While the market statistics have been widely exposed for October, I’d like to focus the better part of our newsletter today on two topics relating to Toronto real estate which seem to be receiving less media attention than the statistics.

CREA’s Proposed Ban on Exclusive Listings

The Canadian Real Estate Association has recently announced a change in its rules for 2023 that will grossly prevent homeowners in Canada from selling their properties ‘exclusively’ (off of MLS). 

You might ask: Why do sellers list exclusively anyway? 

There are a variety of reasons a seller might want to avoid going to MLS. Most commonly, it is for privacy reasons. Perhaps the family has gone through a public tragedy, and they do not want the sale of their home visible in the public eye for further scrutiny. Perhaps the seller is a publicly traded company CEO and about to leave their current job but has yet to announce their resignation. A sale of their home would trigger this knowledge. Or perhaps the seller is just very private in their personal dealings and simply wishes to trade their real estate assets in confidence. There are many variables I have encountered with sellers in Toronto that made them pursue the exclusive option of selling their homes. To me, it seems a reasonable right to have.

Okay, then how do these exclusive sales happen?

The sale is most commonly generated through our agent networks. Our team has mass email connections to agents working throughout the Toronto market, is connected to large chat groups to discuss off-market options, and takes part in general agent interactions at brokerage meetings or agent open houses where we can openly discuss the exclusive options we hold. Also, as a team with a large market share of listing inventory, we often know the cooperating agents with well-suited buyers who have repeatedly come to see our listings throughout the year. Our team holds an extensive database of contacts (“leads”) who have expressed interest in our listings for specific neighbourhoods and are keen to be aware of off-market opportunities. These are networks and relationships we have been working hard at for decades that offer a unique benefit to those who work with us as realtors and provide the opportunity for our seller clients to sell quietly, out of the public eye.

So what’s changing?

These new rules imposed on CREA’s 155,000 participating agents would mandate that any publicly advertised ‘exclusive’ offering would be required to go to MLS within three days of its public exposure. As agents, we will be permitted to discuss exclusive listings within our own brokerage, but as soon as it is publicly advertised (whether it be online or in print), discussed outside of the brokerage, or any sort of “for sale” sign is installed, then the property will need to be added to the MLS system within three days. How these rules are to be enforced is yet to be disclosed.

When does this start?

It was proposed to start in January of 2023, however there has been such strong resistance from realtors and property owners alike that the Canadian Real Estate Board is now going to tender a vote to its members. This will delay the implementation of this change, and as well will likely result in modifications to the policy CREA is trying to implement.

As a property owner yourself, I would welcome your thoughts on this subject matter, either for or against the proposed rule change. Should this be a topic of interest to you, please let us know, and we will gladly keep you informed of further changes to this in advance of the new year.

Ban On Non-Resident Home Purchases

My second topic is related to “foreign buyers” in Canada. Both the Federal and Provincial governments in Canada are taking continued action in their efforts to curb foreign purchasing of Canadian real estate. These initiatives are suggested to help curb the increase in the average sale price and create opportunities for Canadians to acquire property at home.

Provincially:

As of October 22, 2022, in Ontario, the non-residency tax on the acquisition of real estate was raised from 20% to 25% of the purchase price and due on the completion date. When the percentage was increased from 15-20% in March of 2022, we were experiencing peak sales performances for all types of residential property in Toronto. This was also the month, of course, when interest rates began their ascent. At ground level, I have not had any foreign buyers pull back from purchasing real estate in Toronto due to either of these increases. However, I have seen a rise in demand from foreign buyers wishing to purchase property this fall due to the Federal Bill C-19, which takes effect in January of 2023.

Federally:

In June of 2022, the Liberal Government passed a law in Parliament called the “Prohibition on the Purchase of Residential Property by Non-Canadians Act.” This applies to residential real estate purchases after January 1, 2023. 

The law (noted under Bill C-19) imposes a two-year ban on foreign investment in Canadian housing from purchasers that are not Canadian citizens or permanent residents. To put it more clearly, it makes it illegal for foreign buyers to purchase (most types of) residential real estate in Canada. The legislation is being implemented to “grow our economy and make life more affordable for Canadians.”

Exceptions, of course, are noted. The ban does not apply to non-residents whose spouses are Canadian Citizens, nor to permanent residents, International Students on the path to permanent residency, individuals with work permits residing in Canada, purchases of multi-plexes with more than six units, commercial properties and vacant land.

A $10,000 fine will be applied to anyone violating this law. Following this, the federal government may apply to the associated provincial superior court to gain an order to re-sell the property (at a price that is no more than what it was originally purchased for). 

Arguments have been tabled that this new law will be deemed unconstitutional, so again, revisions may be made prior to the January 1, 2023 implementation. As of now, there is a red line in the sand preventing “foreign buyers” from entering into an agreement of purchase and sale in Canada for residential properties, and those involved in the trade (agents, real estate lawyers) will also be liable for their participation. 

I welcome your thoughts and comments on these items at your leisure. I will endeavour to bring you closer to the details of these new mandates as we progress and any further changes that might take place prior to January 2023.

I hope you are enjoying your fall and wish my American clients a very Happy Thanksgiving next week.