Leading development firms spot sales opportunity in the midst of protests

Frank O’Brien
Western Investor

There is debate over whether anti-government protests in Hong Kong will lead to an exodus of its residents, but Vancouver developers are piling into the Chinese territory to offer Canadian condos to anyone planning an exit.

In Hong Kong, the vice-president of international property at Soho — Hong Kong’s version of LinkedIn, but with a focus on real estate — has noticed a sharp increase in Canadian real estate developers pitching property sales.

“In the first half [of this year] there were 55 per cent more exhibitions of Canadian property in Hong Kong than in the prior half,” said Eli McGeever. “The protests have definitely played a role in it.”

The developers marketing Vancouver property in Hong Kong now include Enrich Developments, Shape Properties Group, Westbank Corp., and Aspac, McGeever said after touring real estate exhibitions that are held across the city of eight million people.

Each of these Vancouver companies has held at least one marketing exhibition in Hong Kong since the start of August, according to McGeever.

There is also evidence that some Hong Kong residents are preparing to depart from the city, where increasingly violent protests have entered their 13th week.

Official Hong Kong government data shows that the number of locals seeking police checks has surged by 48 per cent this year compared with 2018. These documents, certifying no criminal record, are crucial to applying for foreign visas. Applications increased 12 per cent in June, 41 per cent in July, and 48 per cent in the first two weeks of August, compared with a year earlier, according to data released by Juwai.com.

But Georg Chmiel, chairman of Juwai.com, China’s largest portal for foreign real estate, said that most departing Hong Kong residents are not looking at Canada.

“There is not a mad rush among the general population of Hong Kong to acquire real estate in Canada,” Chmiel said.

He said the average Hong Konger is more interested in Asian destinations, such as Malaysia, which are more accessible and affordable, and provide a faster route to residency or citizenship.

There are approximately 320,000 Hong Kong residents who already hold a Canadian passport, and Chmiel said that’s the group that is focused on Vancouver real estate.

As Canadian citizens, they would not be subject to B.C.’s 20 per cent foreign-homebuyer tax, he noted.

Real estate agents in West Vancouver, Vancouver and Richmond have reported increased inquiries from Hong Kong residents recently, but there is scant hard data.

Ken Tin Lok Wong, a Richmond-based immigration consultant, said that “a mass exodus of full-on Canadian citizens from Hong Kong to Canada is unlikely” because people have to choose between making more money in Hong Kong or living in a stable place like Canada but with less pay and higher taxes, he told the Richmond News.

Copyright © Western Investor

Investors’ search for yield outweighs effect of more restrictive legislation

EVAN DUGGAN
The Vancouver Sun

Investors’ appetite to buy rental apartments in the Vancouver region appears to be bouncing back after a first half to 2019 that saw many buyers waiting on the sidelines amid uncertainty in the market, one brokerage house says.

Demand for apartment buildings in the region has been down this year, said Lance Coulson, an executive vice-president with CBRE in Vancouver. He said provincial and municipal policy interventions aimed at improving renters’ rights and tamping down renovictions had pushed some potential buyers to the sidelines.

“There were a lot of things going on in the market that created some uncertainty,” said Coulson, whose firm recently released its national multi-family overview report. “A number of investors were on the sidelines … wanting to see what 2019 was going to bring.”

Overall, national investment volumes for apartment buildings have climbed for four consecutive years, reaching an all-time high of $8.3 billion in 2018, according to the report. Canadian investment volumes through the first half of 2019 have also been strong and the sector is currently on pace to reach the second-highest yearly investment volume total on record.

It’s a different story in the Lower Mainland. Apartment sales reached a total of $1.4 billion in the Vancouver region last year. But total apartment sales deals for the first half of this year totalled just over $400 million, according to figures provided by CBRE. “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 said.

Among the recent tenancy law changes, the B.C. government amended its Residential Tenancy Act last year to require landlords to increase eviction notice periods, boost compensation, and provide first right of refusal to tenants in cases of unit renovations. Vancouver’s city council, in its Tenant Relocation and Protection Policy, also increased compensation for tenants who are forced to move due to renovations, with compensation tied to how long the tenants lived in the unit.

