How 15 years of Vancouver housing data points to more price drops

Josh Sherman
Business in Vancouver

Vancouver home prices haven’t hit bottom yet, not according to the latest forecast from a credit union based in BC and Ontario.

“Home values will continue to ease lower,” writes Bryan Yu, deputy chief economist for Central 1 Credit Union, in a B.C. Economic Briefing.

But how much lower, exactly? Yu expects to see the benchmark price of a home in Vancouver drop another 5 per cent before the market stabilizes.

Over the past three months, the benchmark price of a Metro Vancouver home, including both condos and houses, has fallen 3.1 per cent, according to the Real Estate Board of Greater Vancouver. That put it at $1,070,600 as of the end of September.

While sellers, particularly those in the higher-end detached market, may not welcome the prospect of a further depreciation in home values, buyers should get a leg up.

“Buyers will be able to negotiate better pricing terms in the market,” says Yu, adding to his prediction.

As sales activity has slowed — compared to September 2017, transactions were down 41 per cent last month — listings have been piling up.

This past month, 2,611 existing homes changed hands, making for the slowest September since 2012. Yu anticipates total sales this year will be down 25 per cent from 2017’s tally, with roughly the same level of activity expected in 2019.

There is no one cause hampering activity, Yu suggests.

Rather, he provides a list of several factors driving activity down: expanded stress testing for mortgage applicants, the already high cost of housing, and rising interest rates. “A plethora of provincial policy measures have shunted buyers to the sidelines and given pause to those still able to purchase as prices erode,” he notes.

© 2018 BuzzBuzzHome Corp.

Homebuilders began fewer projects this year

Steve Randall
Mortgage Broker News

Canada’s homebuilders began fewer projects in the six months to September according to new data.

CMHC’s 6-month moving measure of the seasonally-adjusted annual rate of housing starts for the month shows 207,768 units, down from 213,966 in August. The standalone monthly SAAR of housing starts for all areas in Canada was 188,683 units in September, down from 198,843 units in August.

“The national trend in housing starts stood at a 19-month low in September, following declines in four of the last five months,” said Bob Dugan, CMHC’s chief economist. “The slowdown in the pace of new residential construction activity in recent months is a result of both lower single-detached and multi-starts activity and brings new residential construction closer to its long run average from the elevated levels registered in 2017.”

The highlights Strong demand in Vancouver maintained the year-to-date pace of new home construction seen in 2017 but starts trended lower in September. A quarter of starts were in Surrey.

Toronto saw strong multi-family starts especially in the semi-detached sector, offsetting a decline in single-family homes to create an upward trend overall.

Rental apartment starts pushed the year-to-date total for Quebec higher than the same period of 2017 although overall starts decreased in the third quarter of 2018.

Total housing starts in Winnipeg continued to trend higher in September with several new condo projects started. While year-to-date multi-family starts are 3% above the same period of 2017,  total housing starts remain 5% below 2017 production as rising inventories of single-detached units have slowed activity in this segment of the market.

For the first time in four months, St. Catharines-Niagara CMA housing starts trended higher, mainly due to the apartment sector. New single-detached construction continued to slow, reaching the lowest monthly level in seven years.

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BCREA ECONOMICS NOW

BCREA

The total value of Canadian building permits rose 0.4 on a monthly basis in August to $8.1 billion on broad strength in the non-residential sector. Residential building permits declined for a third consecutive month.   In BC, the total value of permits reached a record high of $1.8 billion, smashing the previous record set earlier this year by nearly 13 per cent. Residential permits increased 17 per cent from July and were up 31 per cent year-over-year. Non-residential permits were up 77 per cent on a monthly basis and passed the $600 million threshold for the first time as the result of large office building projects in Vancouver. Construction intentions August were mixed in BC’s four census metropolitan areas (CMA):

• Permits in the Abbotsford-Mission CMA increased 11 per cent on a monthly basis to $31.3 million. Year-over-year, permit values were down 9 per cent.

