Marco Chiappetta knows better than anyone how interconnected today's world really is.
As a sales representative for Sotheby's International Realty, he has access to real estate sales professionals in over 72 countries thanks to the strength of Sotheby's global brand.
“I have met with clients who have relocated to Florida for a work and lifestyle change; clients who are in the middle of right-sizing from a home in the suburbs and looking at purchasing a condominium suite in Yorkville, while also contemplating a second home in Southern California. Another client recently approached me about being referred to a broker in Valencia, Spain to assist him with purchasing a winter home,” says Chiappetta.
With so much experience representing clients with international real estate aspirations, Chiappetta is the perfect agent to answer this week's question.
If you are moving to Toronto from overseas or if you're moving from Toronto to a different country, what do you need to know about purchasing real estate?
First off, Toronto is a very attractive market for foreign investors. From the quality of our post-secondary education to the relative stability of our political landscape; Canada, and specifically Toronto, is seen by many across the world as a great market for investing and doing business.
That being said, foreign buyers should be mindful of the new mortgage stress test, which came into effect on January 1, 2018, for all insured and uninsured mortgages. Buyers will need to pass a stress test to obtain financing from a Canadian lender. This means all buyers will need to qualify for a mortgage that is two percentage points higher than the negotiated rate.
In April 2017, a Foreign Buyer’s Tax was also introduced by the provincial government. The Non-Resident Speculation Tax accounts for 15 per cent of the purchase price on a property. While the tax is up front, some buyers may be eligible for a Foreign Buyer Tax Rebate. The criteria for such a rebate includes becoming a permanent resident within four years of purchasing your property, having a work permanent for at least a year from the purchase of the property or being a full-time student for at least two years after the purchase of the property.
In addition to the Non-Resident Speculation Tax, foreign buyers should also be mindful of the Land Transfer Tax. In Ontario, there is a Provincial Land Transfer Tax and in the City of Toronto, there is a second Municipal Land Transfer Tax. Your real estate agent should be able to help you calculate the total amount of land transfer tax you owe when purchasing a property. It’s also important to keep in mind that when it comes time to sell, there may be a non-resident withholding tax of 25 per cent on the sale of the property.
For any of my foreign buyer clients looking to expand their real estate portfolio to include Toronto, I always recommend seeking the advice of a chartered accountant and a lawyer with the experience necessary to successfully facilitate a transaction without needlessly compromising the client. Our team at Sotheby’s International Realty can assist in putting together this kind of team of highly skilled professionals.
On the flip side, whether people are looking at securing a permanent home, a vacation home or a residence for a child being educated abroad, the global real estate landscape does not operate in the same fashion as it does in Toronto. In many markets around the world, buyers do not have the option of being represented by a real estate broker like in Canada. If a buyer wants to view a property, they have to contact the listing brokerage directly and it’s the seller who grants them access and shows them the home. In other markets, a seller can hire more than one brokerage to represent their property. Some countries also lack a centralized MLS system which often makes the search for a home a very fragmented experience.
When leaving the comfort of Toronto to purchase real estate in International markets, it is imperative to seek advice from local professionals. In my travels, I have found that no two places are quite the same. This is applicable even in the United States, where differing tax implications await depending on the state you are looking to purchase within.