Real Estate

Did we just hit the bottom of the Toronto RE correction?

  • Last Updated:
  • Oct 22nd, 2017 1:43 pm
Member
May 9, 2017
313 posts
354 upvotes
ilim wrote:
Aug 11th, 2017 2:35 pm
You actually much closer to correct numbers than Jungle .

Even with 500K of profit you pay around 16% of tax, we have brackets based taxes ,so Jungle's rounded up 27% never will happen even in theory.
Heck even for 1 million gain you pay just north of 18%.

http://www.icalculator.info/canada/fina ... nnual.html
Your numbers are only accurate if you have no other income so they are at the low end.

If you are in the top tax bracket and your marginal tax rate is 50% your capital gains tax would effectively be 25% (50% inclusion x 50% tax rate).

Ontario's top marginal tax rate is 53% so 27% is indeed possible if you are a high earner.
Sr. Member
Jan 17, 2006
553 posts
264 upvotes
Toronto
ahlaker wrote:
Aug 11th, 2017 3:14 pm
That link quotes 2014 tax rates. Put a $500k gain into StudioTax 2016 and you'll see that in Ontario you're paying $98.5k in taxes. That works out out to 20% -- and that's if you have no other income. If you're already near the top rate, you'll get no benefit from the "brackets based taxes" you're quoting. Someone already making $150k in Ontario who sells their property for a $500k capital gain will be paying ~26% on their capital gain. @Jungle's numbers could certainly happen "even in theory".
No 27% will never happen. 1 million will fetch around 23%
500K around 19%
300K around 15%
900K around 22.6%
So still most people will be within 15-19% range unless you got lucky.

https://simpletax.ca/calculator
Member
Sep 19, 2012
411 posts
247 upvotes
Calgary
ilim wrote:
Aug 11th, 2017 3:35 pm
No 27% will never happen. 1 million will fetch around 23%
500K around 19%
300K around 15%
900K around 22.6%
So still most people will be within 15-19% range unless you got lucky.
https://simpletax.ca/calculator
Your numbers are only accurate if you have no other taxable income in the year. IMO, that is not particularly useful for most people.
ilim wrote:
Aug 11th, 2017 3:36 pm
Smart people will also sell it through corporation or trust or something else I don't know about to deffer the income when your personal taxes are minimal, but for this you had to plan ahead.
You're essentially saying: "Don't worry, my numbers are right because Joe Real Estate investor will do some unknown stuff to reduce taxes by planning ahead". Ok then.
Last edited by ahlaker on Aug 11th, 2017 3:44 pm, edited 1 time in total.
Sr. Member
Jan 17, 2006
553 posts
264 upvotes
Toronto
ahlaker wrote:
Aug 11th, 2017 3:44 pm
Your numbers are only accurate if you have no other taxable income in the year. IMO, that is not particularly useful for most people.



You're essentially saying: "Don't worry, my numbers are right because Joe Real Estate investor will do some unknown stuff to reduce taxes by planning ahead". Ok then.
Yes, edited my previous post. You of course assume that every investor is a regular Joe that does not know how to plan his taxes.
Anybody who is incorporated , most realtors and investors are, easily will deffer their personal income to next year after they sold the property, but yes those who have high paying day job will pay extra but again, they are not the ones you have feel sorry about.

And even if it above 20% it is still much more favorable tax than other type of income.
Member
Sep 19, 2012
411 posts
247 upvotes
Calgary
ilim wrote:
Aug 11th, 2017 3:36 pm
Edited: with high income it really adding up, not applicable to me again as I can deffer my business income through corporation but I guess if not planned regular high earners will pay more. Most of the investors though have business so they can correctly plan their taxes.
We're both right, how about that? High fives all around! In your case where you can control your taxable income, you'll pay ~19% personal tax on your $500k capital gain. For others that earn their money via salary, if they are in the top tax bracket in Ontario, they'll pay ~27%. So we can agree that the range of tax rates on a $500k capital gain is 19% - 27%, yes?
Member
May 9, 2017
313 posts
354 upvotes
ilim wrote:
Aug 11th, 2017 3:35 pm
No 27% will never happen. 1 million will fetch around 23%
500K around 19%
300K around 15%
900K around 22.6%
So still most people will be within 15-19% range unless you got lucky.

https://simpletax.ca/calculator
You are looking at effective tax rates. @ahlaker and I are talking about marginal tax rates (the tax you pay on an additional dollar of income).
Sr. Member
Jan 17, 2006
553 posts
264 upvotes
Toronto
NotRobot wrote:
Aug 11th, 2017 4:08 pm
You are looking at effective tax rates. @ahlaker and I are talking about marginal tax rates (the tax you pay on an additional dollar of income).
I gave you precise numbers on exact amounts of capital gain in Ontario, the rest is your personal circumstances and tax planning situation.
Member
Aug 7, 2014
295 posts
85 upvotes
dantey wrote:
Aug 11th, 2017 3:15 pm
Vancouver - home of the rich retirees or poor youth/youth of the retirees
Toronto - home of the youth with jobs or parents of the youth
Vancouver is the better choice than Toronto for most asian rich investors in real estate because (a) closer to "home country", (b) warmer winter climate, (c) land scarcity (because of ocean on one side and mountain on the other) meaning more price appreciation, and (d) fresh sea food that most asians love....
Member
May 9, 2017
313 posts
354 upvotes
ilim wrote:
Aug 11th, 2017 4:13 pm
I gave you precise numbers on exact amounts of capital gain in Ontario, the rest is your personal circumstances and tax planning situation.
You gave a special case of no other income which is most likely applicable to very few to show a low tax rate to show someone else was incorrect in what they said. I never disputed your numbers when there is no other income.

