Toronto's New Taxes Push High Earners Out Of The City & Top Markets To Buy/Invest Instead (W/ Darren Cabral)

Welcome back to another episode of Inside Canadian Real Estate. This one's going to be a shorter episode and it's going to be a solo episode. So you're just with me today. We're going to be covering some interesting stories that I just want to talk about that are relevant. And a lot of that's going to center around tax and some of the tax changes in Ontario and Canada and especially the ones that are related to real estate. Now that said, here's my disclaimer.

I'm not an accountant. I'm not a financial advisor. I'm a real estate agent. I'm a real estate investor. This is opinion and it's opinion based on articles I've scrolled through for about like 38 seconds that I just feel like we should talk about. And I'll be looking forward to jumping in the comments and continuing the conversation.

So I'm just going to bring you the information today. You tell me how you feel about in the comments underneath the podcast and the videos on Instagram wherever you're watching this and let's talk about it. But these are interesting. These are interesting headlines and they're pretty self-explanatory. So let's just jump into some of these. I'm going to have my phone out today, not because I'm texting anybody, it's just because I have the articles up.

So the first thing that we're going to talk about today that you've probably all heard by now is Olivia Chow, who is obviously now the mayor of Toronto has been doing. I can't, I can't even keep a straight face. Olivia Chow, who is the mayor of Toronto, has been doing some great work as she's been taking over management of the city. Most of that great work involves finding out more ways to take money from you and give it away, and the best one I've seen so far is the new property tax increase. So if you live in Toronto, Toronto homeowners are about to see a 10 1/2 percent increase to their property taxes. Keep in mind, they already pay some of the highest property taxes in Canada, but also they pay a double land transfer tax.

So All in all, their net tax on real estate is some of the highest. I think it is the highest in the country, maybe next to Vancouver. And Olivia Chow looked around and thought, we need more of this. And I think in her own words, it's if the rich, which are anyone who apparently anyone who owns. If you own a home, basically, in Olivia Chow's eyes, if you own a home, you're rich. That's what Olivia Chow thinks.

So if you own a home in Toronto, you're rich by Olivia Chow standards, and she thinks you need to pay more of your fair share so we can fix the city's problems. Because sorry, this is definitely going to get political. I should have warned you ahead of time. So if if political talk triggers you, this is probably a terrible show to listen to. But basically, according to Olivia Chow, we just take more money from people that own homes and spend it. We can fix the city's problems because we all know that the more money governments take from you, the better things get it.

Almost always, it almost always works. So I'm sure this will be no different. I'm sure they won't waste this money on projects that do nothing. They get half completed. I'm sure they won't send another $90,000,000 to the Caribbean, or another few billion to Ukraine, or another few billion to Israel. Well, we have 10 cities built and Canadians can't get homes.

I'm sure they're not going to do that. I'm sure they're going to use it very intelligently this time. I'm sure they won't even have to increase it again in a year when they say, again, this wasn't enough. But anyway, that's my little rant. So the property taxes are going up 10, 1/2%. That means if you want a home in Toronto, you're going to be paying more, period.

So on top of your cost of living, on top of the carbon tax increases that you're already paying, when you pay your gas bill, when you fill up your vehicle at the at the pump, you're now going to have to pay a little bit more. And that seems to be the theme of Liberal government this year is just a little bit more. They just need a little bit more of your money and they can fix things. Somehow. They never do. So if you're Toronto homeowner, this is just another thing kind of stacked against you at this point.

I hope. I hope you really like living there. Or I hope you're at some point considering to maybe get out of there, 'cause I think the best thing, if you're outraged about the taxes in Toronto, the cost of living in Toronto, the best thing you can do is vote with your tax dollars by leaving. Stop spending, property tax there. Stop spending your hard earned money on stores there. Stop paying the HST there.

Get out. Go to somewhere that actually appreciates you, that's a little quieter, that doesn't steal all your money. So I haven't looked. Pull it up. Tell me if you can find details. So yeah, my producer Anthony was here.

We didn't mic him up today, but he just said they're also introducing some sort of Toronto wide tax. They've they're considering a tax, which sounds like some sort of sales tax in addition to HST. Just for Toronto. He's going to pull up details here so we can cut back to this and give you some details. But yeah, that's what's happening basically in Toronto. So that's our first kind of update.

I'm curious how you guys feel about that. Let me know. I'd love to hear from you guys. What do you feel? Is the tax warranted? You think it's a good thing?

