Guide: Toronto Real Estate
Stability, good schools and clean air are just some of the factors drawing foreign investors to Toronto.
Lined with maple trees and large Victorian houses, The Annex is a prime downtown Toronto neighborhood. Its stately stone buildings house notable Canadians including the Eaton family, writer Margaret Atwood, John Ralston Saul and his wife, the former Governor General of Canada Adrienne Clarkson. And yet the area’s bucolic feel belies its central location. On a sunny September autumn afternoon, the streets are noticeably quiet, populated only by the occasional jogger or dog-walker. In the place of traffic, there is the sound of school children playing at a neighborhood school.
Toronto may be Canada’s business and financial center, but it is more akin to Melbourne than London or New York. The city contains pockets of urban density, but is comprised mostly of a series of neighborhoods, each with its own characteristics, that spread out across the northwest shore of Lake Ontario. The city of 2.6 million (5.8 million if you include the Greater Toronto Area) is known for its international population –about 49 per cent of the population was born outside Canada, as well as its thriving arts scene that includes nearby Stratford Festival, a center for theatre known for its productions of Shakespeare plays, and the International Toronto Film Festival, which rolls out a red carpet each September.
Toronto is also known as a city that is clean, safe and green, and for offering a lifestyle which, if you can cope with the winters, includes access to nearby beaches, sailing and ‘cottage country’, areas north of the city such as Muskoka or the Kwarthas which are dotted with lakes and private homes — a weekend escape for many Torontonians. The city is also home to some of the country’s top private schools and universities. Add these factors to the price of property in Toronto, which remains affordable compared with other international centers, and you have a recipe for foreign buyer activity, agents say.
“We receive a lot of inquiries from overseas buyers,” says Ross McCredie, President & CEO, Sotheby’s International Realty Canada. “In Toronto, we see roughly 25 percent of high end buyers coming from outside of Canada, from countries including China, the Middle East, the United States and Russia.”
Toronto broker Andy Taylor, who specializes in high-end condominium sales at Sotheby’s International Realty Canada, says that safety and quality of life are big draws for the foreign buyers he deals with. “I have found that foreign investors are looking at Canada and specifically Toronto because it is a relatively safe place to park their money,” he says. “The banking system maintained its strength through the financial crisis, and the political landscape is also very stable. The school system, especially Post Secondary schools like University of Toronto offer world class education and many buyers look at buying a property to eventually house their children while attending school.”
Foreign buyers are currently driving demand for luxury homes in the city, particularly those priced at over CAD$3 million, according to a report from Re/Max. In June 2015, there were 379 homes in that price range sold in Toronto, compared to 179 a year ago.
Re/Max brokers and agents reported luxury buyers, primarily from China, are typically families with children who are relocating to Canada to live.
“While there has been a lot of concern about foreign investors in Canada’s housing market, we’re seeing that the foreign buyers in our major luxury markets are living in their properties,” said Gurinder Sandhu, executive vice-president of Re/Max Integra Ontario-Atlantic Canada. He says the relative strength of the yuan, which wasn’t devalued until mid-August, helped make most Canadian real estate affordable.
As Andy Taylor notes, the depreciating Canadian dollar, largely due to low oil prices, also currently makes real estate a bargain for many overseas buyers. “Our dollar has depreciated 30 percent over the past nine months. That means a property priced at CAD$3 million is now $2.1 million.”
Overseas interest is adding a boost to one of Canada’s most dynamic and expensive real estate markets, and Paul Maranger of Sotheby’s International Realty Canada doesn’t see the trend changing any time soon. “Income and employment are strong. Interest rates are low. Unless one of these variables changed, we don’t expect prices to drop. Toronto has no land. Unlike many other cities, we are land locked by Lake Ontario.”
Traditionally, single-family dwellings in central locations were in the highest demand, and they record the highest price appreciation (see graph). But the market is changing. “Our market has changed drastically in the past 15 years. The residential condominium apartment now represents 50 percent of all sales,” says Maranger. “Toronto offers buyers the choice of private homes in leafy residential neighborhoods, or high-rise condominiums in the financial and entertainment districts and along the waterfront and major arteries.”