Other cities, such as New Westminster and Port Coquitlam, now use their business licensing system to halt some renovictions, potentially including daily fines or the loss of a landlord’s business licence for lack of compliance.

The sum of various policies gave investors and apartment owners a lot to digest, Coulson said. “It was just easier (for some investors) to do nothing.”

But Coulson recently attended an apartment building investment conference in Toronto where he heard from large institutional investors, who are showing renewed interest in buying Vancouver-area buildings.

He said his firm just arranged a deal that saw Canadian Apartment Properties Real Estate Investment Trust (CAPREIT) purchase The Point, a newly built 98-unit rental building on 201 Street in Langley. He said the midsummer sale, at $39 million, was one of the largest this year in the region. CAPREIT is one of Canada’s largest residential landlords and has 64 buildings in the Lower Mainland and Victoria areas, according to its website.

The sluggish start to the year for investments also likely stemmed from the expectation that interest rates would climb.

“(But), the bond rate has come significantly down and many think (interest rates) could actually go lower, which is helping our market, specifically, when these investors are looking at their returns,” Coulson said.

“The pulse is changing a little bit, which is positive,” he said.

Through all of 2018, 155 apartment buildings sold in the Lower Mainland, according to Goodman Commercial, a firm that specializes in apartment building sales and publishes the Goodman Report.

Fifty-six buildings were sold in the first eight months of 2019 in the region, said David Goodman, a principal with the firm.

“For 2019, we are averaging a total of seven buildings sold each month,” he said. Spread over the remainder of this year, the average would suggest a total of 80-90 building sales, roughly half of the 2018 deal totals.

He said their analysis suggests the average price per rental unit has declined by 10 to 13 per cent in 2019, pushing prices back to 2017 levels.

One steady factor in the market has been demand from tenants.

Vancouver’s regional population continues to rise by about 40,00050,000 people per year and the cost of home ownership remains well out of reach of many residents, making renting the only option.

Coulson said the rental vacancy rate remains under one per cent in many parts of Vancouver, but the market is starting to ease slightly for renters.

“Some (landlords) are saying they have hit kind of a plateau now, or that some of their units are taking longer, and they believe that tenants have more choice.”

© 2019 Postmedia Network Inc.

New single-family home buyers pay higher taxes

Steve Randall
Mortgage Broker News

Buyers of newly constructed homes in the Greater Toronto Area pay some of the highest government charges in North America according to a new study.

The analysis of taxes, fees, and other government charges across several North American metros shows that buyers of new single-family homes in the GTA pay on average $222,000 in fees with high-rise apartment buyers paying $124,000.

The Altus Group report for the Building Industry and Land Development Association (BILD) examined major Canadian cities such as Ottawa, Vancouver, Montreal and Calgary, major US metropolitan areas such as San Francisco, Miami, Boston, New York City, Chicago and Houston, and compared them to various GTA municipalities. The overall tax burden was used as taxation is handled differently by each municipality.

“The facts demonstrate that government fees, taxes and charges play a significant role in eroding housing affordability in the GTA,” said Dave Wilkes, President and CEO of BILD. “These costs are unsustainable and BILD calls on all governments to bring certainty and transparency for new home buyers,” continued Wilkes.

Three times higher The study found that the average total of all government fees for a typical single-family home in the GTA is 3 times higher on a per unit basis than in the 6 US metros – and almost double that in the other Canadian urban areas included.

For high-rise apartments, fees are 1.5 times higher than the US metros and around 30% higher than the Canadian cities.

And while other Canadian cities are roughly in line with US counterparts for the government costs incurred by developers, in the GTA they are double for low-rise and 60% higher for high-rise on average compared to other Canadian jurisdictions.

“The Building Industry and Land Development Association supports the concept that growth should pay for growth,” said Wilkes. “But clearly the costs associated with building a sewer or adding a sidewalk cannot be that much different in Montreal, Ottawa or Calgary.  GTA municipalities should not be adding disproportionate costs on new home buyers as a mechanism to keep property taxes low, especially when the infrastructure benefits all,” added Wilkes.