Do you think it's a bad thing? Do you think it will help? Do you think it's overdue? I don't know. Give me. Give me your opinion.

OK. So that's that one. Oh, sorry. I think Anthony has more info. Yeah. What's the sorry, Anthony just passed me his phone.

If you listen to this in audio, I highly recommend pulling it up on YouTube because it's going to be easier to kind of follow along Toronto to explore municipal sales tax as part of plan to tackle unprecedented financial crisis. Oh, awesome. So basically they want to have a 1% increase on top of HST. So from a 13% to 14% on everything you buy in Toronto, As if it wasn't already expensive enough, there's another one for you. So hey, this isn't to be doom and gloom. I'm just calling it like I see it.

This is what's happening in the city right now. I'm a big believer of, you know what, If you're not happy, leave. If you are happy, all the power to you. If you guys love Toronto, you love paying all the taxes. Keep doing it. Maybe it's your thing.

If you're not, there's other cities out there. There's other cities that want your money, that want your business, that want your property taxes. So don't forget that. Let's hit it with another one. So we have another tax that's coming in. This is another Toronto tax.

So for those of you that live in Toronto, you're going to love this one again in case the last two were not enough. So you have property tax going up, you have a proposed municipal tax, so an increased HST, basically. And now we have a luxury home tax which City Council green lights, This was just a few weeks ago, end of December, they green lighted this. They've been working on it for a couple years trying to figure out the numbers and the rates. Long story short, if you buy a home that's over $3,000,000 or you're building a home that's $3,000,000 or more, there's a new tax. And that tax rate is very difficult to figure out because it's on basically like a like a sort of a a scaled graduated rate.

So it's this percentage on this amount of the home and then this percentage and that percentage goes up and up. So for example, on the 1st 55,000, it's only half percent, but by the time you get to the the last two million and more, you're paying 2 1/2 percent on everything over that 2 million. So it's quite substantial, like a $3,000,000 house. The effective luxury tax on that home is going to be somewhere between 3 and 5% depending how expensive the home is. That's a big chunk on top of your double land transfer tax, on top of your property tax, and on top of the fact that you're buying the home with money that you've already paid income tax on.

It's your after tax income. So essentially, if you're in Toronto and this all goes through, what's going to happen here is you're going to go to work and make money. They're going to take half with what you have left. You're going to spend it on stuff, They're going to take HST from you, you're going to lose another 13%. They're going to increase that potentially to 14%. If that new Toronto municipal tax comes into play, then with what's left, you go to build your beautiful new luxury home and they're going to take another 4 to 5% on top of the price of that home while charging you double land transfer tax and then sending you a property tax bill.

It's literally being taxed from every angle you can like it's very hard to build any sort of wealth. There is no incentive for people with money. I know that people with money, and this is this is a hot topic in real estate right now because everyone's thinking about affordability and people that can't afford houses. What you need to understand is that people with money bring that money into the city when they live there. They spend that money on restaurants and bakeries and grocery stores. They build real estate, they build businesses, they hire employees.

If you penalize them for being wealthy and they just choose to leave because they can, who's going to be spending the money to spur that economy? Who's going to be creating the businesses? Who's going to be creating the jobs? You're going to have a huge decline in that, and the city as a whole is going to start to drop. You're going to have less and less activity in in the city. You're going to have less economic activity.

You're going to have less jobs. You're going to have less spending, right? That's not a good thing. That's why other countries around the world that are developing and trying to build their GDP, they create tax incentives to bring rich people there because rich people spend money. If you owned an island and you were the owner of Magic Island #1, and you wanted to get that island developed, you wanted to have money coming in so you could build things and build cities and build resources, you wouldn't just and say, hey, if you're rich and come here, we're going to penalize, you're going to take your money away. You'd say no, come here, spend your money, build your house, help us build roads, help us build businesses, help us get more people here.

You would incentivize the wealthy people to come work where you are, to live where you are, because that's what makes sense. Toronto's doing the exact opposite of that. And that doesn't it's not about hurting or helping rich people. It hurts the average person. Because when these rich people leave, their money leaves, the jobs leave and the businesses leave and the average people that live in the city that just are working, blue collar, white collar, they're the ones that end up holding that bag right. And then you see prices of everything go up.

You see economies turn. It's not good for anybody. So I know it's always popular to think like, hey, why not tax the rich. They have more money. We have to help people because they'll just leave and then you're not helping people. You're making everything harder.

