

Ben Hoffman, a Toronto music seller, completes about 3,000 vinyl record sales a year on eBay. Most go to the U.S. and other international destinations. Occasionally, someone in Vancouver buys a record. To ship it there via Canada Post would cost him $8.45, once he takes advantage of a 25-per-cent discount he can access through eBay. But if it is sent from Buffalo, the price drops to $5.01 (U.S.). It costs Mr. Hoffman about $1 (Canadian) per LP to courier his wares to Buffalo, where they are dropped into the postal system with stamps he buys and prints online. Add it all up, and he’s still looking at a significant discount off the Canadian rate.

For Mr. Hoffman, whose buyers are likely to abandon him over a 50-cent premium, and for whom shipping is a big cost on what is often a $10 record, that is a major difference.

The savings stem chiefly from how mail rates are calculated by weight and size. The U.S. has one rate to all of Canada, while Canada Post charges by distance. That’s why it’s cheaper to ship light, thick parcels in the United States. Heavier packages are generally cheaper to ship via Canada Post. So Mr. Hoffman only ships through the U.S. to buyers east of Montreal and west of Winnipeg.

But in eBay’s competitive world of penny-mad thrift, cutting out Canada Post is a necessary strategy for some eBay vendors, who have long argued that Canadian mailing rates make them uncompetitive.

“If I didn’t ship through the States, I’d probably have to lay all my staff off for sure and just run the store, my wife and I,” said Gary Nerman, whose Nerman’s Books and Collectibles in Winnipeg employs three people. “It would probably cut our sales down by 80 per cent, 90 per cent.”

Every week, Mr. Nerman drives an hour south to Pembina, N.D., usually with between 90 and 130 books to ship. The savings are dramatic. In the U.S., a special media rate allows him to ship, say, a Stephen King hardcover to Los Angeles for less than $3. From Canada, it would cost about $10. (It’s also substantially cheaper and faster to ship to Europe or Australia, through the U.S.)

Canada Post argues that it is competitive, and that those who send domestic mail through the U.S. are “rare.”

“We are competing fair and square and I think you’ll find that our rates are the best within Canada,” said John Swettenham, general manager of marketing and strategy for Canada Post’s parcels division.

When Canada Post surveys competitors, it ignores the U.S. But there is little Canadian sellers can do. Most are too small to negotiate special rates, or to have a strong enough voice to bring change.

“A lot of Canadians come on [eBay] and they complain: ‘How can we compete? Shipping rates are outrageous here,’” Mr. Hoffman said. “The unpleasant answer always is, ‘Well, you could move to the U.S.A.’ And if you don’t want to live in the U.S.A., then that’s the price of living here.”

The right Canadian property ‘can be a good investment’

The right Canadian property ‘can be a good investment’

25 January 2010

Brits thinking of putting their belongings into storage and buying property abroad may wish to consider investing in a home in Canada.

This is the opinion of Paul Collins, editor at BuyAssociation, who said that the country has weathered the global recession reasonably well, in comparison to other places.

“Recently we have seen – partly due to the global recession – people are buying more for lifestyle reasons and Canada offers great potential in lifestyle property buying,” he commented.

Mr Collins noted that Canada has a great deal to offer British people, adding that there are a huge range of activities on offer there, as well as attractions to enjoy.

Figures published earlier this month by the Canadian Real Estate Association revealed that residential sales activity in the country was up by 72 per cent in December 2009, compared to the same period in 2008, with the average home being priced at $337,410 (£198,567).

Written by Emily Sanders

Real Estate Q & A: If you rent out a home, tax situation could change

Real-estate transactions and the naming of a U.S. executor were among the topics raised in the latest batch of reader questions. Here’s what they wanted to know.

Real Estate Q & A

Q: “My parents live in a home that took 30 years to pay off. They have decided to invest their money in real estate after a $25,000 loss on their investments after the stock market tumbled in early 2009. They will spend about $30,000 to renovate their new condo and will then try to sell it. How can they avoid paying the tax on the sale of the condo without having to live there as their primary residence?”

A: They pretty much have to live in it to qualify for the principal-residence exemption. Otherwise, it’ll be taxable if sold for a profit, and if they’re not careful, may generate straight income, not a capital gain. Syd Berger, tax partner at accounting firm Bessner Gallay Kreisman, notes that a property not used as a principal residence is subject to income tax for the amount of the gain realized at the time of disposition. Capital gains apply only if the property was used for investment purposes – for instance, if it was rented out. “If the property is renovated and subsequently listed to sell, without any intention of a holding period for investment, the gain from the sale may well be considered as income and 100 per cent of the gain would be subject to income tax,” he said.

