Canada should brace itself for a major recession in as little as a year and a half, according to economist Campbell Harvey’s previously successful economic model.
The U.S.Treasury yield curve model, which Harvey developed for his 1986 Ph.D., has shown an inverted reading thrice:in 1989, in 2000, and in 2006.
All of these were immediately before the three major recessions of 1990-1991, 2001, and 2008.Worryingly, as of July 2019, the curve has been on an inverted state for an entire fiscal quarter.
“The key thing is, that’s exactly what it looks like before all recessions a year or a year and a half in advance so this is not surprising at all.This signal delivers a nine- to 18-month advance warning, historically,” Harvey said in an interview with Global News.
He added that what the curve essentially shows is that short-term bonds are paying higher rates than long-term bonds.This is a dangerous combination, despite unemployment being at an all-time low and the stock market at a record high.
“The idea of the yield curve is that when you lock up your money for different periods of time, you expect a different [interest] rate.The
Mortgage investment has just become a whole lot easier—not to mention less convoluted.
Fundscraper is a Toronto-based government regulated online platform that conflates technology, expertise and stringent compliance measures to facilitate financing for a range of real estate projects from large commercial developments to first, second, or combination mortgages with terms between one and three years.What distinguishes Fundscraper is the use of technology to reduce costs and, most importantly, protect investors.
The automated process is a breeze—so much so that Fundscraper eschews traditional hard copy brick and mortar programs in favour of an easy-to-use digital platform.Accepting funds from everybody from individuals to major institutions, it has removed tedious obstacles and streamlined the real estate investment process, especially for property-backed securities in an effort to abet attractive returns.
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“What we do is provide not only a platform to make opportunities available, but we enable the acquisition of that investment. We do the heavy lifting for you!” said Gregory Colford, Fundscraper’s Executive Vice President and Chief Compliance Officer.“We essentially use tools recognized under Ontario securities laws and we do it all online.Throughout the
Investment-use condos are the most significant obstacles to housing affordability in Toronto, according to observers.
Latest Statistics Canada numbers indicated that fully 39.7% of the market’s condos are not owner-occupied, meaning they are either vacant, rented out, or used as second properties by their owners.
Andy Yan, the director of the City Program at Vancouver’s Simon Fraser University, stated that the data only proved that Canadian housing is no longer for Canadians, but rather for those who can command the highest prices.
Wealthy foreigners, especially those from mainland China, have been pinpointed by multiple analyses as major factors promoting out-of-control home price growth.
“It’s not about supply or demand anymore,” Yan said, as quoted by The Guardian.“It’s ‘who are we building for?’”
Aggravating these conditions is that the development of purpose-built rental units was never a high priority for any provincial government over the past four decades or so.
Moreover, any newly built units that do enter the market tend to be expensive condos that get rapidly snapped up by wealthy investors, Realosophy Realty president John Pasalis stated.
“Five years down the road, do we really need 50,000 micro-condominiums that are
Investors should take note—resale condominiums are driving Ottawa’s residential real estate market.
According to the Ottawa Real Estate Board (OREB), there were 2,105 June sales, up 2% over June 2018.Resale condos are, however, where the growth becomes noticeable.
“Increasing by 8.3%, condo resales are the driving force for the upturn in units sold in the first half of 2019,” Dwight Delahunt, president of the Ottawa Real Estate Board, said in a statement.“Combined residential and condo year-to-date sales of 9,876 show a 1.8% increase from June 2018.”
Over the last 10 years in Ottawa, condos have appreciated 34%, and as Delahunt notes, it isn’t a speculative market.Rather, economic fundamentals appear to be the main driver.
“This is not a speculation market.Going forward, we anticipate there will be high demand in the foreseeable future due to increasing population and strong employment in the area,” he said."We’re pleased to see all levels of government starting to address the supply-side issue, but we feel there is still work to be done.We will be watching the upcoming federal election closely to gain insight as to how the various parties intend on addressing attainable homeownership issues.”
According to OREB
Edmonton real estate investment volume grew for the third straight year in 2018, according to a new analysis by Altus Group.
Total investment in the city’s properties grew to $3.94 billion last year, “despite a national struggle to balance supply and demand in real estate,” Altus noted.“This level of investment lead to robust gains in the Industrial sector and the Apartment sector in 2018.”
Investment property sales also grew by 37% in 2018, with the industrial sector contributing the largest volume at $878 million across 220 transactions.
“Demand for new office and industrial space is expected to stay strong over the next year,” Altus stated.
The office and retail sectors had generous gains last year, with the office market enjoying a $149-million increase and the retail segment having a $141-million growth.
“However, the office vacancy rate increased slightly to above 15% in 2019, with continued demand for new modern spaces in the downtown region.”
Residential land investment also accelerated by 18%, while the apartment segment saw the largest annual increase in terms of dollar volume, growing by 69% to reach $849 million.
Late last month, a study by Marcus &Millichap noted
Toronto’s detached home sales in June helped offset notably slower activity in the condo sector, according to the latest data collected by TREB.