That that's why we're here. That's why everything cost so much. That's why inflation is so bad. It's because we kept printing money and giving it to people that are non productive. We're giving it to people that are just burning the money, spending the money. Nothing is being created.

We're we were helping the bottom 90% with all the incentives, with all the Serb, with all the payments and all it did was create more inflation. You're just handing out money that we have to print and nobody worked for and then that money gets burnt and nothing gets created. And then at the same time you're taxing all the people that have any sort of production and then what do you get right? You get, you get that situation that we're in now, You get inflation, you get high cost of living, you get difficulty if you incentivize wealthy people to live, to spend, to work, to build, You get better cities, you get better economies, you get better opportunity.

That's a fact. That's how the United States was built up to this point. So every productive country in the world is built and that's how every developing nation is growing. It's built on commerce whether you like it or not. So you have to incentivize that, not penalize and tax that. And that's what's happening in Toronto.

So I know it looks like they're helping. They're not. This only is going to make things worse. Not to mention, things like the housing tax over the $3,000,000 mark are actually going to push up prices in the one to $2,000,000 range, even higher. So the the houses that were moderately achievable by middle class families like $1,000,000 home, a $900,000 home, those are going to be pushed up now in price dramatically because everyone knows if I build a $3,000,000 house, I'm going to have to pay this huge new tax on it. Well, I'm going to now look in the $2,000,000 range, which is going to put more demand on the $2,000,000 range, which means there'll be less houses available and there's going to be more pressure now on the $1 million range and so on and so on.

So the trickle down effect of that with more people moving down the price bracket to avoid the tax is going to make the homes that were affordable. Now those won't be affordable and those are going to become a luxury as well, right. So there's so many causes and effects when you do these kinds of things. They and they know this, they just do it because it sounds great to stand up there and say we're going to tax the rich, we're going to take money from the rich and we're going to have all these great social programs. They've been saying that for 100 years. It never works and yet we keep going for it.

So anyway, that's what they're doing with that one. So we have the new property tax. We have the proposed Toronto municipal tax and we have the luxury home tax. So these are all big topics right now in Toronto real estate. This is why I'm not a fan of Toronto. A lot of people like it.

I have friends that live there, I have friends that work there, I have friends that invest and build there and that's fine. It's not, it's not for me and I would highly consider. Now I'm going to talk to you as a real estate agent for a second. I would highly consider well you can before prices get suppressed further, like what we've seen in the commercial markets in Toronto, like the office markets when everyone's leaving before. You have this situation where it becomes a market that's not conducive to commerce, where rich people don't want to buy houses anymore and the premiums that they were previously paying, they're not paying anymore. Before that happens, consider consider selling your home.

Consider finding another pocket somewhere in Ontario that's still close to your work, close to your family, but maybe outside of the city limits where you can get two or three times more house, more space for your family with less taxes, less red tape, less bureaucracy, less crime, less everything, right. That's definitely something that you're going to want to consider. If you can do it, now's the time to actually do that. I wouldn't, I wouldn't wait until this goes sideways. So that's that. That's my advice as a realtor.

But hey, if you like it, stay there, keep doing your thing, do you? Next topic. Now this is not going to be tax related, so I'm going to go off kind of the the tax plan here for a second and talk about something else. It's it's a new kind of headline that's come up that I've just started seeing. We haven't heard much about. So I'm curious to kind of dig into it a little more in the coming weeks.

But basically plans announced for the biggest Co-op housing development in Ontario. So essentially there's a cooperative housing plan which is a collaboration between some non profit groups, the municipality and some for profit developers to build basically the largest Co-op housing group. It's it's a large apartment complex, there's multiple buildings, a high rise in there, it's a huge development and it's comprised of about 900 homes. So 900 units will be in here. It's the biggest Co-op housing unit they've actually built in 25 years. It's a pretty big deal.

They're all going to be rentals and they're all going to be a mix of various affordable housing type rentals. And so the majority of these are going to be basically priced as kind of like rent adjusted. So income adjusted rentals where basically you're going to pay what you can afford based on what you make with the average rent being somewhere between 40 and 100%. So there's a scale, so as low as 40% of market rent. So if rent is $10,000 a month, you're only going to pay $4000 a month for example, right? That was a random number.

The rent's definitely not going to be that much, but just as an example. So it's going to be as low as 40% of market rate if you don't make enough money or you have a lower income and that's going to be all the units pretty much. They're all going to be some sort of either like rent controlled or rent matched to kind of or or market match to income. That kind of deal. I don't know if this is good or bad thing. I mean it's a good thing because I know people need housing.