Q: “I live in Montreal and want to name my daughter, a Canadian living with her American husband and kids in Chicago, as executor in my will. Is this possible or will it cause tax problems in Canada?”

A: It’s not recommended. David Altro, a Quebec notary who does business in both countries, said the residency of the estate upon death could become an issue. The Canada Revenue Agency could consider it a non-resident estate, thereby complicating the tax issues.

Q: “My late parents in Greece bought a home in 1953 and left it to me in 1980. It was recently sold. Do I have a tax obligation from this transaction?”

A: It depends. If you didn’t own a house in Canada, and spent time at the property in Greece each year, you might be able to designate it as your principal residence and avoid being taxed on any capital gains accrued since 1980. Otherwise, you’ll have to declare the net gain on the property from the time you acquired it until the year of the sale, and pay the capital-gains imposition applicable that year.


Source:  by PAUL DELEAN | The Gazette | January 25, 2010

Week ahead: Weak GDP growth expected

Week ahead: Weak GDP growth expected

Derek Abma, Financial Post  Published: Friday, January 22, 2010 Economists are expecting Canadian GDP to have grown by 0.3% in November.

OTTAWA – Broad-based accounts of economic performance in both Canada and the United States in late 2009 are due in the coming week.

On Friday, Statistics Canada will be reporting gross domestic product for this country in November. On the same day south of the border, the Department of Commerce will provide the first of its three assessments of fourth-quarter GDP.

For Canada, economists are expecting GDP to have grown by 0.3% in November. That would compare with an expansion of 0.2% in October, which was the second straight month of growth.

Millan Mulraine, economics strategist with TD Securities, is a little more skeptical than the pack, forecasting November’s growth to merely match that for October.

“The recovery in the Canadian economy has been quite slow, as the combination of a strong domestic currency and weak U.S. demand continues to wreak havoc on the export-dependent Canadian economy, even in the face of strong domestic fundamentals,” he said in a research note.

Mr. Mulraine cited factors such as the housing market and wholesale sector as providing “favourable support” to GDP in November, with such effects offset by “weak consumer spending” and “soft manufacturing sector activity.”

CIBC World Markets economist Meny Grauman is even more pessimistic, calling for 0.1% growth in November. He wrote: “Although the outlook for the quarter as a whole remains quite good, that will largely depend on just how strong December turns out to be, as November looks like a dud.

“Despite expected gains in wholesaling and a number of other service sectors like finance and real estate, weakness in manufacturing and retail should keep the monthly print to only a disappointing 0.1% gain.”

CIBC is calling for annualized fourth-quarter growth of 3.5%. Canada recorded a 0.1% gain in the third quarter. That broke a three-quarter recession that started in late 2008. Canada’s fourth-quarter results are to be reported March 1.

Turning to the U.S., it is expected that the coming week’s report will indicate 4.5% annualized growth in the fourth quarter. That’s up from 2.2% in third quarter, which also marked the end of the recession there.

James Marple, an economist with TD, forecast that the U.S. GDP report will show 5% growth, largely as a result of a slower depletion in inventories.

“After a rather meek reading of 2.2% . . . for the final estimate of third-quarter U.S. real GDP growth, the fourth quarter of the year should be the first to resemble anything like a post-recession bounce,” Mr. Marple wrote. “Unfortunately, the rebound is not due to any new-found economic dynamism, but rather to a slowing pace of inventory liquidation after deep cuts earlier in the year.”

He said there was slower growth in U.S. consumer spending compared to the third quarter, and “business fixed investment remained another source of weakness.”

As for other Canadian economic reports in the coming week, payroll data from November is due Thursday, while prices for industrial products and raw materials from December will be reported Friday.

Also, earnings reports are coming from companies such as Canadian National Railway Co. on Tuesday and Tembec Inc. on Thursday.

Besides the GDP report in the U.S., the Federal Reserve will announce a decision on interest rates on Wednesday. It’s widely expected to keep the target rate at between zero and 0.25%. There will also be an array of data on the housing industry there. Existing-home sales are to be reported Monday, new-home sales are due Wednesday and the S&P/Case Shiller home price index will be released Tuesday.