Investors are entitled to the NRRPR (New Residential Rental Property Rebate), for which they must apply within two years, if their unit is leased out for one year. Sounds simple, right?

“There are a number of people who call me two years afterwards and say they wish they knew about it, and it happens more in the rental market than the build market,” said Michael Sproule, principal of Sproule & Associates. “About 25% of them don’t take advantage of the rebate, or they don’t file correctly, or they wait too long, or they don’t have the proper terms and agreements.”

In order to obtain the rebate, a Statement of Adjustment and a rental agreement for one year are required as proof. Sproule added that the latter is imperative, but many investors are either unaware of the stipulation or they make a critical error in judgement.

“The renter of the property has to have a one-year rental agreement with you, and if you do not have a one-year agreement you will not get your rebate back,” said Sproule, who warned about another frequent mistake.

“Sometimes, the builder or developer says, ‘We’ll sell you a condominium and once you close we will find you the tenant,’ and in those situations, you will not qualify for the rebate because, the way the CRA interprets it, that’s an arm’s length arrangement integral to the purchase of the property.”

If an end-user is purchasing the property, they’re eligible for the HST rebate—which the developer holds back on the property buyer’s behalf, unlike the investor who pays it upfront—through the New Home Rebate, but what if circumstances change—as they often do in the half-decade between purchasing and closing?

“A lot can change before occupancy, and the problem with the program is that it’s based on intention, but your intention when you close can be very different from what it was when you bought the unit,” said Mark Purdy, an HST consultant and real estate investor with familyrealtor.ca , adding that the hypothetical end-user, whose HST payment was waived by the builder, may change their mind and rent out the property instead. “Well, the CRA will come back and say, ‘You’re not living there, so we want that money.’ I’d say there’s a clawback 40% of the time. Things change, so now they don’t move into the unit because they found somewhere else, or they got married, or they have kids and the place no longer makes sense.”

While Sproule believes around a quarter of condo landlords leave that HST rental rebate on the table, Purdy says it’s more like 50-60%.

According to the rules of the rebate, fair market value is the price paid for the residential property—say, $400,000—but in the rental property rebate, there’s a mechanism that requires fair market value based on the present-day valuation.

“If I bought the property for $300,000 but it’s worth $500,000 when I close on it, there’s going to be a disconnect with the HST,” said Purdy. “On $300,000 as an investor, I’m going to pay roughly $24,000, but because it’s now worth more than $450,000, I’m not going to get the whole $24,000 back. I’m going to get around $21,000.”

The HST rebate is involuted in nature, but Sproule and Purdy advise investors to study the programs lest they leave five figures on the table.

A report by Point2Homes ranked Halifax, Nova Scotia in first place, followed by Windsor, London, and Oshawa in second, third, and fifth place, respectively.

The ranking compares average household income in the area with average home costs, as well as the percentage of your income that will go towards your mortgage.

In Windsor and London, the average homeowner only needs to spend 11.4% of their income on mortgage payments.

In Oshawa, it’s 12.1%.

The report claims that in Windsor and London, incomes have been increasing faster than home prices for the past decade.

Not all cities in Ontario are blessed with such affordability — the same report by Point2Homes claims that purchasing an average home in Toronto requires a yearly salary of $130,000.

The average selling price for a Toronto home was $930,000.

The investment is aimed at housing people who experience chronic homelessness and giving them supports such as counselling and addiction services to help them stay there.

Toronto is set to receive $90 million over three years and the province says it will announce funding for more municipalities this fall.

It’s the second announcement in recent weeks in which Ontario has doled out millions to Toronto on housing, which had become a contentious file between the two governments.

Mayor John Tory has long advocated for the need for more social housing money from the province, saying there is an approximately $2-billion repair backlog, and slamming the Liberals for a lack of support in this year’s provincial budget.

Housing Minister Peter Milczyn announced last month that more than half of up to $657 million over five years in money for social housing repairs and retrofits would go to Toronto.

So it’s rather fitting – and actually predictable – that after a year where every real estate projection was blown to bits by an utterly unforeseen housing boom, 2021 is already awash with a shower of predictions for the Canadian real estate market.

What follows is a selection of projections for the Canadian housing market from some notable experts –and whether Mortgage Broker News is buying or selling each one.

