Growth is expected to decelerate by the end of 2016

Emma Crawford Hampel
Van. Courier

The price of homes in British Columbia will continue to increase over the next two years, according to an RBC forecast released August 19, but the rate of growth will slow by the end of 2016.

Home sale prices across Canada will also rise in both 2015 and 2016, at rates of 4.6 per cent and 3.2 per cent, respectively. This slight deceleration will be dependent on an increase in interest rates over the period, RBC said in its forecast.

“Our base case scenario is that the Bank of Canada will begin to remove monetary stimulus by the middle of 2016 and raise the overnight rate by 75 basis points to 1.25 per cent during the second half of next year,” the bank said in the forecast.

Nationwide increases will be driven by price growth in B.C. and Ontario, specifically Vancouver and Toronto.

“The affordability stresses found at the national level almost entirely reflect the situation in two major markets: Vancouver and Toronto,” RBC said in its forecast.

“Affordability – and therefore, valuation – conforms to historical norms in virtually every other market in Canada, thereby suggesting little in the way of widespread excessive valuation across the country.”

Consistent with what has been seen thus far in 2015 , detached homes will take the lead in terms of price growth, RBC said.

“[In Vancouver and Toronto], affordability is most stretched for single-detached homes, whereas affordability of condominium apartments is just a little worse than it has been on average over the past 30 years.”

The average home sale price is forecast to be $595,200 across the province for 2015 as a whole – up 7.8 per cent compared with $552,300 in 2014. Through 2016, the average price will continue to grow, but the increase for that year will slow to 4.9 per cent with the price reaching $624,600.

The number of homes sold in B.C. will be up 20.5 per cent by the end of this year when compared with last year. In 2014, 84,000 homes were sold. The forecast for total sales in 2015 is 101,200 units. In 2016, this will fall by 4.8 per cent, RBC forecasts, to 96,300 homes.

Housing starts are expected to follow a similar pattern. A total of 33,100 starts in B.C. for this year is expected in the province – up 16.7 per cent compared with last year. In 2016, starts will fall 6.3 per cent to 31,000 units.

© 2015 Vancouver Courier

John Tenpenny
Other

Prime Minister Stephen Harper’s election campaign promise to collect data on foreign ownership in the real estate market has gotten mixed reviews.

Last week in Vancouver, where the average price of a detached home is over one million dollars, Harper said, “If such foreign, non-resident buyers are artificially driving up the cost of real estate, and Canadian families are shut out of the market, that is a matter we can and should do something about.”

If re-elected, Harper promised his Conservative government would spend $500,000 collecting data on how many foreign investors are buying homes in Canada.

Many welcomed Harper’s promise. Vancouver-based real estate analyst Richard Wozny told Maclean’s there’s no way to rationalize the local market, where sky-high prices have made it impossible for residents with average incomes to buy homes. “Data may help explain things,” he says. “It would help you understand price appreciation and you could then design something that would moderate the impact, making it more in line in the local market.”

CIBC economist Benjamin Tal called the promise “very positive,” telling CBC that “regardless of who wins this election, this is something that we desperately need.”

Meanwhile, Harper’s sudden focus on offshore buyers has some worried. “We need the foreign buyers because they are buying all the high-end real estate,” Joseph Montanaro, an agent with Sotheby’s in Montreal, told the CBC.

As to what actions should be taken if new research found foreign investment to be more extensive, some believe it should be regional in nature.

That’s because in some markets foreign investment is desirable. “For places that depend on tourism, the foreign ownership is actually pretty important, because those are tourists that are likely to keep coming back,” said Tsur Somerville, director of the UBC Centre for Urban Economics and Real Estate.

Copyright © 2015 Key Media Pty Ltd

Other

Canada’s most-celebrated and controversial investor is offering real estate buyers a word of caution – in addition to his take on market corrections.

“I don’t know if it’s going to be a 30 per cent correction,” Kevin O’Leary, founder of O’Leary Financial Group and long-time Dragon, told BNN in an interview. “Maybe it just goes flat for 10 years, I have no idea. But would I be deploying more capital into real estate now, not a chance.”

His ambivalence echoes that of veteran investors in Canadian real estate as they digest the latest CMHC report on the market, expressing real concern that Toronto is headed into dangerous territory.

O’Leary isn’t necessarily convinced.

“One thing we’ve learned over the past ten years in housing in Canada is that reports and government officials don’t change valuations in housing, markets do,” he said. “I think this report is kind of irrelevant.”

For O’Leary, the condo market, specifically, the market for what he calls “shoebox” condos is the area that will indicate where the market will go. He called them the “canary in the coal mine.”

“If you look at the shoebox condo markets in Toronto, Calgary, Vancouver and Montreal, usually the cracks occur there first. I watch those every month and there has been no change in pricing.

In fact, O’Leary said demand for downtown housing in all Canadian cities is insatiable because millennials and people who are moving there don’t want to live in the suburbs or don’t own cars.

Investors agree.

“In these key markets and in Toronto especially, there is a major shortage of rental units in the downtown core and other highly populated pockets of the GTA,” says Paul D’Abruzzo, The CashFlow Engineer. “The lack of new of ‘purpose built rental buildings’ means that a large portion of the condo units being sold, in these key markets, are filling the gap in the rental market.”

Asked when the correction will come, O’Leary pointed to interest rates. “While you have continued zero interest rates and mortgages under three per cent there’s not going to be a correction in housing. It’s when and if Canadian rates go up, that this asset class will suffer.

