Rents have increased 8.2 per cent

Kerrisa Wilson
other

Vancouverites spent an average of $2,100 in rent on a one-bedroom home in April, enough to make the city the priciest rental market in Canada.

Vancouver reclaimed the title from Toronto, which landed in the top spot in March.  

A 4.5 per cent increase in average rent in April over the previous month was enough for Vancouver to overtake Canada’s largest city, according to PadMapper’s Canadian Rent Report, published Tuesday.

Toronto’s median rent of $2,080 in April was up only two per cent from the previous month.

“For the last 24 months we’ve seen an extremely robust rental market,” Vancouver realtor Adil Dinani tells BuzzBuzzNews.

On an annual basis, Vancouver rents have increased 8.2 per cent compared to April 2017.

Dinani attributes the steady increase in rental prices to tight supply and limited new inventory.

“We haven’t seen a completion in downtown Vancouver for quite some time for a new tower and it hasn’t replenished the shortage of rental product. And so inventory stayed extremely tight on the rental side. It’s putting upward pressure on rental prices,” says Dinani.

In addition, Dinani notes that some prospective homebuyers in the city are holding off on purchasing a home in light of new federal and provincial housing-related regulations and a higher interest rate environment.

“Arguably, I would say with the new NDP housing policies, along with higher interest rates and the OSFI stress test, some folks are being pushed out of the market to buy and now they’re pushed into the rental market,” says Dinani.

While one-bedroom room rents soared in Vancouver last month, two-bedroom rents remained flat from March 2018 at $3,200.

Going forward, Dinani expects rents will level off for the rest of the year, as some supply comes into the market.

“Rents have actually moved up alongside condo prices for the past 24 months, so I believe that they’ll stay firm to slightly higher in the coming months. But I don’t believe we’re going to see the same exponential [price] increases as we have in the past 24 months,” he says.

© 2017 BuzzBuzzHome Corp

Spring housing sales slowed

Steve Randall
Canadian Real Estate Wealth

Home sales activity was lower in April as the impact of the mortgage stress tests hit the spring housing season.

The Canadian Real Estate Association says that it is seeing some of the effects it warned the government about with cooling in markets that weren’t overheating.

MLS sales of homes nationwide were down 2.9% year-over-year with about 60% of markets reporting lower sales led by the Fraser Valley, Calgary, Ottawa and Montreal.

Actual activity was down by 13.9% from a year earlier and was 6.9% below the 10-year average for April. Again 60% of markets showed decline, led this time by the Lower Mainland of BC and markets in and around the Greater Golden Horseshoe region of Ontario.

“This year’s new stress test has lowered sales activity and destabilized market balance for housing markets in Alberta, Saskatchewan and Newfoundland and Labrador Provinces,” said Gregory Klump, CREA’s Chief Economist. “This is exactly the type of collateral damage that CREA warned the government about. As provinces whose economic prospects have faced difficulties because they are closely tied to those of natural resources, it is puzzling that the government would describe the effect of its new policy as intended consequences.”

Listings down, sales-to-new-listings ratio above average
The number of new listings was down 4.8% in April, 12% below the 10-year average; but there was 5.6 months of supply, the highest since September 2015.

The sales-to-new-listings ratio was 53.7%, slightly up from 52.6% in March and above the 10-year moving monthly average of 53.4%.

Around 60% of local markets were considered balanced in April.

Prices saw smallest rise since 2009
The Aggregate Composite MLS® Home Price Index was up 1.5% y-o-y in April 2018 marking one full year of decelerating y-o-y gains. It was also the smallest y-o-y increase since October 2009.

Deceleration was driven by a stabilization of home prices in Ontario’s Greater Golden Horseshoe region following a rapid rise a year ago.

Composite benchmark home prices in the Lower Mainland of British Columbia continue to trend upward after having dipped briefly in the second half of 2016 (Greater Vancouver (GVA): +14.3% y-o-y; Fraser Valley: +22.7% y-o-y).

Benchmark home prices continued to rise by about 14% on a y-o-y basis in Victoria and by about 20% elsewhere on Vancouver Island.

Within the GGH region, price gains have slowed considerably on a y-o-y basis but remain above year-ago levels in Guelph (+5.9%). By contrast, home prices in the Greater Toronto Area (GTA), Oakville-Milton and Barrie and District were down from where they stood one year earlier (GTA: -5.2% y-o-y; Oakville-Milton: -8.7% y-o-y; Barrie and District: -8.4% y-o-y). This reflects rapid price gains recorded one year ago and masks recent month-over-month price gains in these markets.