Copyright © 2019 Key Media

‘Store Support Centre’ design features central atrium and carved-out sides

Naoibh O’Connor
Western Investor

Lululemon Athletica outlined its proposal to build a new 13-storey head office on Foley Street at Great Northern Way during a Sept. 12 open house.

The new building, a.k.a. its “Store Support Centre,” will replace the company’s existing head office on Cornwall Street in Kitsilano, as well as three of its smaller satellite offices in Vancouver. The four offices are currently home to about 2,000 staff, but the company expects that number to grow to 4,000 by 2032.

Lululemon’s rezoning text amendment application is asking for additional height and use permissions.

While the City of Vancouver has a policy that limits rezoning applications while the Broadway corridor planning process is underway, last April council granted Lululemon an exemption so it could proceed. The city’s director of planning recommended the exemption because no additional density is being requested and, as an office building, it advances goals of the recently completed False Creek Flats Area Plan.

If the application is approved following a public hearing, the new 13-storey building will include retail and café/restaurant uses on the ground floor.

Morphosis Architects, led by Thom Mayne and based in Culver City, California, is the design architect for the project, Francl Architecture is the local architect, Clive Wilkinson Architects is the interior architect and PFS Studio is the landscape architect.

The building, which was “sculpted” to respond to site constraints, includes a central atrium and carved-out areas on its sides that feature greenery and create public spaces.

Robin Williams, project director at Morphosis, said while under current zoning they’re allowed to build up to 120 feet, they’ve lost a lot of area on the site because of setbacks and easements.

As a result, they need to go taller to achieve the allowable density on the site. The application requests an amendment to permit an increase in height from 120 to 215 feet.

“It’s a very deep, compact proportion of a site, so we really needed to bring natural light into the heart of the building to provide good daylighting to the office floor levels,” he told the Courier September 12. “That means we need to go a little taller in order to create the atrium space in the middle of the building.”

The lower portion of the building facing Great Northern Way is set back to maintain a lower scale along that road, Williams said, while the shaping of the building aims to increase the view to the sky and the North Shore mountains, and create opportunities to integrate the landscape and terraces.

“We’re really using these carved moves to create public spaces along Great Northern Way and Foley Street for the main entrance of the building, which is off Foley Street,” he added.

Williams said the carved areas also help to “soften the shaping and the massing.”

Retail and café space on the ground level, meanwhile, is intended to help create a “lively and vibrant public realm” along Great Northern Way. The existing CD-1 bylaw doesn’t permit commercial uses on the site.

“[Lululemon doesn’t] want this building to be a nine-to-five area. We really want to create this active street front outside of the typical office hours. We really want to enhance the neighbourhood,” Williams said.

The distinct exterior facade is the result of a “brise soleil” shading system.

“We have very stringent energy targets on this project — Vancouver has some of the most stringent energy codes in the world — so we need to shade the façade to reduce the solar gain and energy consumption of the building,” Williams explained. “We’re using this three-dimensional brise-soleil system to control the solar gain and manage the energy consumption of the building and also control visual comfort inside the building.”

If the planning and approval process goes smoothly, the building could be constructed and occupied by the middle of 2023.

The site, at 1980 Foley Street, is between Emily Carr University of Art and Design and Mountain Equipment Co-op, and not too far from the property at Clark and East Sixth where Nature’s Path plans to build its new 10-storey head office by the East Van cross.

Lululemon’s Foley Street property was assessed at $79.4 million on the 2019 BC Assessment roll. The previous year, the site was valued at $49.4 million.

Copyright © Western Investor

Low interest rates and employment growth stimulate home sales

Steve Randall
Mortgage Broker News

Canada’s population and employment growth, coupled with an expectation of enduring low interest rates, means home sales are forecast to improve over the next year or so.

An updated forecast from the Canadian Real Estate Association calls for 482,000 unit sales in 2019, 5% above the 2018 5-year low and an upward revision of 19,000 units.

The upgrade is mostly (85%) due to expected increases in sales in BC and Ontario, while housing market activity is predicted to remain subdued in the Prairies and Newfoundland and Labrador.

With the reduction in the BoC benchmark interest rate, used to determine affordability for the mortgage stress test, together with the launch of the federal First-Time Home Buyer Incentive, CREA is confident in gains for the market.