The city’s detached housing segment enjoyed a 19% year-over-year increase in sales last month, which made up for the condo market’s 3.2% decline during the same time frame.
Lower condo sales stemmed from a weaker Toronto core, which suffered a 5.6% decline in activity last month.This negated a 2.7% increase in the GTA.
Overall Toronto sales went up by 10% annually in June, for a total of 8,860 homes changing hands.TREB noted that the market continued to labour under low supply and red-hot prices, however
New listings dropped minutely by just 0.4%, ending up at a mere 15,816 homes for sale in Toronto.The market’s benchmark housing price grew by 3.6% year-over-year to $798,500, and the average sales price increased by 3% to $832,703.
Condos remained among the most desirable property types, posting the largest annual price growth at 7.5%.The benchmark price of the asset class stood at $539,500 in June.
“Buyers started moving off the sidelines in the spring,” TREB chief market analyst Jason Mercer stated, as quoted by
It is more likely than not that the Bank of Canada holds the interest rate at 1.75% on Wednesday, but there’s a growing chorus that believes it will decrease the rate before the end of the year.
“If we were only looking at domestic factors, we might think that the Bank would soon start to consider further rate hikes,” said Capital Economics’ Stephen Brown.“Economic growth is on track to outperform the Bank’s forecasts in the second quarter and core inflation has risen in recent months.But outside of Canada, trade tensions have grown, there are signs that U.S.GDP growth is slowing, and the Fed has signalled that it will soon cut rates.We suspect that the next move will be a cut.”
Dalhousie University’s Lars Osberg believes an interest rate cut is coming sooner rather than later.
“Sudden global trade softness,” he said.
However, neither a rate hike nor decrease is likely Wednesday because of headwinds from abroad, according to the Conference Board of Canada’s Alicia Macdonald.
“While some data suggests that the Canadian economy is indeed emerging from its recent slump, there remains a significant risk to the global economic outlook due to global
Warning that the affordability situation has reached crisis levels, a new report by advocacy organization Generation Squeeze stated that Canadian millennials now need almost three decades to save enough money for home purchases.
“It’s an emergency… these are critical levels,” leading academic and Generation Squeeze founder Paul Kershaw told the Financial Post.“We’ve been sounding alarm bells in B.C.and across country.Affordability is a way bigger problem than we’ve been talking about.”
At current income levels, and assuming that 15% of pre-tax earnings are allocated to housing savings, today’s young adults and first-time buyers are estimated to take as much as 29 years to afford a home in Metro Vancouver.
This duration is fully eight years longer than the previous generation needed back in 1976, Generation Squeeze stated.
In the Greater Toronto Area, this demographic will need 21 years to save for a 20% down payment on an average-priced home.In Ottawa and Quebec, prospective buyers will have to run tight budget ships for 10 and 11 years, respectively.
Across Canada, millennials will need takes 13 years of full-time work to save for a home purchase.
These results dovetailed with the findings of
Despite stronger sales on an annual basis, Victoria’s real estate market performance last month remained muted in the greater scheme of things.
Overall sales volume in June was 4.5% higher year-over-year, but was 12.7% below May 2019 levels.
“June has trended lower than May for the past few years and tends to signal the end of the active spring market,” Victoria Real Estate Board president Cheryl Woolley explained.“The summer months of July and August generally see less activity than the spring, as people’s attention shifts to vacation and away from real estate.This year, we have seen slightly more sales compared to June of last year.
“We have also seen one hundred fewer new listings enter the market this year, which continues to make a challenging market for buyers who are hoping for more options.”
Single-family homes sold the most in BC’s capital city in June, with transactions increasing by 10.4% annually.On the other hand, the condo sub-sector had a 6.1% decline during the same period.
The benchmark price of single-family properties in Victoria’s core fell by 4.3% year-over-year, ending up at $859,600.Condos’ benchmark value edged up by 2.97% to settle at $524,100.
It will take a monumental market crash for home prices to come down—that isn’t likely to happen—so the time is nigh for Canadians to relinquish the stigma associated with renting.
“We do think of renters, too often, as a second-class neighbours and we use that second-class status to discourage having rental buildings in neighbourhoods that have typically been more oriented to single-family detached homes,” said Dr.Paul Kershaw, founder and lead researcher of Generation Squeeze, an advocacy organization for young Canadians.“We have to change that and recognize that renters are just as excellent neighbours as owners and recognize that many people’s kids are going to be renters for long periods of their lives, even if they’re lawyers, and recognize that things are changing.”
Among Generation Squeeze’s projects is We Rent, which endeavours to level the playing field between owners and renters.While most subsidies favour homeowners, renters have few, if any.
“We have policy goals and observe housing subsidies in place for homeowners—tax-free RRSP saves money to put into your down payment;you never have tax-sheltered money to put into your rent,” said Kershaw.“You have homeowners’ grants and the First-Time Home Buyer plan, not to mention the biggest
The Greater Toronto Area will see approximately 2.2 million square feet of new office space by the end of the year, but this would not be nearly enough to accommodate the robust hunger for the asset class.