The problem that I tend to have with these is what do they look like in 10 years? Because every Co-op housing building we've ever built essentially turns into over time a very non desirable place. They they tend to be quite rundown. You have a lot of crime. The buildings become dilapidated, they don't get maintained properly. They get destroyed.

The city doesn't do a good job. The tenants don't do a great job. So I I I don't, I don't know how this one's going to going to pan out. They said that it's it's unclear how the ownership structure is going to work, but they did say that the people living there are going to be basically make up essentially the condo board and be able to kind of make their own rules and their own governance that would be interesting. I hope this works. I don't, I don't know how it will work, but again it's one of those things they're going to dump a lot of money in and hopefully it actually has a positive result.

So I'm curious what you guys think about these sort of dedicated Co-op housing builds with with rent controls and rent kind of marked to income where we're reducing rent based on your income and all this. What do you feel about that versus just focusing on building more traditional rental supply, affordable rental supply, but that's kind of free market if we build enough of it, we build them low cost, we have lower rents. Like what do you think of that versus this model or versus building more affordable even condo units for resale and just trying to get cost down on those or do you think the solution is a mix of all of them? I'm just curious what you guys think.

So let us know in the comments whether you're watching on YouTube or on social, if you're on the podcast on Spotify, feel free to join us on Instagram on social at inside Canadian real estate and just join the conversation there. But I'm just curious what you guys think of this and if that makes sense to you. But I thought I'd talk about it 'cause I think we're going to see a lot more of this. And this seems to be the focus now of a lot of the government initiatives is purpose built rentals and affordable housing, rent controlled units. So we'll see. We'll see how it goes.

I mean, Toronto Housing and all these organizations haven't had a great track record in the past. So if this ends up being anything similar, might not be great. I know that they're intended as stepping stones of getting people in and getting them a start. The problem is it almost never ends up that way. People get into that system and they just never leave and they become dependent on it. And so they become dependent on the government bodies that funded and subsidized it, which is not a good thing for you and I.

It's not a good thing for society, but I guess it's a good thing for government. So the more people depending on them, the more power they have, I guess the better chances they have of being re elected, the longer they stay in office. So it's all good, right? But I'm curious what you guys think. I know we're getting a little deep down the political rabbit hole today. I haven't done that often.

I don't do that often. But I felt today, with all these new announcements in 2024 of just like taxes and and all these things coming out, I thought we just have to talk about it, 'cause it as if you're an average Canadian, if you're a taxpayer, this stuff's on your mind. You want to know where your money is being spent? What? What are they doing? What are they building?

What are they taking from? You want to know? So I thought I'd talk about it. So that's that note. The last thing we'll talk about now we're going to go from kind of like negative news to medium news to some positive news. Let's talk about the real estate market and kind of what markets we're seeing now doing good and where some opportunities are so far in 2024.

So real quick is going to be a quick one. But basically we talked a lot about Toronto, but all the tax increase, all this, I think that's going to negatively impact a lot. I think you're going to see a drop in condo prices for sure. We have a lot of new condo supply in Toronto, a lot of new condos being built and with all the taxes cost of living all this a lot less desire to be in the inner, inner, inner city. So that's going down. But what is going up is the suburbs around these pockets.

So areas, I mean all over, like we call it kind of Silicon Valley of of of Canada or of Ontario, which is that whole like Guelph, Waterloo, that whole corridor, lot of growth there, lot of growth in home prices, a lot of growth and demand, A lot of companies putting massive headquarters in there, a lot of big tech companies investing billions of dollars in fulfillment centers in research centers, That's becoming a really interesting area of Ontario is if you go a little bit out West and have a look out there, we have some great universities out there. And like I said the headquarters for almost every major tech company is going to be going in there along with manufacturing, with logistics, with fulfillment centers that western pocket like go anywhere around even like London.

There's a lot of interesting stuff happening out that way. So if you're a real estate investor or even a home buyer, look out that way. It's definitely something interesting to take a peek at. OK. The other pocket that's interesting is the Simcoe County region, so anywhere from basically Bradford all the way up to the Muskokas, if that's your thing. These areas are are set to skyrocket, especially the southern points like Bradford.

Bradford is the most southern part, basically of Simcoe County. And the crazy thing with it is like the prices right now are almost on par with what Innisville is, which is another 20 minutes N it shouldn't be, it should be a lot higher. We have closer access to the city. We have basically the 400 comes right through Bradford and so you have instant access to the highway, you have go trains and transit access. You have all the infrastructure, you have retail, you have access to malls 5-10 minutes away like Upper Canada mall which is a world class mall. You have a lot going for the city and yet the prices are the same as areas like Innisville for example.