However, despite the gains, activity is set to continue to lag the levels seen prior to the implementation of the B-20 mortgage stress test.

The forecast for 2019 on a per capita basis remains the second weakest since 2001.

British Columbia is expected to continue to weigh on national figures in 2019, with a decline of 5.4% compared to 2018. This is expected to be more than offset by gains in Ontario (+8.3%) and Quebec (+9.7%).

Along with BC, Alberta, Saskatchewan and Newfoundland and Labrador are all forecast to come in at or near multi-year lows in 2019.

Manitoba, Quebec and New Brunswick are expected to set new annual sales records while activity in Ontario is forecast to be in line with the 10-year average for the province.

Improved 2020
Heading into 2020, things look better with national home sales forecast to rise by 7.5% to 518,100 units next year, but most of this increase reflecting a weak start to 2019 rather than a significant change in sales trends out to the end of next year.

Even with a forecast 14.3% hike in British Columbia’s sales in 2010, that only returns activity to in line with the province’s 10-year average.

Ontario and Quebec are predicted to see sales rise by about 7% in 2020, while activity in Alberta will recover by about 5% compared to 2019.

The national average price is forecast to advance by 2.1% in 2020 to $501,400, remaining below its 2017 level.

Copyright © 2019 Key Media

August home sales improved from July

Steve Randall
Mortgage Broker News

There was an increase in Canadian home sales in August with a 1.4% improvement compared to July.

New data from the Canadian Real Estate Association also shows an increase in actual (not seasonally adjusted) activity of 5% year-over-year. This puts sales 17% above the six-year-low recorded in February of this year but still 10% below the highs of 2016 and 2017.

Winnipeg led the gains with a record-setting August and there was further improvement in the Fraser Valley. However, there were modest gains across most of the country and Moncton posted the largest decline month-over-month, returning to more normal levels following a spike.

Mortgage rates and house prices moved in homebuyers’ favour in August.

“The mortgage stress-test has eased marginally and that’s helped some potential homebuyers,” said Jason Stephen, CREA’s President, “but the extent to which they’re adjusting to it continues to vary by community and price segment.”

Inventory lowest since December 2017
There was a 1.1% month-over-month increase in new listings, but inventory continued is decline from the long-term average of 5.3 months.

August saw 4.6 months of supply nationwide and the sales-to-new listings ratio was 60.1%, unchanged from July and above the long-term average of 53.6%.

The tighter market supports price gains and the Aggregate Composite MLS® Home Price Index (MLS® HPI) rose 0.8% m-o-m in August 2019, the largest increase in over 2 years.

Home prices in Greater Vancouver and the Fraser Valley remain furthest below year-ago levels, (-8.3% and -5.5%, respectively), while Vancouver Island and the Okanagan Valley logged y-o-y increases (3.7% and 1.5% respectively).

Prairie markets posted modest price declines, while y-o-y price growth has re-accelerated ahead of overall consumer price inflation across most of the GGH. Meanwhile, price growth has continued uninterrupted for the last few years in Ottawa, Montreal and Moncton.

“The recent marginal decline in the benchmark five-year interest rate used to assess homebuyers’ mortgage eligibility, together with lower home prices in some markets, means that some previously sidelined homebuyers have returned,” said Gregory Klump, CREA’s Chief Economist. “Even so, the mortgage stress-test will continue to limit homebuyers’ access to mortgage financing, with the degree to which it further weighs on home sales activity continuing to vary by region.”

Copyright © 2019 Key Media

The national August housing numbers are in

Penelope Graham
other

The national August housing numbers are in, and they’re looking rosy; the latest data from the Canadian Real Estate Association points to sustained improvement across the country with sales up for a sixth consecutive month, prompting the board to improve its forecast for the remainder of this year and next, including a turnaround for the country’s weakest markets.

Sales are up 5% year over year with a total of 44,437 transactions, marking a 17% improvement from the market’s low in February of this year. However, activity is still about 10% short of its 2016 – early 2017 peak. The average home price rose 3.9% from 2018 to $493,000, while the MLS Home Price Index – a measure of the overall value of homes sold – edged up 0.9%.