• In the Victoria CMA, total construction intentions were down 9 per cent to $71.1 million, a 40 per cent decline over this time last year.

• In the Kelowna CMA, permits values decreased by 14.5 per cent on a monthly basis to $96.6 million, but were up 4 per cent year-over-year.

• In the Vancouver CMA, the value of permits rose 66.4 per cent on a monthly basis and accounted for three quarters of all permit values in BC.  Most of the increase came from the City of Vancouver, though the City of Burnaby issued over $250 million worth of apartment building permits in August.

Revolutionizing the payments process for landlords and tenants

Canadian Real Estate Wealth

Ensuring that rent is received on time each month can seem like a never ending pain point for real estate investors. Not all tenants are perfect, and receiving late rental payments can seriously impact cash flow and have several frustrating knock-on effects.

In an attempt to improve the payments process for both landlords and tenants, RBC Ventures has launched Get Digs, an online platform designed to streamline payment and receiving of rent payments.

“Get Digs aims to transform the rental experience and remove the painful hurdles that exist in what is an antiquated system,” says Megan McQuillan, Co-Founder and Product lead at Get Digs™. “There are some major pain points for landlords and renters in Canada, and our mission at Get Digs is to help alleviate them”.

On Get Digs, landlords can easily manage aspects of the rental process, including payments, and tenants can pay their rent using a variety of methods, including credit card, Debit Mastercard, VISA Debit, Interac e-Transfer and cheque.

“In the current market, for the most part, renters are forced to pay rent with post-dated cheques but that just isn’t commensurate with the experience customers receive in all other areas of their daily activities,” McQuillan says.  “People have choice in how they pay for just about everything, and we wanted to introduce that level of flexibility to the rental space.”

The RentSteady service offered by the Get Digs platform means the landlord gets paid even if their tenant misses a payment.

“It eliminates all of the stress and time associated with chasing rent payments,” McQuillan says. “It takes away the worry-factor. It also means less hassle depositing rent, and less time spent following up on bounced payments.”

Extensive research on the landlord and tenant experience was conducted before Get Digs went into development. The research team talked to landlords and renters across Ontario to understand their processes and pain points, and to find out how to make their lives easier.

“We called landlords, connected with people face to face and collected survey data to really get in front of potential users in all of the possible ways,” McQuillan says. “Quickly, we started to hear the pain-points, particularly around payments, for renters and landlords. We wanted to ensure that we are not creating a solution for one group; there are two audiences in the rental market and we wanted to make sure we came up with a solution that provided value for both.”

Copyright © 2018 Key Media Pty Ltd

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MARKET SUMMARY

Regardless of the details — even though the devil is in the details –, the USMCA (NAFTA 2.0) agreement is welcomed news, as it has lifted the general uncertainty clouding the economic horizon over the last year, however, this does not change the fact that the overall Canadian economy continues to slow compared to previous years, with GDP growth expected to come in at approximately 2.1% in 2018. The British Columbia (BC) economy is expected to pull ahead with a GDP forecast of 2.4% and an unemployment figure of 4.9% by the end of 2018. The fact that a labour shortage is placing a damper on job growth certainly accentuates BC’s impressive low unemployment rate. Despite strong employment growth in the Greater Vancouver Area (GVA) over the last two months, year-to-date (up to Sept. 2018) employment growth is negative, at -0.5%. Employment is expected to continue growing for the remainder of 2018 and over the next few years, with high-tech and construction employment leading the charge. The GVA economy is expected to outperform most other major Canadian cities, with GDP growth of 2.3% in 2018.

Minimal overall wage growth (despite minimum wage increasing), relatively high inflation and rising interest rates continue to wreak havoc on debt servicing costs for households. Ultimately this is weakening consumer confidence and forcing households to start making tougher decisions on how they spend. Much of retail sales growth lately has been fueled by inflation, and as the prices of energy, food and other necessities continue to rise, it is the discretionary items that will become even more discretionary. With more certainty in the economy, expect the Bank of Canada to continue raising interest rates, which will further compound the debt servicing cost issue for households. This has already started weighing on retail sales, in fact GVA’s retail sales have declined by 2.2% year-over-year, the weakest performing major market in Canada, and the impact of increasing debt servicing costs on retail sales is expected to intensify as interest rates continue to increase. Watch for this to start impacting mid-level retailers going forward in 2019.