Calgary and Edmonton benchmark home prices were again little changed on a y-o-y basis (Calgary: +0.1% y-o-y; Edmonton: -0.9% y-o-y), while prices in Regina and Saskatoon remained down from year-ago levels (-6.5% y-o-y and -3.4% y-o-y, respectively).

Benchmark home prices rose by 8.4% y-o-y in Ottawa (led by a 9.4% increase in two-storey single family home prices), by 6.3% in Greater Montreal (led by a 7.3% increase in two-storey single family home prices) and by 4.2% in Greater Moncton (led by a 5.6% increase in one-storey single family home prices).

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Over 50,000 affordable units to be added to Toronto and Vancouver

Ephraim Vecina
Canadian Real Estate Wealth

Fuelled by a booming tech industry, Toronto’s economy has produced an all-too-familiar problem: soaring housing prices beyond the reach of the middle class. That’s also plagued Vancouver where prices have gone even higher than in Toronto.

Now, Canada is embarking on an ambitious plan to create more moderately-priced rental units. With land handouts and tax incentives provided by the city and provinces, one group hopes to bring 50,000 affordable apartments to Toronto and Vancouver in just 10 years.

The project, to cost at least $10 billion, is at a scale never before seen in Canada, both in its size and speed. And it’s raising questions about whether or not the country will be able to address its affordability problem before it’s too late.

At stake, proponents say, is the continued growth of Canada’s biggest cities. Last year, Toronto ranked first in UBS Group AG’s annual list of major cities worldwide with the greatest risks of a housing bust. That has made even property developers who have reaped big profits fretful that critical workers will be priced out of housing.

“If we don’t deal with this issue of housing, we’ll hit a ceiling where we can’t expand that sector of the economy that we desperately need,” Westbank Projects Corp. CEO Ian Gillespie told Bloomberg.

The Canadian plan, run by a new non-profit called Creative Housing Society, is proposing to build units aimed at people with median annual income between $40,000 to $100,000, who would spend less than 30% of their household income (before tax) on housing costs.

That’s become increasingly difficult now. The average annual income needed to purchase an average-priced resale condo in the city is $100,000 up from $77,000 a year earlier, according to Urbanation Inc.

On January 1, the government attempted to tame housing prices with regulations that make it harder to get a mortgage. But that has driven people to the rental market, where average monthly rents surged about 11% in the Toronto region in the first quarter, to $2,206, Urbanation said.

For property developers, building affordable housing is typically a low-margin proposition, especially amid rising construction costs, land prices, and interest rates. But the city and provinces are showering groups with incentives, including tax breaks, reduced fees, and promises of quick approval time, as short as six months. That’s spurred a host of other companies, including Canadian Real Estate Investment Trust, Greenwin Inc., and Tricon Capital Group Inc., to jump on the affordable bandwagon.

Creative Housing takes it one step further. The group’s proposed model includes a deal in which the city provides land free as long as affordable housing is built and maintained on it in perpetuity.

It’s also in talks with the Canadian Mortgage and Housing Corporation to receive financing that freezes lending at today’s interest rates for a 10-year period. With most of the equity coming from private institutional lenders, the non-profit is hoping to start building as early as next year.

“You need to add a significant amount of housing to even begin to respond to the demand and we’re so far behind in this area that it’s really hard to catch up,” Creative Housing CEO and former chief city planner for Toronto Jennifer Keesmaat said. “But if our model works, there’s almost an infinite amount of new affordable rental units that could be absorbed in the market.”

Copyright © 2018 Key Media Pty Ltd

New commodity about to cause valuation surge

Armina Ligaya
REP

TORONTO _ Canada’s impending legalization of marijuana is spurring demand for commercial real estate, particularly for retail shops in Alberta, where the government is selecting private operators to conduct over-the-counter sales, industry players said Tuesday.

Real estate consultancy JLL said its phone has been “ringing off the hook” as cannabis companies look to secure space to cultivate the plant and seek retail space to sell the final product.

Commercial real estate prices haven’t “seen a major bump yet”, but that is expected to change after legalization, research manager Gaurav Mathur said during a panel discussion at an industry conference in Toronto.

“It’s on an asset-by-asset basis, not prevalent throughout the industry just yet,” he said at the Land & Development conference on Tuesday.

