Market and economic uncertainty has proven to be a damper on real estate investor activity in Vancouver, according to data from CBRE.
These factors have compounded the pressure from a lower number of renovictions and strict government policies – the Residential Tenancy Act, in particular.The latter measure has affected investors and apartment owners especially hard.
“It was just easier [for many investors] to do nothing,” CBRE executive vice president Lance Coulson said, as quoted by the Vancouver Sun.
“There were a lot of things going on in the market that created some uncertainty.A number of investors were on the sidelines … wanting to see what 2019 was going to bring.”
From January to June, apartment sales in the Vancouver region amounted to just over $400 million.This represented a pace far lower than last year’s, which enjoyed an overall 2018 total of $1.4 billion.
“Based on a few deals that have sold since June, and what I believe is currently in play, I estimate that total sales for year-end 2019 could be in the $850-million range,” Coulson predicted.
Extremely tight supply in the affordable housing segment remained a feature of the
Autumn is the real estate industry’s second-busiest time of the year and the pre-construction condo market is replete with an interesting suite of amenities.
And according to Barry Fenton, president and CEO of Lanterra Developments in Toronto, the city’s shrinking condo units make dynamic amenities all the more essential.
“A lot of amenity spaces include mental wellbeing by having yoga studios and state-of-the-art gyms, but also massage rooms, saunas, wet and dry steams,” he said.“Whether someone buys a 500, 800, 1,500 or 3,000 square foot unit, they want to feel good and that’s why it’s important to include such amenities.”
Lanterra, like most developers, hires consultants to conceptualize what its buildings’ wellbeing spaces should look and feel like, the finer points of which Fenton likens to nature’s placidity.
“In some condos, we have planned exercise communities that come down and use the facilities, but it’s also about how the spaces are designed:it’s like being in a forest;it’s tranquil and peaceful,” explained Fenton.“A lot of facilities think a 10x15 room will work, but it doesn’t.People want to stay healthy in body and mind today, and we believe that these extra amenities help achieve that.”
Montreal homeowners have been found to miss their payments much more frequently than those in Toronto, if their delinquency rates are any indication.
This was especially apparent in smaller mortgages, according to Canada Mortgage and Housing Corporation.
As of the first quarter of 2019, Montreal mortgages valued at less than $100,000 had a 0.22% delinquency rate, representing 4.76% annual growth.To compare, the rate in Toronto for that bracket was at 0.11%, fundamentally unchanged from the same time last year.
In the $100k - $200k category, Montreal’s delinquency was at 0.32%, up by 6.67%.Meanwhile, Toronto’s incidence in this range was 0.10%, which was 9.09% lower year-over-year.
Among those who borrowed between $200,000 and $300,000 in Montreal, the rate was at 0.29%, up by 3.57%.In contrast, Toronto saw much less delinquency in this range, shrinking by 11.11% annually to end up at 0.08% delinquency.
“If [these] are older mortgages like we suspect, the holders are benefiting from falling rates.Lower payments mean a lower chance of delinquency,” Better Dwelling noted in its analysis of the data.
The prevalence of delayed payments among lower-valued mortgages in Montreal might be stemming from the recent surge in demand
Paul D’Abruzzo took a tenant to the Landlord and Tenant Board for three months of unpaid rent on an investment property he owned in Whitby, and through mediation—his best option—ended up coughing up a fourth month of rent-free living.
“My tenant sat there in mediation and said she can’t pay rent anymore, and after I asked her to leave she said she had nowhere to go,” said D’Abruzzo, who’s also a broker with Expert Investor Team at Rock Star Real Estate.“I was advised by the mediator that if I go before the board and ask for a standard eviction of 11 days, I’d most likely not get it because the adjudicator is going to sympathize with the tenant and give them 30 days to leave.
“I was footing the bill for someone who can’t afford to pay rent just so that I could get a proper eviction order.One of the risks is that during those 30 days, they could damage the place and once they leave I have no recourse.That was the best deal on the table and I had to take it.I was pushed into a corner and gave a lady 30 days of free rent
Affordable housing units have seen their importance particularly swell in Quebec, which has seen a marked increase in chronic homelessness over the past few years.
This was especially apparent among newcomers and immigrants, many of whom have taken refuge in shelters across the province.
Recently, Employment and Social Development Canada released the results of its “point-in-time” analysis of homelessness in 61 communities.
The survey found that around 14% of homeless people were newcomers to Canada.As much as 8% identified themselves as immigrants, while 3% were refugees and 4% were refugee claimants.
“Many of them are coming to Toronto in Ontario, and to Quebec, and in those communities, the rental market is just really tight and we just don’t have the capacity to house them,” according to Tim Richter, president of the Canadian Alliance to End Homelessness.
The federal government has pledged to relieve some of this strain, vowing with the Quebec government to commit nearly $175 million in affordable housing investments up to 2024.
The funds are intended to ensure a healthy supply of low-cost homes for the province’s most in-need segments.Of these, $172 million will be going to the Canada-Quebec Reaching
With demand for low-cost housing heating up in Toronto, the federal and Ontario governments have pledged a multi-million-dollar investment in the renewal of a large-scale affordable housing building in the downtown core.