Copyright © 2015 Key Media Pty Ltd

Other

Grosvenor Americas has received unanimous rezoning approval from the District of North Vancouver for a mixed-use project in Edgemont Village, support secured largely thanks to the long-term vision put forth by the firm.

Grosvenor Edgemont, rendered below, will have 82 residential units (a mix of townhomes and condos) and 62k SF of retail along Edgemont Boulevard, anchored by a Thrifty Foods. Grosvenor Americas SVP and GM Michael Ward tells us the plan is to have a restaurant go in there as well. With rezoning approval in place, the next step is getting a building permit for the project, which Michael—a North Van resident himself who lives a mile away from the site—tells us is expected within the next six months. Construction is slated to begin in early 2016.

Getting the nod from North Vancouver is huge; the municipality is notoriously tough on developers. But Michael notes Grosvenor’s big-picture approach —in the case of Edgemont it plans on owning the retail space “for quite some time”— makes community consultation a top priority. In addition to the usual public meetings and presentations, the builder has for the past two years rented out a retail space in Edgemont Village to serve as a public information centre, with Grosvenor team members on hand to field queries and have direct conversations with concerned citizens, which Michael says has helped to combat misinformation.

Public consultation can be a lengthy process, “but I think everyone around here feels at the end of the day you end up with a project that improves the neighbourhood and is a better project for us overall as a business proposition,” says Michael. It doesn’t hurt that a number of senior management at Grosvenor, like him, live in North Van, as well as in West Vancouver, where the company is developing Ambleside, a mixed-use development on the waterfront. “Perhaps that’s coincidence,” he says, “but certainly there are a number of people here who have a vested interest in both those neighbourhoods.”

Speaking of Grosvenor Ambleside, construction has just begun on the $325M project—with 98 high-end condos, plus 35k SF of retail along Marine Drive—that Michael, who caught the school bus across the street from the site when he was 12, hopes will infuse new life into an area that hasn’t seen much development since those days. Grosvenor is negotiating with a number of groups to lease space, says Michael, with potential for a restaurant, florist, coffee shop and an urban grocer to locate there. “We’ve looked to who we think are the best tenants around Vancouver in each of those categories.”

And the development continues. Late last year Grosvenor acquired a downtown site at the corner of Hornby and Pacific streets, where it is in the initial stages of planning for a high-rise residential tower, Michael tells us. “We bought two development sites, side by side separated by a city alley,” he notes, adding that the plan is include community uses on the second parcel. “For us it’s not about just one project, getting in and getting out,” he stresses. “The long-term success of the neighbourhood is what’s vitally important.”

© Copyright 2015 Bisnow

Steve Randall
Other

Prime Minister Stephen Harper’s election promise to collect and analyze data on foreign ownership of real estate has been welcomed by economists.

However, they want any decisions on policies to restrict overseas investors buying Canadian property to be left until the data has been collected.

Benjamin Tal, senior economist of CIBC, told the Globe and Mail that the pledge was “very positive” and is desperately needed, whatever the outcome of the election.

Tal does not believe that foreign ownership is a major issue though — although he accepts that the government will probably implement some measures to curb it anyway.

Most economists are urging that any restrictions should not be universal or they could pose a risk to most housing markets when Toronto and Vancouver are the main concern.

Copyright © 2015 Key Media Pty Ltd

Steve Randall
Other

Higher consumer confidence has pushed home sales up by 20.7 per cent in Vancouver to 10,247 in July.

New figures from the British Columbia Real Estate Association show that total sales dollar volume was $6.2 billion, up 33.9 per cent from a year earlier and the average MLS price rose 11 per cent to $608,294.

BCREA chief economist Cameron Muir says that consumer confidence is driving sales except in the northern-most parts of B.C., where the economy is more reliant on resources.

“Tighter market conditions are driving home prices higher as supply struggles to keep up with demand,” he said.

Copyright © 2015 Key Media Pty Ltd

BCREA
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Jennifer Paterson
Other

Toronto has been added to the Canada Mortgage and Housing Corporation’s list of the country’s riskiest housing markets, with the insurer citing a combination of price acceleration and overvaluation.

“The rise in house prices have not been matched by growth in personal disposable income, giving rise to a modest risk of overvaluation,” said Bob Dugan, CMHC’s chief economist, in a press release, pointing to the Toronto market.

However, the CMHC did not indicated whether Toronto investors, agents and buyers should expect a deceleration in prices.

The CMHC’s latest House Price Analysis and Assessment (HPAA) framework, which is designed to detect the presence of problematic conditions in Canadian housing markets, also pointed to a high level of risk in Winnipeg, reflecting risks of overvaluation and overbuilding, and in Regina, reflecting price acceleration, overvaluation and overbuilding, particularly of condo apartments.

Both Winnipeg and Regina were highlighted as risky markets in CMHC’s last report, published at the end of April. 

“Nationally, CMHC continues to detect a modest risk of overvaluation,” said Dugan. “However, our overall assessment of the risk of problematic conditions varies from centre to centre due to regional differences in housing markets. Imbalances in local housing markets could be resolved with further moderation in house prices or improving economic conditions.”

According to the report, the risk of problematic market conditions continues to be assessed as moderate for Montréal and Québec due to the detection of some risk of overvaluation.

In Toronto, Ottawa and Montréal, CMHC is monitoring the risk of overbuilding, with condos under construction near historical peaks. “Inventory management is therefore necessary to make sure that these condominium units under construction do not remain unsold upon completion,” added the report.

Low overall housing market risk is observed for Vancouver, as none of the individual risk factors are currently detected.

Copyright © 2015 Key Media Pty Ltd

Frank O’Brien
Other

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Western Investor
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