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A Guide To Buying A House In Canada

There’s a lot to love about Canada. The world’s second largest country is home to a vast, pristine wilderness of rugged woodlands, snow capped peaks and glittering lakes. The cities too have a lot to offer, with a vibrant cultural scene and a booming jobs market.

On top of that, Canada enjoys some of the best quality of life anywhere in the world, supported by universal healthcare, excellent public healthcare and a population famous for its friendliness.So it’s hardly surprising that almost a quarter of a million expats flock to Canada every year, making it one of the most popular destinations for temporary and permanent immigrants.

However long you intend to stay for, you can make Canada your home. There is no restriction on owning property and prices can make this an attractive proposition. If you intend to stay for less than a year, you can still open bank accounts and buy property, but if staying longer, you must register as an immigrant.

Although expats go through the same process as any Canadian buying property in the country, that system can be strange and confusing to those who are not familiar with it. It doesn’t help that as well as federal rules which apply across Canada, each province has the power to institute its own rules, taxes and limitations.

At every step of the way, seek out professional advice and follow the tried and tested routes of sealing the deal. It’s not unusual for Canadian agents to work on behalf of overseas buyers and most are happy to communicate over email and video calls whilst hunting for your ideal home.

Canada has long attracted expats, those seeking adventure in the wilderness and opportunity in the cities. Whatever dream you are chasing in the country, make sure it doesn’t turn into a nightmare with a bad property investment.

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Choose a location

Canada is vast. It’s big enough that even with a population of nearly 34 million, it has one the world’s lowest population densities. You can easily find a slice of peace and quiet in the woods, away from the hustle and bustle of cities.

It’s important to consider exactly where in this mighty nation you want to live and the lifestyle you want to enjoy. A rugged, rustic existence is easy to find, but isn’t right for everyone. Those who enjoy takeaway coffee and the latest fashions will find themselves as comfortable in downtown Toronto as aspiring lumberjacks are in British Columbia.

Canada is bilingual, with English spoken as a primary language everywhere apart from Quebec where French takes precedence. The culture varies from region to region, with the northerly areas seeing a greater influence of Inuit tradition and frontier spirit.

The climate too changes across the country, from freezing arctic conditions to hot, balmy grassland. With giant lakes, two long coastlines and mighty peaks, weather conditions can be extreme and varied. The same city can swelter in summer and freeze in winter whilst the same day can see wildly different forecasts for the same province.

Location can influence the pricing of property to a great degree, with prices rocketing for fashionable neighbourhoods in mild Vancouver, but plummeting for the more chilly and remote villages on Prince Edward Island.

House prices aren’t as volatile as those in other developed nations, but over the course of a few years a city can go from the most expensive, down a few spots and back up. As a rule, prices go up a little above increases in consumer spending power.

As of June 2015, the most expensive average property could be found in British Columbia at CAD$632,000 and the lowest in New Brunswick at CAD$164,000.

Choose the kind of property you want

Start with online research to get an idea of just how diverse the Canadian property market is. Buyers can snap up everything from apartments to Victorian townhouses, log cabins to mansion and loft conversions to prefabricated family dwellings.

There are plenty of Canadian realtors with online listings, and agents around the world also advertise property in Canada. Expats already in the country should also check out the listings pages of the local press to see what houses go for what prices.

Some expats have gladly paid over the odds for fairly average accommodation, prompting a backlash in the media about foreign investors driving up base prices. One Chinese expat spent CAD$1 million on a simple bungalow in north Toronto, whilst Brits buying up cottages in Newfoundland have faced similar accusations. So look carefully into what you’d get for your money and see if the price tag matches the quality.

Older, weather-worn houses sit on the market alongside brand new, luxury versions, giving a wide spectrum of prices. An older three-bed detached house can cost as little as CAD$155,120 compared to a newer property of the same size weighing in at a whopping CAD$3,105,018.

Decide what you will do with the property

Even though there is nothing to stop expats snapping up property in Canada, they may find themselves restricted as to how much time they can spend living in it. Most ‘visitors’ are allowed to stay for six month stints but restrictions are in place to prevent ‘flagpoling’. This is a technique where visitors fly to their home countries for a few days and then return for another six months.

The majority of expats will be on one or other of a wide range of visas, giving them the right to work in the country under certain conditions or for a set amount of time. Obviously, these restrictions will inform what you may want to do with any property you buy.

It’s not uncommon for expats to buy a property and rent it out for part of the year, or even to let it out long-term with a view to a permanent move in a few years.

Anyone buying property faces the same taxes, charges and fees, regardless of their circumstances. In global terms these extra costs are pretty tame, but anyone seeking to rent out their property needs to be ready for the extra levies this incurs.