Mathur also expects “offshoots” of the domestic cannabis industry, such as supply and accessories shops, to drive demand for commercial real estate going forward.

Canada is preparing for the legalization of cannabis for recreational use later this year, but has left it to the provincial or territorial governments to decide how to distribute the drug. Provinces such as Ontario, Quebec, Nova Scotia and Prince Edward Island have tasked their provincial liquor boards to handle retail sales of marijuana.

But other provinces such as Saskatchewan and Newfoundland and Labrador have said the private sector will handle retail sales.

Alberta, however, is an attractive province for cannabis retail as the Alberta Liquor and Gaming Commission has not put a cap on the number of licenses that will be issued, but stipulates that no one person or entity can hold more than 15 per cent.

The province expects to issue roughly 250 licenses to private operators in the first year.

Saskatchewan, for comparison, only plans to issue 51 retail cannabis permits in 32 communities, and qualified applicants will be put into a random selection process, similar to a lottery. Newfoundland and Labrador says its most recent round of applications for potential cannabis retailers was for up to 41 licenses.

Canopy Growth’s vice president of stakeholder and government relations Jeff Ryan told the panel that the company recently shifted focus towards retail as it aims to set up shops in provinces such as Alberta, Newfoundland and Labrador and Saskatchewan.

Ryan said in an interview after the discussion that the licensed producer has encountered stiff competition for retail space in urban centres in Alberta.

The competition for retail space in Alberta is “absolute insanity,” said Mark Goliger, the chief executive officer of National Access Cannabis Corp. which has signed an agreement with coffee chain Second Cup to convert some of its coffee shops into weed dispensaries.

In addition to NAC’s existing network of medical clinics and pharmacies, the company is aiming to open recreational cannabis dispensaries in provinces where legal under its newly-launched Meta Cannabis Supply Co. brand.

Alberta’s cannabis retail licensing system has big players and mom and pop shops alike vying for prime spots and submitting applications, he said.

“Everybody is trying to get retail locations, and that of course is driving up the price and driving up the terms,” he said in an interview.

He said NAC has encountered bidding wars, with other parties “spiking the market with overly aggressive terms” such as double the asking price per square foot and very aggressive termination clauses.

“They’re just going in there and throwing lots of money and being aggressive with landlords, and its creating an out of balance scenario,” Goliger added.

However, some landlords are still hesitant about leasing to cannabis companies amid lingering stigma.

The law firm handling work on leases for Ontario’s pot retail shops has seen pushback from landlords.

“That’s in Ontario where we’re having a government laid-out store,” said Lisa Borsook, executive partner of law firm WeirFoulds LLP.

“And yet it’s been my experience that landlords, nonetheless, have qualms about having cannabis in their centres.” 

The Canadian Press

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Retirees driving demand for recreational real estate

Joannah Connolly
Western Investor

When the weather is fine, who doesn’t dream of whiling away their days in an oceanfront cabin or lakeside cottage? It certainly seems that older Canadian have exactly that goal.

n the vast majority of Canada’s most popular recreational real estate markets, it is retirees and baby-boomers who are driving vacation property purchases, according to an annual recreational market survey by Re/Max, published May 15.

In the survey of brokers and agents across the country, respondents in more than 91 per cent of recreational markets said that older buyers were the driving force in buying vacation properties in that area – in stark contrast with one year ago, at 55 per cent of markets.

The survey found that in B.C., Ontario and Atlantic Canada, an increasing number of boomers are cashing in on their high-priced principal residences and buying recreational properties outside of urban centres to live in year-round in their retirement year. This trend is “increasingly blurring the line between recreational and residential properties,” said the report.

“Last year, we found that baby boomers and retirees were increasingly selling their homes in urban centres like Toronto and Vancouver,” said Elton Ash, regional executive vice-president, RE/MAX Western Canada. “It’s clear that many put the equity they received from those sales into the purchase of a recreational property with the intention to retire in comfort and away from the city.”

Aside from an “affordable purchase price,” which was Canadians’ biggest priority, “waterfront access” was rated as the most important must-have when choosing a vacation property, pushing “reasonable maintenance costs” into third place.

In B.C., it was a similar story to the national picture, with retirees making up most of the purchasers in the province’s recreational hotspots. But the survey also found an emerging trend of younger professional couples and families also making the most of significant uplifts in the value of their primary residences to buy vacation homes.

Re/Max added that the vacation property market in B.C. remains a strong seller’s market, with not enough available vacation homes to meet the demand.