But the luxury of living in a sizable home close to the business district is still highly coveted, and largely unique to Toronto. “What distinguishes Toronto from other cities on the Eastern Seaboard of the United States is that we have single family detached homes, some on 2+ acres that you can drive to the downtown core in less than 20 minutes,” says Michael Kalles of Harvey Kalles Real Estate in Toronto.
Rosedale, an historically upscale neighborhood in central Toronto, offers an easy commute to the financial district and is home to many of the city’s top executives. The area’s stately, refurbished homes rarely come onto the market and they range in prices from $2 to upward of $10 million.
One Rosedale property currently listed with Sotheby’s International Realty features over 17,000sf of living space across five levels with undulating glass walls that back onto a ravine. Known as the Integral House, the property has an understated two-story street front, but expands over five levels on the inside and includes a spa level with a heated pool, an art gallery and music hall, and four bedrooms including a separate two-bedroom guest flat. There is an elevator serving three levels and, in consideration of the cold Canadian winters, the property features a heated driveway and walkways, and heated flooring throughout the residence. There are also three wood-burning fireplaces. The home is listed for CAD$22.9 million ($17.2 million).
“What is amazing about this home is that it is set in the ravine,” says Sotheby’s listing agent Paul Maranger. “Not at the edge of the ravine, nor set back from the ravine, which is the practice in Toronto, but literally in the ravine. It’s like living in a glass tree house.”
Other prime neighborhoods for larger, detached homes include Forest Hill, The Bridle Path, Yorkville, and Lawrence Park. Bridle Bath is the site of the city’s newest and largest homes. Properties here often range from 8000 to 25,000sf and are priced from around $3 million to over $20 million.
In the luxury condo market, Yorkville has traditionally been the premier neighborhood. The area is home to many high-end boutiques and fine dining options that are easily accessible on foot. Upcoming projects here include 1 Bloor Street East, a 70-story condominium tower designed by Hariri Pontarini Architects that will include a mix of hotel, luxury retail and commercial office space. “This combination, while common in Asia, is uncommon in Toronto,” Maranger says. “I think the tower will be in high demand.”
Toronto’s overall condo market has seen a lot of new inventory this year, particularly in Yonge and Eglinton area, a midtown intersection that has seen a surge of new development proposals thanks to a light-rail transit line now under construction.
Freed Developments Corp. has launched three projects in 2015, all of them near Yonge Street and Eglinton Avenue.
Overall builders launched 55 new projects and sold nearly 11,000 condo units in the first half of 2015, the third-best year on record according to research firm RealNet Canada Inc. Most of the sales activity has been among presales. The spike in inventory was among the red flags prompting Canada Mortgage and Housing Corp. to name Toronto a “high risk” housing market earlier this year. But with strong sales through the spring and early summer, unsold condo inventory ended the second quarter 13 percent lower than the same period last year, condo research firm Urbanation Inc. said. According to the Canada Mortgage and Housing Corporation, condominium starts will begin to slow down in 2016 as capacity constraints, especially in terms of labor and material and land supply shortages play roles in curtailing new home construction activity.
Inventory is also dropping in the luxury segment. “Inventory has come down and we’re seeing high demand and prices increasing,” say Andy Taylor. Demand is strongest in the CAD$3 to CAD$3.5 million range and is likely to outpace supply as fewer serviced luxury buildings come onto the market. Over the last five years a period of accelerated development in downtown brought to the market the Ritz Carlton Residences, The Four Seasons Private Residences and Trump International Hotel and Tower. But building in this market segment has slowed. “Half of the equation for luxury product is the lifestyle, the doorman, the valet,” says Taylor. “And for the moment we’ve maxed out on this.”
Canadian law allows foreigners (nonresidents of Canada) to buy, own, rent out and sell their property without any limitations.
Buyers of houses and condos in Toronto have to pay a provincial and a municipal land transfer tax when they purchase a property. Each tax is around 2% for homes exceeding $400,000. A lawyer will arrange for land transfer taxes to be paid when the deed to the new home is transferred into the buyer’s name.
First time homebuyers who plan to use the purchase as their primary residence may be eligible for land transfer tax rebates.
When foreigners sell their local real estate there are certain withholding taxes applicable on the sale. It is advisable to consult a local tax specialist and/or lawyer.
Text by Sophie Kalkreuth
This article was originally published in PALACE Magazine