Money earned from renting a property in Canada is subject to Canadian tax. Even if you live overseas, you must file a Canadian tax return, disclosing how much you made from the property. Landlords are expected to pay 25% of their rental income each month direct to the taxman.

This money is then held in bond, awaiting a tax return at the end of the year. At this point, you’ll either get a demand for more cash or a welcome rebate. Clever loopholes exist whereby foreign owners can name a Canadian resident to file on their behalf, saving a tidy sum.

Be aware also that when selling a property, foreign sellers must file a clearance certificate to announce they are all square with the tax department. Until this is complete, 25% of the property’s total value will be held back.

Find a realtor

It is entirely possible for an individual buyer to sit at a desk half the world away and arrange to purchase a property. But it isn’t the easiest way of doing things.

Estates agents, or realtors, have to be licenced in Canada, with poor or corrupt performances costing them their permits. The realtor can act as researcher, negotiator and advisor, guiding you through the process and getting you the best deal possible.

A good agent will be one step ahead of the process throughout, lining up the next stage of the purchase as the previous one progresses. They should be on top of getting surveys done and liaising with both parties’ lawyers to keep agreements on track.

Find someone local to the area you’re looking in. There may be national chains, but find an agent who specialises in your neighbourhood. These local experts are likely to know the perks and pitfalls of property types and different areas.

Also keep an eye out for someone with a little experience, you may be their first international client and there’s a lot to think about. You don’t want someone unfamiliar with the basics, let alone your unique case. Don’t be afraid to grill prospective agents about their time in the business or their success rate, and search online for reviews to uncover the best performers and the worst pretenders.

Fees can usually be negotiated and range from three to seven per cent, although the most common deal is to pay seven per cent on the first CAD$100,00 and three per cent on the remainder.

Get a mortgage pre-approved

If you need to borrow money to buy a Canadian property, you must borrow it from a Canadian lender. In most cases, this is not a problem, with references from banks in a home nation, credit checks and verification of income being enough guarantee.

An influx of foreign property speculators in Canada reflect the market’s status as an attractive investment market. Many currencies enjoy leverage over the Canadian Dollar, whilst the dollar remains a stable denomination. Plenty of investors and expats are mortgaging their primary residences in order to then transfer the cash over to spend in Canada.

Some lenders will, however, require a larger deposit for a home loan than residents would pay. Canadians put 5-10% down on homes when they make an offer, where expats may need to cough up as much as 35%.

The typical Canadian mortgage covers 80% of the property cost and is repayable over a term of 15 years.

Research tax and insurance

As well as tax implications for rental income from homes, there are levies and fees to pay when buying. These apply at both Federal and Provincial level, so depending on how you buy, you’ll pay a different sum.

In Ontario buyers pay Land Transfer Tax, coughing up anywhere between 2% and 50% of the value of the property. Normal sales taxes also apply to property sales, again varying by territory.

Goods and Services Tax of 7% and Provincial Sales Tax of up to 10% are normally included in the asking price. Some states charge taxes that others don’t, meaning the total cost of taxes can vary from 4% to 11% of the asking price. Although a complex way of doing things, this system makes Canada one of the cheapest places to buy in terms of fees and taxes. When the time comes to sell a property, all are subject to 25% Capital Gains Tax.

It’s not just Canadian taxes that may cause expats an issue. Some countries will require all assets worldwide to be disclosed, with income from the rental or sale of overseas property earning a double whammy of tax.

Insurance can be expensive for expat residents or those spending part for their year outside Canada. Shop around for quotes before settling on a supplier.

Make an offer

Making an offer is a little more complex than saying ‘I’ll take it’. Buyers who have found their ideal property should have their agent draw up a contract of sale and a purchase agreement.

These documents outline the terms of the sale, which may dictate that repairs must be done at the seller’s expense. The contract should also outline the deed to the land on which the property sits and the home survey.

In most cases it’s entirely possible to conduct this stage remotely, with the agent signing on your behalf. Some lenders will insist on the buyer being present in person to put ink to paper, but even this can be bypassed by designating power of attorney.

Contact the lawyers

A real estate lawyer or a notary public needs to get involved at this point to conveyance the mortgage and transfer cash. The legal teams will also give the contract and seller a once over, checking that the title is in order and that the property complies with government regulations.

The last hurdle is the lawyer preparing a Statement of Adjustment, which confirms the price and the payment schedule as well as any taxes owed. The buyer will make out a cheque to the lawyer, who will then process everything in one fell swoop.

Collect the keys and enjoy

With paperwork and payment all done and dusted, there is nothing to stop the Canada-bound expat from collecting their keys and settling in to enjoy life.

Article by Andy Scofield, Expat Focus International Features Writer

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