CIBC’s base-case scenario: Canadian home prices rise by 2.4%
CIBC recently came out with one of the banking sector’s more optimistic views for the Canadian housing market, a modest increase of 2.4% in real estate prices by October. (In December, RBC projected an 8% decline.) That’s the bank’s base-case scenario, or what could be expected if conditions today are allowed to continue. CIBC’s worst-case scenario involves a 6.9% decrease in home prices, while its best-case projection is an increase of 11%.

Buy or sell? Sell.

A 2.4% increase would place 2021 slightly below 2018’s increase of 2.51%, which seems unlikely. Remember that 2018 marked a cooldown period for Vancouver and the continuation of market softness across the Prairies, in Newfoundland, and, to a lesser extent, in New Brunswick. The current low interest rate environment has energized buyers from coast-to-coast, and prices have a long way to go in cities like Edmonton, Saskatoon, and Saint John before sellers will have trouble getting the prices they’re after.

Even though businesses will continue to falter as COVID-19 lockdowns drag on, the majority of the people who will be affected will be renters, not homeowners, so the possibility of a surge of inventory hitting the market and keeping prices in check is not one to bank on. Dwindling supply might hamper the number of sales that take place, but it will only increase prices. CREA expects the average home price to increase by 9.1% in 2021.

CIBC’s best-case scenario is far more likely than its base-case, although buyers might wonder who it’s actually “best” for.

“Supply shocks” could devastate Vancouver, Toronto markets
Investment research firm Veritas predicted that two possible “supply shocks” could lead to plummeting home prices: the liquidation of rental properties by investors and a catastrophic end to the country’s mortgage deferral experiment.

In exploring the latter possibility, Veritas ran three scenarios where between 5% and 15% of homes with deferred mortgages found their way on to the market after their deferral periods ended, resulting in real estate prices falling by 4-11% nationally, 10-17% in Vancouver, and 15-26% in Toronto.

Buy or sell? Sell.

Considering the fact that borrowers have been exiting deferral programs left and right since September and have yet to desperately flood the market with supply, there is little evidence that even 5% of deferred mortgages, let alone 10% or 15%, will prove so problematic that borrowers will have to liquidate their properties.

By October 31, the number of deferred mortgages at Canada’s largest banks totaled less than 70,000 and was 86.3% lower than in the previous quarter. In December, RBC announced that as of the end of October 2020, 90% of the deferrals offered through the bank’s client relief program had expired. Only 2% of RBC’s deferred mortgages had slipped into delinquency at that point, and a third of those were delinquent prior to the deferral being put in place.

Some borrowers will fall through the cracks and have to sell, but a 15% decrease in the average home price in Toronto? That would require an utter catastrophe.

Regarding investors, some will have to crash out of the condo market, particularly those who were using their properties as Airbnb’s and are now painfully cash flow negative each month. Many won’t be able to carry their properties until a flood of vaccinated travellers return to their cities, nor will they be able to afford to rent their properties long-term at today’s lower rental rates. But many will resist the urge to sell, knowing that the return of international students and other immigrant renters is inevitable, and that rents and condo prices will once again be on the rise.

Ex-urbs will see more activity than major urban cores
This projection comes courtesy of, among others, Moody’s, who said in late 2020 that it expects to see “greater resilience in lower-density markets outside Canada’s large urban cores,” driven by demand for properties with more space for working from home. Smaller, more affordable markets, Moody’s said, “will particularly benefit from this trend.”

Buy or sell? Buy.

This one’s a bit of a no-brainer, and not simply because of the new work-from-home reality so many of us are still adapting to. Remote work has simply juiced a trend that was already intensifying in Canada’s most active real estate markets: drive until you qualify. Now that remote work has freed so many Canadians from having to live within commuting distance of their jobs, they are able to purchase the properties they want essentially anywhere they feel comfortable living.

This shift in demand comes at an opportune time, when home prices in major markets like Toronto, Ottawa, Montreal, Victoria, and Vancouver are rising at a rate so far beyond that of their residents’ wage growth that moving hours away is the only way most of them will ever be able to afford a home.