For more details, read the full 2018 Re/Max Recreational Property Report.

© Copyright 2017 Western Investor

Greater Vancouver gap between building cost and market price largest in Canada

Hayley Woodin
Western Investor

The cost of land restrictions and zoning regulations has a dollar amount, and in Greater Vancouver, it comes with five zeroes.

According to new research from the C.D. House Institute, “excessive regulation” around building single-family homes in the region added $600,000 to the price of an average home between 2007 and 2016.

The analysis also shows that barriers to building single-family supply make up about half the cost of housing in the area – the highest level in Canada, and one on par with Manhattan, New York.

The study, titled Through the Roof: The High Cost of Barriers to Building New Housing in Canadian Municipalities, examines the gap between the physical cost of building new single-family housing across Canada, and the price those homes fetch on the market.

After accounting for the cost of land and a 17 per cent profit margin for developers, the study concludes that a functioning municipal housing market should see little to no construction cost gap relative to sale price per square foot.

This is the case for the regions of Quebec, Waterloo and Moncton, New Brunswick.

But not in B.C.

Four B.C. regions were included in the study – Kelowna, Victoria, Abbotsford-Mission and Vancouver – and they rank highest on the institute’s chart. In second place, the construction cost gap of Abbotsford homes ­– deemed to represent the additional cost of regulations and restrictions – is $150 per square foot. In Vancouver, the cost gap is doubled, at $300 per square foot.

The report notes zoning regulations, delays on permit approvals, development charges and land-use restrictions serve as a substantial barrier to building new housing, with the result being higher prices.

While zoning regulations in supply-constrained markets may by design favour multi-family projects, the report notes that restrictions around building height can have a similar effect.

Copyright © 2018 Western Investor

Canadian home sales fell to its lowest level in five years

Greg Quinn
REP

Canadian home sales fell to the lowest in more than five years in April, as tougher mortgage qualification rules deterred buyers.

The number of homes sold last month declined 2.9 percent from March, the Canadian Real Estate Association said Tuesday from Ottawa. Declines were recorded in about 60 percent of cities tracked including Vancouver, Calgary, Toronto and Montreal.

It was a disappointing start to the busy spring selling season for realtors that suggests markets are still struggling with tougher rules that require borrowers to prove they can afford to cope with higher interest rates. Policy makers made the changes along with other steps, such as foreign buyers taxes, to put the brakes on a surge in price gains last year that some fear could be a danger to the financial system.

The drop in April is the third monthly decline this year, with sales down over 20 percent since December. The new mortgage qualification rules kicked on Jan. 1.

“This year’s new stress test has lowered sales activity and destabilized market balance for housing markets in Alberta, Saskatchewan and Newfoundland,” CREA economist Gregory Klump wrote in the report. “This is exactly the type of collateral damage that CREA warned the government about.”

Even with the drop in sales, prices are still holding up. The benchmark index climbed 0.6 percent on the month, and is up 1.5 percent from a year ago.

The number of new homes listed for sale also declined 4.8 percent in April. 

Copyright Bloomberg News

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TD Bank discounting its variable mortgage rate

REP

TD Bank is looking to attract more homebuyers with a hefty discount to its variable mortgage rate as competition among Canada’s biggest lenders heats up.

The Toronto-based lender decreased its five-year variable closed rate to 2.45 per cent, or 1.15 per cent lower than its prime rate, for the month of May.

TD’s special rate offer comes roughly one week after the Bank of Montreal discounted its variable mortgage rate to 2.45 per cent until the end of May.

Mortgage planner Robert McLister said last week that BMO’s special discounted variable rate was the biggest widely advertised discount ever by a Big Six Canadian bank.

TD spokeswoman Julie Bellissimo says its special five-year variable closed rate discount applies to new and renewed mortgages, as well as the variable rate term portion of certain TD home equity lines of credit.

The moves come amid slowing mortgage growth. The Canadian Real Estate Association says national home sales sank to the lowest level in more than five years in April, falling by 13.9 per cent on an annual basis. The national average sale price decreased by 11.3 per cent year-over-year. 

The Canadian Press

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RE/MAX survey shows older buyers dominating recreational sales

Steve Randall
Canadian Real Estate Wealth

There’s been a sharp increase in the influence of retirees and Baby Boomers on Canada’s recreational homes market.

A survey of brokers/agents by RE/MAX shows that the share of markets where older buyers are dominating recreational sales – including Prince Edward County and Comox Valley – has increased from 55% in 2017 to 91% in 2018.