Steady Growth to Continue Into Next Year

CREA anticipates these improvements will continue with steady sales growth throughout the remainder of this year and 2020; sales are to increase 5% and 7.5% over the next two years, respectively. That includes robust improvement in the beleaguered British Columbia market, where sales are to rise by a whopping 14.3% in 2020, as well as a 5% uptick in Alberta. The national average sale price is forecast to stabilize at 0.5% this year (compared to a previously predicted -0.6% decline), before increasing 2.1% to an average of $501,400 in 2020.

Lower Mortgage Rates Improve Stress Test Chances

CREA attributes this positive growth mainly to today’s uber-low interest rate environment, which has reduced the criteria for the federal stress test considerably; as fixed mortgage rates have been slashed by consumer lenders, that has in turn lowered the five-year benchmark rate used by the Bank of Canada to qualify prospective home buyers for mortgages. Under current rules, borrowers of new mortgages must prove they could qualify for a mortgage at this rate, or their lender rate plus 2 per cent, whichever is higher.

“The recent marginal decline in the benchmark five-year interest rate used to assess home buyers’ mortgage eligibility, together with lower home prices in some markets, means that some previously sidelined home buyers have returned,” stated Gregory Klump, CREA’s chief economist.

“Even so, the mortgage stress test will continue to limit home buyers’ access to mortgage financing, with the degree to which it further weighs on home sales activity continuing to vary by region.”

Supply Dipping Below Long-Term Average

August sales gains were actually strongest in Winnipeg – which experienced a record-setting month – and also saw promising improvement in the Fraser Valley, while Moncton saw the greatest decline in activity. The markets with year-over-year sales increases include BC’s Lower Mainland, Winnipeg, the Greater Toronto Area, Ottawa, Montreal, and Calgary real estate markets.

The supply of new listings increased 1.1%, roughly in line with sales, keeping the national sales-to-new-listings ratio (SNLR) even keel at 60.1%, up from 60% in July. That’s just on the edge of a sellers’ market, and up considerably from the long-term average of 53.6%. CREA defines an SNLR (which is calculated by dividing the number of sales by the number of new listings during the month) of 40 – 60% as a balanced market. A percentage above or below that threshold indicates a sellers’ or buyers’ market, respectively. According to this criteria, three quarters of all markets could be considered balanced in August. 

However, the months of inventory – a measure of how long it would take to liquidate all available homes for sale on the market – currently sits at 4.6 months, the lowest level since December 2017, and below the long-term average of 5.3 months. As has been the case, inventory levels are split across the country, remaining much higher than typical in the Prairie provinces as well as in Newfoundland and Labrador, and much higher than usual in Ontario, Quebec, and the Maritimes. British Columbia is considered “well centred”, setting the stage for price stabilization.

BC and Prairies Starting to Improve

In fact, according to CREA, Vancouver real estate  and the Prairies are already experiencing a slowdown from the price declines that have plagued these markets over the medium term, though still far from the rebounding values occurring in the Greater Golden Horseshoe markets and much of eastern Canada. 

 Check out the infographic below to see how prices changed in Canada’s major markets in August.

© 2015-2017 Zoocasa Realty Inc.,

The Lower Mainland saw a slide in commercial real estate sales in Q2

Steve Randall
REP

The Lower Mainland saw a slide in commercial real estate sales in the second quarter compared to a year ago.

The Real Estate Board of Greater Vancouver reported 407 commercial sales in Q2 2019 compared to the 604 sales of a year earlier, a 32.6% decrease year-over-year.

The total dollar value of commercial real estate sales in the Lower Mainland was $1.463 billion in Q2 2019, a 65.6 per cent decrease from the $4.253 billion in Q2 2018.

“The reduced activity in the commercial market has largely mirrored what we saw in the residential market through the first half of 2019,” Ashley Smith, REBGV president said. “Residential demand did pick up in the summer months. How this change will affect the commercial market remains to be seen.”

Multifamily, land largest slumps The largest percentage decreases in sales were in the multifamily and land sectors.