Given this economic backdrop, the office, industrial and retail commercial real estate markets in the GVA remain deeply embedded in favour of landlords. The office market vacancy rate decreased by 110 basis points (bps) year-over-year to end Q3 2018 at 5.2%. The market continues to experience strong demand from high-tech companies, such as Amazon, and co-working companies, such as WeWork and International Workplace Group (IWG – Regus), continuing to announce new and expanded operations in the Vancouver market. IWG recently agreed to lease 120,393 SF at 400 West Georgia when it opens in 2021. As a result of this dynamic of low vacancy and strong demand, the net asking rental rates are on the rise, however, the average net asking rental rate, at $23.57/sq. ft. per annum at the end of Q3 2018, was down 2.1% year-over-year due the mix of available space and most of the highest quality space being leased up. It is important to note that downtown vacancy is even lower, at 3.4%, down 200 bps year-over-year, whereas suburban vacancy is only down 70 bps over the same period to end Q3 2018 at 6.3%. For a tenant looking for 100,000 SF of space today, there are no current options in the market, so these tenants will need to wait until the next supply wave is delivered. Due to the limited options currently available, construction activity has picked up, particularly downtown, with current and expected construction projects now representing approximately 10% of the current GVA market office inventory, compared to just 1.7% in Q3 2017. Much of this space will not be available for several years, and as a result demand continues to spill over into the suburban markets. With limited new supply expected in the short term, expect vacancy to remain tight and rental rates to continue increasing.

The industrial market vacancy rate is virtually unchanged year-over-year to end Q3 2018 at 3.2%, however, this is up 40 bps from Q2 2018, as a result of approximately 3.5 million SF of new supply delivered over the previous 12 months. The GVA industrial market remains exceptionally tight, and even though there is 3.4 million SF of space currently under construction, representing 1.5% of existing inventory, it is not enough to meet the demand from tenants and users. As a result the average net asking rental rate continued to increase, up 7.4% year-over-year to $10.80/sq. ft. per annum. Employment in Vancouver has been sliding for much of 2018, and combined with higher interest rates and high debt levels, consumer confidence and retail sales are beginning to suffer, and this is starting to reflect in the retail market. Although the retail market vacancy was down 50 bps year-over-year to end Q3 2018 at 2.8%, it is up 10 bps from the end of Q2 2018, however, there has also been approximately 600,000 SF of new retail supply delivered year-to-date. The average net asking rental rate continues to perform well, up 12.5% year-over-year to $30.61/sq. ft. per annum.

These insights are made possible through CoStar, the largest commercial real estate source for property listings for sale or lease in Canada. CoStar enables users to gain insight into over 22,939 properties currently tracked in the Greater Vancouver Area, which include 973 properties for sale and 3,323 spaces for lease.

CoStar conducts constant, proactive research with a team of 60+ researchers making over 12,000 database updates each day.

OVERALL MARKET ACTIVITY

PROPERTIES TRACKED

 

New luxury hotels define Alberta?s economic confidence

Frank O’Brien Geoff Kirbyson
Western Investor

Alberta’s hotel industry is experiencing a 52 per cent occupancy rate this year, compared with a 62 per cent average across Western Canada, and revenues are flat, but luxury hotels are underway or opening from the capital city to Canmore.

It’s been 28 years since the Edmonton Oilers won the Stanley Cup, but the owners of the city’s newest luxury hotel think a close proximity to the NHL team will lead to championship-like success.

The JW Marriott hotel is scheduled to welcome its first guests next March as the NHL playoffs get underway.

“The amount of attention the district will get and the arena already gets is nothing but a benefit to us,” said Steve Walton, director of sales and marketing for the JW Marriott in Edmonton’s downtown entertainment district.