Hunger for affordable housing has intensified amid punishing price levels.During the first seven months of this year alone, condo prices in the Greater Toronto Area shot up by 9.1% annually, ending up at $743 per square foot.
“Low inventory levels are putting upward pressure on price per square foot in the Greater Toronto Area, especially for entry-level properties like condos,” according to Tom Storey of Royal LePage Signature Realty.
In comparison, single-family detached housing had a mere 1% year-over-year increase, up to $486 per square foot.The overall aggregate price across every residential asset class increased by 6.1% annually, up to $782 per square foot.
Last week, CMHC and the provincial government committed $2.2 million for the urgent repairs and retrofitting needed by the 78-unit Harmony “B” Housing Co-operation Corp.rental complex.
This is a vital addition to a market that has seen a consistent degree of unaffordability over the last few years, according to Adam Vaughan, Parliamentary Secretary to the Minister of
Borrowing and home-buying activity remains undeterred in Canada, despite monthly payments being much higher than the global standard.
Data from Scotiabank indicated that last June, the nation’s household mortgage credit grew by 5.2% month-over-month.This was its fastest pace in two years, and came amid a noticeable 3.7% increase in the outstanding balance of Canadian mortgage debt, which ended up at $1.57 trillion total.
“Mortgage growth has surely rebounded after a period of deceleration from early-2017 to its mid-2018 trough which was induced by a series of measures aimed at tackling runaway home prices,” Scotiabank economist Juan Manuel Herrera and research analyst Alena Bystrova wrote in their report, as quoted by Livabl.
“Real estate markets continue to adjust to regulatory changes and are now benefitting from a decline in borrowing rates after reaching an eight-year high in late-2018, alongside a tightening spell by the Bank of Canada,” they added.
Compared to the rest of the world, Canadians are actually paying higher-than-normal mortgage rates, only exceeded by a small number of developed nations like the United States and Australia.
A recent analysis by HuffPost Canada has shown that even with fixed-rate
Surging growth of rental demand is spurred by unaffordability in Vancouver, along with an influx of immigrants in Montreal, according to the latest edition of IPA’s Midyear Canadian Multifamily Investment Forecast Report.
Amid a burgeoning economy, Greater Vancouver posted a healthy pace of jobs creation, with the workforce growing by 6.7% annually in June (roughly 93,100 new employment posts).
Despite the expanded purchasing power, however, Vancouver is far and away still the most expensive housing market in Canada.The benchmark price for single detached homes currently exceeds $1.4 million, and the median mortgage payment is around $4,000 greater than the market’s average rental rate.
These pose formidable barriers, especially for young households and first-time buyers.Many of them are thus forced into rental housing – itself beset with its challenges, as vacancy was at a mere 1% as of the end of 2018.
Meanwhile, in Montreal, the provincial government’s immigration policy is paving the way for even more demand among non-locals.This will augment last year’s approximately 28,200 non-permanent residents (mostly students and temporary workers) originating from overseas.
“An estimated 16,000 households will be created this year, partly supported by a simpler immigration system than the
Disproportionate population distribution is causing economic and fiscal crises throughout Ontario, including in the Greater Toronto Area.
The GTA is home to 45% of Ontario’s population, yet received 77% of the province’s immigrants last year, which The Conference Board of Canada warns is overburdening the region’s infrastructure while leaving other census metropolitan areas looking skeletal.
The challenge, says Pedro Antunes, chief economist at The Conference Board of Canada—which released a report entitled Immigration Beyond the GTA:Toward an Ontario Immigration Strategy—has been convincing immigrants to choose some of these CMAs, many of which even have buoyant labour prospects.
“Toronto has diasporas that are much more attractive to new immigrants because they have local contacts and family that allow them to integrate into that market, so they favour the GTA more than other regions,” he said.“The reason to regionalize immigration is the demographical challenge all Ontario municipalities are facing with respect to population growth:In some CMAs, we see negative population growth.More importantly, it’s a challenge to grow their labour forces, and baby boomers are leaving the workforce and coming into their older years where they need more health care.”
Last year, 106,000 immigrants chose the GTA
In the Greater Toronto Area, supply scarcity is a major force driving home prices upward, according to Tom Storey of Royal LePage Signature Realty.
“Low inventory levels are putting upward pressure on price per square foot in the Greater Toronto Area, especially for entry-level properties like condos,” Storey explained.
From January to July of this year, the aggregate price across all housing types went up by 6.1% annually to $782 per square foot.
During this period the median price of Toronto’s condos had a 9.1% annual uptick, up to $743 per square foot.This had made it noticeably more difficult for more households to afford the property type.
To compare, single detached homes had a far lower 1% year-over-year increase, up to $486 per square foot.
Among the most active market participants are starting households and young professionals, who would rather live in a constricted condo over a detached home if it means greater access to work and amenities.