There were 13 multi-family land sales in the Lower Mainland in Q2 2019, which is down 66.7% from the 39 sales in Q2 2018. The dollar value of multi-family sales was $152 million in Q2 2019, a 73.9% decrease from $583 million in Q2 2018.

There were 103 commercial land sales in Q2 2019, 54.8% below the 228 land sales in Q2 2018. The dollar value of land sales was $738 million in Q2 2019, a 69.1% decrease from $2.388 billion in Q2 2018.

There were 179 office and retail sales, down 12.3% from the 204 sales in Q2 2018. The dollar value of office and retail sales was $367 million in Q2 2019, a 57.8% decrease from $870 million in Q2 2018.

And there were 112 industrial land sales in the Lower Mainland in Q2 2019, which is down 15.8% from the 133 sales in Q2 2018. The dollar value of industrial sales was $206 million in Q2 2019, a 49.9% decrease from $412 million in Q2 2018.

Copyright © 2019 Key Media Pty Ltd

‘If you don’t vote for us, there’s nothing to help you.’

Neil Sharma
Mortgage Broker News

Justin Trudeau announced his Liberal Party would expand the First-Time Home Buyer Incentive if elected—as well as implement a non-resident speculation tax nationwide—but it begs the question, why now?

“I don’t know that anyone will object to it, but with that in mind, and with an election on the horizon, I wouldn’t be surprised if it was a card they were saving for late in the election campaign,” said Mark Cohen, managing partner of The Condo Store Marketing Systems in Toronto, which, along with Vancouver and Victoria, is where the FTHBI will be expanded to.

“It’s a bit of a hostage situation because this is only going to happen if the Liberals are re-elected. In other words, ‘If you don’t vote for us, there’s nothing to help you.’”

The previous FTHBI capped household income at $120,000, which put maximum mortgage value at $480,000, but under the new proposal that number would rise to $789,000 in the GTA, Vancouver and Victoria, where Trudeau made the announcement.

“One thing I hear from a lot of young people here in Victoria is that they can’t even imagine buying a home right now. Owning a house should be a realistic life goal,” said the Prime Minister, who also announced a 1% Canada-wide speculation tax on non-residents if re-elected.

Cohen can attest to the influence foreign money is having on domestic real estate prices, and while he believes Trudeau’s policy announcement is cynical, he’s still glad the prime minister has something to offer.

“The majority of units closing these days are closing in cash, which means a lot of outside money is coming into the city,” he said. “For people who have been living here a long time, they’re not transporting money into Toronto. By acknowledging Toronto needs help, it’s going to give a good boost to all the incumbents who have found themselves in uncomfortable situations.

“You can’t buy very much for half-a-million dollars in the GTA, never mind in Toronto proper, so this is a good thing because there’s acknowledgement that Toronto needs some kind of initiative to help from an affordability standpoint.”

At The Condo Store, Cohen has witnessed too many would-be first-time buyers leave disappointed and grow disillusioned about their homeownership prospects in the city they grew up in.

“But there are also the ones we don’t see because they’ve already given up and ruled themselves out,” he said.

Copyright © 2019 Key Media

August home sales up 4.9% from last year

Josh Sherman
Livabl

The stress test requires borrowers to either qualify for their mortgages at the Bank of Canada’s benchmark rate — an average of the Big Six banks’ posted rates — or 200 basis points above the borrowers’ contract rate, whichever is higher.

Similar testing had been implemented in 2016 for insured mortgages.

Following the rule changes last year, home sales across the country fell.

While BC home sales activity appears to be once more on an upward trajectory, it hasn’t fully recovered to previous levels.

“Home sales have been rising through the spring and summer, but still remain well below pre-B20 stress test levels,” writes BCREA’s Ogmundson.

While the average price of a BC home climbed 2.6 percent to $685,575 on a year-over-year basis in August, Greater Vancouver home prices remained below year-ago levels.

The average price of a Greater Vancouver home was $974,167, 3.7 percent shy of where the measure stood in August 2018.

Local performances across the rest of the province varied.

For example, Vancouver Island prices soared 8.7 percent annually, averaging $504,320 in August, while Victoria prices remained roughly unchanged at an average of $703,666.

Here’s how markets fared in BC:

© 2019 BuzzBuzzHome Corp.