So Bradford is primed to definitely boom. There's not that much new development coming up for detached homes. So there's going to be a low detached home supply in the coming five years and you have a great quality of life, like you have great roads, great communities, great schools and access to everything. Especially with the Bradford bypass coming, it's going to push values even more. If you ever thought about moving N Bradford's definitely a good place to be if you're comfortable. Going even more north in this field is a really interesting spot Still, I think a little expensive still for what it is, but it gives you a much more rural feel without being actually completely isolated.

You're still can be relatively close to the four hundred 30-40 minutes into the city if you need to get into Toronto, but you have a very country, rural vibe. It's a good place to look if you're looking to move your family, if you want a little bit of a quieter pace, a little bit more space and land. And you're willing to go into a bit of an older house. You can find still some great deals on big pieces of land in great pockets of Innisville. You're 5-10 minutes from the lake. You're 30-40 minutes from downtown Toronto where you need to be.

You have lots of nature and fresh air. It's a beautiful spot to be. If you're OK going that far and want more density, Barry's another option. Barry's going to be a great place in 2024, I think for you guys to look. If you're if you're looking to start a family, prices are great, even cheaper than Innisville in many cases but still a very hot market like I sell a lot of houses in in Barrie World War 2-3 days on market like moving very quickly, lots of demand but price is still very fair where if your budget is like 707 fifty you can still find good detached homes. You can find good real estate in that price point and they have a great waterfront every kind of amenity every kind of public transit everything.

So very, very good spot to be. Now if you want to go really far and you're comfortable, you're saying, hey, I've had enough of this city, I want to move my family out or you're looking to invest. The Muskokas are very interesting right now. There was a bit of a panic in cottage country, a big depression in prices up in the Muskokas for different pockets. Brace Bridge is really exciting to me right now. I'm really looking at Brace Bridge for investment opportunities, development opportunities.

The town's been quite compliant and working with developers. I know a lot of friends and I've had family move up to Brace Bridge where they've sold their house closer to the city and they were buying. I I had a friend buy basically 5 acres for like $600,000 with a 2000 square foot detached home and they moved up there with all their kids. Their family like they're coming from place where they were spending $1,000,000 for a shoebox essentially. So for half price they got essentially a family acreage. Quality of life is beautiful.

Bracebridge and Muskokas in general have next to no crime. The nature and scenery is fantastic. So another great pocket to look. So there's a lot to be hopeful for in the Ontario real estate market. Now I don't look much out east, so I won't speak on that, but I know that there are some beautiful pockets that are booming that are kind of posing a lot of opportunity. Like I know Lindsay ON is getting kind of hot.

I know there's some opportunity out in whippy and out that way, but it's just not something I look at. So I'm going to stick to the the West End right now and my big recommendation of look at Simcoe County, it's it's poised for some pretty strong growth I think over the next few years. And it's an area that I do a lot of business in as a real estate agent and it's also an area to do a lot of business in as a real estate investor. Most of our investments are flips, all that stuff is happening in Simcoe County and it's been an absolutely fantastic market where pricing is super reasonable but demand still stay strong. So there is some positives if you live in Toronto, not so many positives if you're willing to get out of Toronto, there's a lot of good stuff going on.

So don't be afraid to look at these other cities, whether it's for, again, you personally, your family want to move there or if you're an investor looking for new places to get your money to work. There's a lot of opportunity in these pockets. So I'll end on that note. That's my positive. Still lots of great things happen in the real estate market. Again, we think rates are probably going to be coming down.

I talked to us a few times, I'll have a mortgage broker come on one of our next episodes to talk about rates this year. They're definitely coming down. I think we have about three rate drops coming that are planned and so rates will come down. We're going to expect a little bit more demand in the housing market and now's a really good time. If you ever considering a move or relocation to get out of the city, get into different pocket, now is going to be a time to do that. I think we have a lot of growth ahead of us.

It's going to be a rough time until about summer of this year, but I think from summer into winter of 2024, we're going to start seeing some good strong growth. So if you're going to make any moves, investment for your family, whatever your home, do it before summer 2024, that's the time. So that's my news, that's the breakdown, That's my Soul episode. Hopefully you guys enjoy talking about taxes and the new Corp developments and kind of what's going on different markets. And I'll see you next week on another episode with another great guest. See you there.