You said 27% is impossible. 27% is actually a possible marginal tax rate of capital gains if you are a higher earner.

Of course personal circumstances and tax planning matter.

Enjoy your weekend.
Deal Fanatic
User avatar
Oct 23, 2003
6556 posts
739 upvotes
rjg4235 wrote:
Aug 11th, 2017 3:10 pm
Toronto has 2,500,000 people born in other countries. That is 4x the entire population of Vancouver... I think it's safe to say plenty of immigrants choose Toronto...

8 of Canada's richest 20 people live in Ontario, 1 lives in BC... I think it's safe to say wealthy people choose Ontario...
Toronto can have 250 million people born in other countries, all of them together would have less purchasing power than 5-10 resident of West Vancouver. Money is still money. Mexico and Beijing, as random examples, have many more millions of people, doesnt mean everyone wants to be there.

8 of Canada's richest 20 "live" in Toronto during the summer, and even then, not necessarily all of it. Anyone that rich, does not "live" in 1 place.

You're also forgetting those Canadians have Canadian businesses and NEED to manage them, from Toronto. Whats a foreigner who runs 10s or 100s of millions of dollars in international businesses going to do in Toronto if thats not where they work?

Toronto is a working man's city. All of those 8 have Toronto based businesses, would have little need to be in the city otherwise. Probably would own some RE but "live" for a few weeks in Muskoka or cottage country somewhere.

No one lives in Toronto because its the perfect climate or vacation spot. Its a post industrial city that runs the financial sector for most of Canada, thanks 100% to the Quebec separatist movement that scared all the big banks from Montreal, off into the southern distance.

Its RE is fine, but there's only 1 place in Canada that has a warmer winter climate.
[OP]
Deal Addict
Feb 22, 2011
1675 posts
1475 upvotes
Toronto
Buggy166 wrote:
Aug 11th, 2017 6:05 pm
Toronto can have 250 million people born in other countries, all of them together would have less purchasing power than 5-10 resident of West Vancouver.
Lol...
Deal Fanatic
User avatar
Oct 23, 2003
6556 posts
739 upvotes
rjg4235 wrote:
Aug 11th, 2017 6:16 pm
Lol...
not sure if you've noticed much but equal wealth distribution isnt a thing, so there are singular people with more purchasing power than millions of others put together.
[OP]
Deal Addict
Feb 22, 2011
1675 posts
1475 upvotes
Toronto
rjg4235 wrote:
Aug 10th, 2017 12:40 pm
Zolo is showing Toronto up 7.1% YoY, seems like all the prediction of a negative YoY by September are going to be wrong.

Active listings down to 5679.

Anecdotally I have heard realtors stating clients who were having issues selling at the price they want have decided to capitalize on rent market and list property for lease instead. One thing a lot of people forget is that there are options for homeowners.

edit; I'll just add people expecting a rush of people trying to sell in fall might be disappointed. There was a rush in April because it was a hot market with inflated prices. It makes sense people would rush to cash out then, especially with new rules causing uncertainty. I doubt people will rush to sell in a depressed market.
Zolo is showing Toronto up 7.9% YoY now. Definitely not a perfect indicator but doesn't seem like the sky is falling either. Seems to be getting more stable. I think it's because the ratio of homes to condos is evening out. House sales down 29% vs 20% for condos.

https://www.zolo.ca/toronto-real-estate/trends
Deal Addict
Feb 2, 2014
3963 posts
768 upvotes
Toronto
Here's my take on what is happening....

Q1 had mind blowing numbers.

Sellers eventually found out what their property was worth and decided to cash out in Q2 (investors, people wanting to downsize...)...as a result, supply became very high.

With the high prices, new rules and media, buyers decided to sit out for a while...so you have a high supply due to the crazy Q1 prices and lower demand because buyers are hesitant.

Now all the seller's can't sell at Q1 prices, so properties are sitting on the market. Eventually they will take the listings off the market and all the buyers will re-enter the market.

Hopefully at this point we will finally have a balanced market.
Kevin Somnauth, CFA
Mortgage Agent and Real Estate Sales Representative
[OP]
Deal Addict
Feb 22, 2011
1675 posts
1475 upvotes
Toronto
CdnRealEstateGuy wrote:
Aug 12th, 2017 4:05 pm
Here's my take on what is happening....

Q1 had mind blowing numbers.

Sellers eventually found out what their property was worth and decided to cash out in Q2 (investors, people wanting to downsize...)...as a result, supply became very high.

With the high prices, new rules and media, buyers decided to sit out for a while...so you have a high supply due to the crazy Q1 prices and lower demand because buyers are hesitant.

Now all the seller's can't sell at Q1 prices, so properties are sitting on the market. Eventually they will take the listings off the market and all the buyers will re-enter the market.

Hopefully at this point we will finally have a balanced market.
This seems pretty rational to me. Q1 was definitely out of control but I don't think this summer lull is the new norm either.

I think the lack in sales is due to uncertainty, I don't think the underlying demand or desire to own a home in Toronto has changed.

Top

Thread Information

There are currently 5 users viewing this thread. (1 member and 4 guests)

gblue