According to a new market analysis by Marcus &Millichap, a significant portion of this demand is stemming from the region’s tech sector.
The rapid growth of this segment, along with Toronto’s enviable status as a premier tech destination, has magnetized revenue-rich tenants.
“An open immigration policy and mature tech ecosystem have national and international firms adding to their workforce in Toronto,” Marcus &Millichap explained in its report.
During Q1 2019, more than 50,000 new jobs were added to GTA’s workforce, “many at the high-tech companies that have been driving office absorption.”
“The metro has become increasingly popular as a major hub for tech and artificial intelligence, leading companies such as Shopify, Amazon, Microsoft and many others to announce plans to bring on more workers and take up additional office space.”
“Large supply influx brings more options to Toronto,” the study added.“The vast majority of construction is occurring downtown, where roughly 8.6 million square feet is
Official measures have placed Montreal’s overall rental vacancy rate at 1.9%, considerably below the 2.8% seen last year.
Scarcity is even more acute in apartments offering three bedrooms or more, with a vacancy rate of just around 0.8%.
These numbers continue the trend of rental market tightness in Canada’s largest markets.An estimated 31,000 homes across Canada were used for Airbnb rental so frequently in 2018 that they have become essentially unavailable for long-term rentals, according to new research by McGill University.
This sum is sufficient to accommodate everyone in North Vancouver, the researchers noted.This is also equivalent to approximately 1.5% of Canada’s purpose-built rental housing.
Montreal, together with Toronto and Vancouver, accounted for 40% of the aforementioned 31,000 homes, and represented nearly half of Canada’s average daily listings last year.
These significant limitations in supply have proven to be major market influences.As much as 130 households still needed places to move to as of July 1.
“People who don’t have a good income have no place to go because there’s just no affordable housing in Montreal right now,” Front d’action populaire en réaménagement urbain (FRAPRU) spokesperson Véronique Laflamme told Global News
Affordability remains a challenge in the Toronto and Vancouver metropolitan areas, but the safest investment bet might not even be within Canada’s borders.
“A lot of people don’t realize that in the U.S.we’re getting the lowest interest rates we’ve had in the last three years,” said Alain Forget, RBC Bank’s director of business development in the U.S.“At one point, they were above 4%, but now they’ve fallen.The challenges in key markets like Vancouver, most of B.C., and the GTA are affordability and, additionally, the mortgage stress test.The tighter mortgage lending restrictions affect the market from a diversification standpoint, but a lot of markets in the U.S., like Florida and Arizona, are affordable for Canadians.
“And in the U.S., we don’t have a stress test.”
Moreover, a copacetic ROI in Toronto and Vancouver is becoming as cumbersome as passing the stress test is for an investor keen on portfolio diversification.
In Naples, Bonita Springs and Estero, located in southwest Florida, there were a total of 12,622 sales during the 12-month period ending May 31, 2019, which is a 4.7% rise over the same period a year earlier.Available inventory hit 7,698 units, which was up 11.8%
Construction employment losses accompanied a noticeably lower volume of housing starts in May.
The most recent edition of the ADP Canada National Employment Report, which measures changes in total Canadian non-farm payroll employment, stated that the construction industry lost 11,223 jobs during that month.
This was the first decline for that month over the past 3 years, and represented a vast majority of the 16,020 employment losses nationwide in May.
“It’s also the largest decline over the past seven years.The shift is something worth watching,” Better Dwelling wrote in its analysis of the report.“Declines aren’t unusual, but typically employment rises in May.”
Data from the Canada Mortgage and Housing Corporation indicated that nationwide starts for that month went down to 201,983 units, from the 205,717 in April.
The Crown corporation attributed the number to weaker construction activity in the single-family segment.
“The national trend in housing starts decreased in May as a result of continuing decline in the trend for single starts as well as a decline in the trend of multi-unit starts that follows gains in this segment in recent months, in urban areas,” CMHC chief economist Bob Dugan
With a $40 billion LNG (Liquefied, Natural Gas) export facility being built in Kitimat, British Columbia, real estate investors have been presented with a golden opportunity for returns on their investment seldom seen anymore in the Canadian market.
Kitimat, already named the top western Canadian city for real estate investment because of the LNG terminus and pipeline, is getting a boost from Riverbrook Estates, a master-planned community being developed by Kerkhoff Construction with 47 homes slated for development during the first phase alone.
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The foundation of sagacious real estate investing is robust knowledge of market fundamentals, and with the largest private sector investment in Canadian history, Kitimat has emerged as a diamond in the rough, says Jason Pender, a partner in Riverbrook Estates and owner and CEO of JV Development Group.
“It’s the best place to invest in Canada, and the reasons behind that are LNG is the biggest private sector investment in a single project and it’s in Kitimat where the population is 8,000,” said Pender.“With an estimated 7,500 to 10,000 construction workers coming over the next