“Millennials know what they want and, in some cases, are willing to pay more for less space in order to be in their desired neighbourhood.This is consistent with the trend of location being an
Consumer demographics are an increasingly important driver of sales activity in the Montreal housing market, according to Royal LePage Altitude broker Maxime Tardif.
“Baby boomers looking for smaller units, millennials increasing their purchasing power, and more foreign buyers contributed to a hike in condo prices and demand in the past three years,” Tardif said.
In addition, the region’s geography is contributing to the steadily growing presence and popularity of multi-unit housing.
“Available land is limited on the island;builders and developers are making every square foot count.As a result, more high-end, spacious units are being constructed in the suburbs, particularly near transit stations.”
“The outskirts of the city are becoming attractive to many home buyers who are willing to trade shorter commute times for more square footage and better affordability.With the transit system expansion that the REM will bring by 2021, commuting to the city core will be easier and make living outside the city centre more desirable.”
These findings supported the latest figures from the Quebec Professional Association of Real Estate Brokers, which stated that the city’s condo sales volume increased by 16% annually in July.This mirrored the percentage growth in activity across
Vendor take-back mortgages were fairly popular in Canada 25 to 30 years ago when interest rates were stratospheric compared to where they are today.
While seemingly a relic, could vendor tack-back mortgages make a comeback in the residential real estate market now that B-20 has made mortgage qualification a nightmare for many would-be buyers?
“B-20 could definitely make vendor tack-back mortgages more attractive,” said Tim Syrianos, broker-owner of REMAX Ultimate Realty in Toronto.“If people have the qualifications necessary other than 200 extra basis points, that is.
“The seller could benefit by having the vendor take-back mortgage because they earn interest on money lenders don’t offer and it’s a more secure environment because it’s against real estate.”
While Syrianos acknowledged vendor tack-back mortgages could function as a solution to B-20, he does not expect they will resurface in the residential real estate market anytime soon.The growth of private lenders and mortgage investment corporations are a big reason.The other is reason is sellers usually need the money they earn from selling their homes to purchase new ones.
“They’re not as commonplace in the market today because people need money to purchase their own
Vancouver’s home price madness does not appear to be cooling down any time soon, with one of the most outrageous recent examples being a $2,850/month “affordable” rental suite in the West End.
In a piece for the Vancouver Sun, columnist and markets observer Dan Fumano noted that a recent Craigslist entry advertised a three-bedroom rental home supposedly aimed at “low-income” families.
The asking rent rate for the property indicated otherwise, as it would have been affordable only for tenants who have incomes roughly two times larger than the market average.
Said listing was removed early last week, amid frank astonishment from a local market already labouring under exorbitant housing costs.
Danny Laufer, who previously occupied the unit for seven years with his wife and two children, expressed hope for a new local owner after moving out in early 2019.
Upon learning of the absurd price, he expressed his dismay to the mayor and every other significant local official, including the BC Housing Minister.
In his letter, Laufer wrote that Vancouver’s current situation is unsustainable, “taking away precious family housing that exists, and replacing it with market rate housing that is
Even Prince Edward Island is now seeing bidding wars, which in turn have become major drivers of home price growth over the past few years.
A rental vacancy rate of 0.2% in Charlottetown has helped propel this phenomenon.
“It does happen, no question,” Century 21 and Colonial Realty broker/owner Joel Ives told CBC News.
“People are banging on doors, saying ‘I really like your house, are you interested in selling?’ And some people say ‘yes, maybe we are if the price is right.’”
Competition is especially fierce in the $250,000 to $350,000 price bracket – all the more because any new construction in Charlottetown tends to be either in the starter home or luxury categories.
From 2016 to 2019, the average home price in PEI’s capital grew by 38.5%, settling at $277,000 as of mid-year.
This considerably outpaced other high-volume cities like Victoria (33.3%), Toronto (25.3%), Montreal (17.7%), and Vancouver (10.93%).The only markets that exceeded the Charlottetown figure were Ontario’s Niagara Region and some sections of Vancouver Island.
PEI Real Estate Association president Greg Lipton noted that a steady influx of new consumers represented further demand.From 2010 to 2018, the province
Canadian Real Estate Wealth’s November/December mega-issue is on the way.In addition to our cover feature, 75 Cash Flow Plays for 2020, we will, as usual, be sharing the strategies of successful investors like you.
One article we’re particularly excited about is Kirill Perelyguine’s piece on triple-net leases.In it, Perelyguine writes:
Commercial leases offer a number of benefits for the investor-owner.First, the type of commercial lease agreement that the tenant signs - Triple Net - means that the tenant is responsible for their proportionate amount of the property tax, maintenance and insurance, sometimes even the major structural repairs to the property.In the case of a single-tenant property, the tenant usually pays for all of the associated costs, leaving the landlord with the “clean” net amount of rent, which makes it much easier to calculate cash flow and make long-term financial projections.
CREW readers can look forward to reading Perelyguine’s expert take on the many pros and handful of cons that commercial investors run into when working with triple-net clients when the next issue hits newsstands in October.
Our impatience getting the best of us, we asked Perelyguine, who is both