The hotel will have 346 guest rooms and 22,000 square feet of meeting space, and the crown jewel will be its main ballroom – named after Oiler hockey legend Wayne Gretzky. At 10,500 square feet, it will be the largest of its kind downtown. The hotel will also have five restaurants and lounges, including a high-end steak house.

It’s the first full-service, four-star hotel in downtown Edmonton in 30 years. The JW has been booking conferences for more than a year and has confirmed major events well into 2019.

“The demand is there, for sure,” Walton said. On top of the hotel’s 22 floors will be another 33 floors of condominiums, making it one of the tallest buildings west of Toronto.

While the JW is the newest hotel in the central business district, it’s certainly not the only one drawing attention. The Hyatt Place opened last year with 210 rooms and just under 10,000 square feet of meeting space.

Karen Chalmers, executive director of Edmonton Destination Marketing Hotels, said hotel space is up about 16 per cent over the last few years.

“During the boom times from 2012 to 2013, it seemed like a great time to build hotels in Alberta,” she said.

Marriott, in fact, has two more luxury hotels underway in Calgary.

Alberta’s average hotel revenue per available room (RevPAR), a key industry metric, will struggle to reach $69 this year, according to CBRE’s Hotel Outlook 2018. This compares with a RevPAR of $83 three years ago.

In Lloydminster, more than 300 hotel rooms were added with the opening of three hotels a few years ago. Almost immediately after the ribbon cuttings, however, the price of oil plunged and Lloydminster hit “rock bottom,” said Katlin Ducherer, the city’s economic development officer.

A similar situation happened in Red Deer, Alberta’s third-largest city. A number of new hotels opened up just prior to the 2014 downturn and there simply hasn’t been enough business to go around ever since.

“Red Deer has been a depressed hotel market for some time,” said Dave Kaiser, president and CEO of the Alberta Hotel & Lodging Association.

For the first six months of 2018, Red Deer hotels have been operating at 46 per cent occupancy with an average room rate of just $109. The national average, by comparison, is 63 per cent occupancy with room rates of $155. In some markets during this past summer, occupancy has been as low as 25 per cent.

“One of our people stayed at a [Red Deer] hotel in August and he was the only guest in the whole place,” Kaiser said.

But a Rocky Mountain hotel developer appears confident in the future.

Clique Hotels president Jim Muir sees Clique’s new Malcolm Hotel in Canmore as a recent pinnacle of his 44 years in the hospitality industry.

“The Malcolm is something very special,” Muir said. The four-star, 127-room luxury hotel will hold its grand opening November 3 as the first luxury hotel built in the resort community in 20 years.

Due to visitor demand for hotel space in the Alberta Rockies, the Malcolm held a soft opening this summer.

The new hotel has already booked two dozen weddings and a dozen large conferences through 2019, Muir said.

A Canmore resident, Muir is confident the Malcolm Hotel will also become a Rocky Mountains landmark and a signal that Alberta’s hotel industry is back.

Copyright © 2018 Western Investor

“Fabulous” residential building will have 181 homes, including 20 with lock-off mortgage-helper suites, plus commercial and retail

Bill Cleverley
Western Investor

The tallest building to be built on the Roundhouse properties in Victoria West — a 25-storey residential tower — has been given the green light by City of Victoria council.

“This is a big addition to the area and some people will get hesitant about that. But it fits within the vision we had for the area,” said Coun. Chris Coleman, who called the design “fabulous.”

“This fits the vision we had and it accommodates the rest of the area, I think, exceptionally well.”

The 183-unit project at 210 Kitma Rd., is the first residential component to be built on the former Canadian Pacific Railway E&N Roundhouse lands by the Mariash Group and Focus Equities.

Coun. Margaret Lucas called it “a lovely design.”

“It has been in the making for a very long time and the time has come for this to definitely move forward,” she said.