But the secondary markets being buoyed by the urban exodus are not likely to remain affordable alternatives for long. Competition is already flaring up in off-the-beaten-path communities like Bancroft, Ontario, where the average home price in November 2020 was 24.3% higher than a year before, and in Woodstock, Ontario – population 40,000 – which saw its benchmark price for single-family homes leap 28.4% year-over-year in November.

It will be interesting to see just how much homeowners used to big city amenities such as widely available healthcare, abundant schools, and eclectic nightlife will be willing to sacrifice in order to find affordable housing. One assumes there has to be a limit, particularly for younger buyers who have proven willing to spend ridiculous sums on rent to live close to the action. But in a freshly birthed, post-COVID world, who can be sure?

Subsequently, the national average price in 2020 is on track to rise by 13.1% on an annual basis to just over $568,000 — reflecting the current balance of supply and demand, which heavily favours sellers in many local markets.

In Ontario, CREA forecasts that 228,665 homes will change hands by the end of the year, up 9.2% from 2019 levels,. While the average price should rise 17% to $708,377, up from $604,883 in 2019.

CREA’s forecast noted that mortgage interest rates have declined to record lows in 2020, including the Bank of Canada’s benchmark five-year rate, which is used by major banks to qualify applicants under the federal mortgage stress test, which has lead to more buyers being able to qualify for mortgages this year.

With the Bank of Canada committing to keep interest rates low into 2023 and with mortgage interest rates expected to remain near current levels through the new year, CREA forecasts 2021 will still be a strong year for sales.

“On a monthly basis, sales are forecast to ease back to more typical levels throughout 2021,” CREA wrote in the report. However, presuming there’s a more normal spring market in 2021, the year as a whole is expected to see more home sales than 2020.”

On a national level, CREA is predicting 584,000 home sales for 2021, up 7.25% year-over-year. All provinces except Ontario are forecast to see increased sales activity in 2021, as low-interest rates and improving economic fundamentals allow people to get into the markets where homes are available for sale.

For 2021, CREA has predicted that there will be 221,220 home transactions in Ontario, a decline of 3.3% from 2020 levels. However, average home prices are expected to climb 16.3% to land at $823,656.

“Ontario has seen strong demand for several years, particularly outside of Toronto, which has eroded active supply in the province,” CREA said in its report.

“The strength of demand, particularly for larger single-family properties, will drive the average price higher as potential buyers compete for the most desirable properties.”

This forecast comes as Ontario’s housing market was down on a year-over-year basis in November, however, this reflected a supply issue rather than a demand issue — particularly in the ground-home segment. This has led to the average home price in the province remaining up year-over-year.

The largest year-over-year gains in November — between 25- 30% — were recorded in Quinte & District, Tillsonburg District, Woodstock-Ingersoll and a number of Ontario cottage country areas.

Year-over-year price increases in the 20-25% range were seen in Barrie, Bancroft and Area, Brantford, Huron Perth, London & St. Thomas, North Bay, Simcoe & District, Southern Georgian Bay, and Ottawa. This was followed by year-over-year price gains in the range of 15-20% in Hamilton, Niagara, Guelph, Cambridge, Grey-Bruce Owen Sound, Kitchener-Waterloo, Northumberland Hills, and Peterborough and the Kawarthas.

Moreover, prices were up in the 10-15% range compared to last November in Oakville-Milton and Mississauga. Across the GTA, the average selling price for all home types was up by 13.3% to $955,615.

With just ten days left in 2020, CREA is far from alone with its predictions around average home prices increasing in the new year. James Laird, co-founder of Ratehub.ca, expects detached home prices will increase between 4 to 7% in 2021, with the strongest growth in the suburbs around major urban centres.

“With Canadians working from home, the demand will continue to be strong for more space. Larger homes outside of the city centre will see the strongest demand,” said Laird.

What’s more, Royal LePage, predicts that the median price of a standard two-storey home in the GTA will rise 7.5% next year, reaching an average price point of $1,185,800. In a significantly less dramatic increase, the median price of a condominium is forecast to increase 0.5% to $600,800.

Meanwhile, the aggregate price of a GTA home (all home types) is expected to increase by 5.75% year-over-year, ultimately reaching $990,300.

Looking ahead, only time will tell how the housing market will truly perform, but for now, let’s hope 2021 holds as much good news as suggested by the forecasted increase in home prices in the region.