The rising values of their primary homes is fuelling the buying power of older Canadians, especially for those in Vancouver and the GTA. But rather than buying for recreational use, many are focusing on where to retire.

“Last year, we found that Baby Boomers and retirees were increasingly selling their homes in urban centres like Toronto and Vancouver,” says Elton Ash, Regional Executive Vice President, RE/MAX of Western Canada. “It’s clear that many put the equity they received from those sales into the purchase of a recreational property with the intention to retire in comfort and away from the city.”

Recreational homes a good investment
A third of respondents to the RE/MAX survey say they own or want to own recreational property as an investment.

It found that in some areas in Toronto there are many owners of recreational properties who rent their primary residence in the city, while renting out their recreational home for most of the year. They are renting where they live but buying where they play.

Then there are those who have bought a recreational property with others.

“Many Canadians want to live out the ‘Canadian Dream’ and spend time at the cottage or cabin but today, that doesn’t necessarily mean owning a recreational property outright,” says Christopher Alexander, Executive Vice President and Regional Director, RE/MAX INTEGRA Ontario-Atlantic Canada Region. “Many are choosing to rent recreational properties, often by pooling resources with friends and family, which speaks to recreational properties still being in high demand.”

Copyright © 2018 Key Media Pty Ltd

Collective housing where several people live together

Canadian Real Estate Wealth

In a city known for soaring real estate prices and low vacancies, some people in Vancouver are finding innovative ways of blending their housing and social needs.

One option is called collective housing, where several people live together not only to share a space, but to create a community where resources and work are shared as well.

Jen Muranetz moved into her first collective home about four years ago, drawn by the idea of housemates who have a greater purpose than splitting the cost of living. Now, she and four other adults share a cosy home in east Vancouver, and she says their situation mirrors that of a family.

“I’ve lived with roommates and it’s been nice, but you only connect with each other to a certain extent,” she said. “You’re on your own paths, doing your own thing. But here we’ve come together because we believe in a shared vision, essentially.”

Muranetz is part of the Collective Housing Society, a resource and advocacy group for collective homes around Vancouver. The network includes about 20 homes in various neighbourhoods, and includes everyone from students to working professionals, families to seniors.

Being part of a collective requires more commitment and communication than living with roommates, said Anika Vervecken, who lives with her four-year-old son and three other adults in Vancouver’s Strathcona neighbourhood.

One member of the collective is a deaf man with a developmental disability. Another is a woman who’s staying in Vancouver for just a few months as she travels around the world.

Together, they make and eat meals, socialize and tackle household chores. If one person is having a busy week, someone else will pick up the slack, getting groceries or helping out a bit more with cooking and cleaning.

Vervecken said when her energetic son asks her the same question for the hundredth time, there’s always a housemate who’s happy to make paper airplanes with him and give her a short break.

“There’s no expectation to give up anything in your life to be part of this collective. It’s more about us working together to make it fit,” she said, noting that living together exposes each person to a variety of experiences that they may not have otherwise.

Everyone has their own reasons for joining, said Erik Case, one of Vervecken’s housemates.

“Some are doing it because it’s Vancouver and it’s expensive here. Some are doing it because they’re shameless hippies,” he said.

Vancouver isn’t alone in having a housing collective community, Muranetz said, adding that Victoria, Montreal and San Francisco all have established networks.

A zoning bylaw in Vancouver that prohibits more than five unrelated adults from living together in a single dwelling creates issues for larger collectives, Muranetz said.

As a result, some collective homes, particularly old mansions in the city’s upscale Shaughnessy neighbourhood, are living outside of the law.

“If you have a house with, say, eight bedrooms, and the rent for that house is $5,000, $6,000, of course they’re going to rent out eight bedrooms, not just five,” Muranetz said.

“The reality is that the definition of family is evolving, especially in a housing crisis in Vancouver.”

The Collective Housing Society is working with city staff to find a way to change the rules so they protect safety and simultaneously allow for more flexible living, she added.

A city spokesperson said staff are reviewing the bylaw and will report to council when they have more information.

Collective living isn’t about trying to pack as many people into a house as possible, Muranetz said, but using space effectively to create a community.

“We’re not trying to encourage people to start up rooming houses. We’re just trying to be like, well, if these houses already have a lot of bedrooms and there’s people who need them, let’s use them.” 

The Candian Press 

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