“At 25-storeys tall this building will have an impact on the views of the city, however the orientation of the building height, and the resulting views are consistent with the design guidelines,” senior planner Mike Betanzo told councillors.

The Roundhouse tower will become one of the two tallest buildings in Greater Victoria. Hudson Place One, under construction in the 700 block of Herald Street, will also be 25 storeys.

The Vic West property was zoned in 2008 and is subject to a master development agreement and Roundhouse design guidelines. Councillors have agreed to issue a development permit for the tower project which allows:

• Residential tower with 181 residential units that includes 20 studios, 73 one-bedroom units, 52 two-bedroom units and 36 three-bedroom units. The project also introduces multi-family flex units — 20 suites with separate studio lock off unit that could serve as a mortgage helper or an in-law suite but can’t be stratified.
• Commercial uses, bike storage, two townhouses and lobby and amenity space in the ground level podium.
• A commercial corridor connecting to commercial space in the historic Roundhouse building.
• A start on the E&N Trail through the Roundhouse site connecting Catherine Street and Saghalie Road.
• Design and development of the adjacent city-owned Sitkum Park, replacing the paved parking area with plantings and seating areas.

The project includes 316 parking stalls in five levels of underground parking, far exceeding the 184 stalls required under the zoning as well as 269 long-term bicycle stalls and 27 short-term bike stalls.

Coun. Marianne Alto said she was impressed both with the parking and with the “depth and breadth of the support letters coming from neighbours and residents and folks in various community organizations” for the proposal.

Betanzo said some of the over-supply of parking is intended to service future development on the Roundhouse site.

Coun. Ben Isitt argued the development could use further design refinements. “It’s a very tall building and I think how it presents to the community will have a significant impact and so personally I feel the application hasn’t reached a level of quality for me to be able to support it moving forward,” he said.

Copyright © 2018 Western Investor

Concord Pacific’s amenity-rich Park George will be big on smart design

Simon Briault
The Vancouver Sun

Park George

Project location: 13768 —100 Avenue, Surrey

Project size: 339 homes ranging in size between 573 and 2,056 square feet. Prices for one-bedroom homes start at $379,900, at $540,000 for two-bedroom homes and $899,900 for three-bedroom homes

Developer: Concord Pacific

Architect: DYS Architecture

Interior designer: LIV Interiors

Sales centre: 9908 King George Blvd., Surrey

Hours: 11 a.m. to 5 p.m., daily

Telephone: 604-583-9866

Website:www.parkgeorge.com

There are not many places where a new condo comes with access to two private swimming pools, an outdoor hot tub theatre, a tennis court, a work lounge, a sports social lounge, a virtual spin studio and a video conferencing room. Park George, the latest offering from Concord Pacific in Surrey, is one such place.

Part of the reason for the extraordinary range of amenities on offer at Park George is because residents will be able to make use of the facilities that are already in place at Park Avenue, two of Concord Pacific’s previous residential towers nearby.

“We call our developments master-planned communities because we try to share the amenities across a number of towers – in this case four – so that it keeps people’s strata fees down,” explained Grant Murray, senior vice-president of sales at Concord Pacific. “In total, there will be about 110,000 square feet of amenity space, 30,000 square feet of it indoors.”

“You simply won’t find the same range of amenities in a single residential tower, or even two towers,” Murray added. “And you certainly won’t find them in a location that is so well connected in terms of transit. It’s really a big selling point for us.”

Park George’s two towers of 36 and 39 storeys will include 339 homes in total. The neighbourhood around the development has been a decade in the making, when the City of Surrey came up with a long-term plan to transform the city centre into a new urban core. This involved adding multiple highrise residential buildings, retail offerings and amenities, a new location for Surrey City Hall, the expansion of Surrey Memorial Hospital, and a new RCMP headquarters.

“Then you’ve also got the extra rapid transit that will be coming to Surrey in the near future, extending the transit options south down to Newton,” Murray said. “We recognized 10 years ago that Surrey was really going to explode in popularity as somewhere people want to live and work.”

“Park George is going to be dead centre in all of this new development and it’s also right next to two parks – Holland Park and Quibble Creek,” Murray added. “That means you’ll never have anything in front of you and there are excellent view corridors. This is because Quibble Creek is a riparian park that is designated as protected green space. It gives you a lovely suburban feel in an urban setting.”

Murray explained that the City of Surrey is aiming to transform, not just its residential environment, but its economic one as well.

“Everything’s been gearing up to make this a new urban area and they’re hoping to attract high-tech companies to the city in particular,” he said.

The City of Surrey’s website talks extensively about its aspirations to become a “Smart City”, which aims to create “sustainable economic development and a high quality of life for…residents by considering innovation and technological advancements as a key ingredient in…decision making, strategy and investment.”

Concord Pacific and Park George, in particular, are well set up to contribute to this vision, according to Murray.

“These are the first towers in Surrey that will have 100-per-cent electric vehicle parking,” he said. “They also have a keyless entry and the WiFi connection will be fantastic so you’ll be able to walk around anywhere in the building and be connected, including in the elevators. We’re really big on technology and that’s why we’re installing smart thermostats in every suite so you’ll be able to set the temperature in your home while you’re away. With all of these smart ideas, we’re really catering to that generation that does everything with their phone.”

Kitchens at Park George include Panasonic microwaves and Bosch appliance packages with wall ovens, four-burner gas cooktops, stainless steel hood fans and built-in fridge-freezers. Bathrooms have Grohe fixtures, Kohler sinks and built-in shower niches. There are two colour palettes to choose from – Sunrise Chiffon and Evening Silk – and suites also come with Blomberg washers and dryers.

Murray expects the amenities at Park George to be a key selling point when sales open this month.

“Because the density in the area is so high, you’re generating enough money to be able to put in a huge amount of amenity space,” he said. “The amenities across the four towers really complement each other so there’s always something on offer no matter what you’re into or what the weather is doing at any given time of the year.”

Homes at Park George will range in size between 573 and 2,056 square feet. Prices for one-bedroom homes start at $379,900, at $540,000 for two-bedroom homes and $899,900 for three-bedroom homes. Completion is expected for mid 2022.

“It’s just an ideal location for a master-planned community,” Murray said. “It’s been a fantastic ride over the last 10 years and these are the last two towers in the area so we’re expecting lots of interest.”

© 2018 Postmedia Network Inc.

Homeowners could be facing two interest rate rises

Steve Randall
REP

Homeowners could be facing two interest rate rises in the coming months according to an updated forecast.

CIBC Capital Markets said Thursday that it was already expecting a rate rise in October due to anticipation that a NAFTA deal would happen. The agreement of the next-gen trade deal USMCA supports the earlier forecast.

However, economists are now calling for a further rate rise in January 2019, slightly earlier than it had been forecasting. That’s due to recent positive data points.

The good news for homeowners with mortgages is that, following those two rate rises within three months, CIBC Capital Markets believes there will need to be a “prolonged pause” by the BoC due to the “elevated sensitivity of households” to the interest rate hikes.

The outlook also forecasts that the Canadian dollar will strengthen over the next six months or so before easing back to the low 1.30s against the greenback by mid-2019.

Challenges ahead for the economy CIBC economists Andrew Grantham and Royce Mendes have posted their economic outlook for the coming years and highlighted some challenges.

These include rising mortgage rates, attracting and retaining talent, and a US slowdown by 2020.

Provincially, Alberta is expected to see stronger growth in 2018 than previously predicted due to a resurgence of oil production.

BC is set for weaker growth than expected due to the slowdown in the housing market, which is a key driver of growth in the province. The economists note that there has been a more pronounced slowdown in the BC housing market activity than in Ontario and not much of a rebound so far.

The outlook also suggests a slowdown in consumer spending in BC and Ontario as the provinces see the biggest impact from rising interest rates.

The report highlights that 5-year mortgages will be renewed at higher rates for the first time in a generation.

Copyright © 2018 Key Media Pty Ltd