Buyers and Sellers expectation for 2020

Penelope Graham
other

What can Canadian home buyers and sellers expect as we enter a new decade? Check out Zoocasa’s top five predictions for home sales, price growth, and mortgage rates in the new year!

1. Home Sales Will Continue to Recover from 2018 Slump 

Canada’s housing market has come a long way from its 2016-2018 boom-bust cycle. After sustaining roughly two years of softer sales and price growth following the introduction of the federal mortgage stress test, as well as provincial taxes and policies in Ontario and British Columbia, demand for homes for sale found its footing in the second half of 2019.  Canada’s largest urban centres, such as the Greater Toronto Area and Greater Vancouver, as well as its strongest secondary markets, started to experience sustained rebounds in home buyer demand due to a number of factors, including lower interest rates; a subdued Bank of Canada (BoC), combined with strength in the bond market, kept the consumer cost of borrowing at historic lows all year long.  That’s helped soften the blow of the stress test, which requires insured mortgage borrowers to qualify at the Bank of Canada’s five-year benchmark rate, while uninsured borrowers must qualify for a rate roughly 2 percentage points higher than the one they’ll get from their bank. Not only did an overall lower rate environment pull the BoC’s qualifying rate down to 5.19% from 5.39% this year, but all borrowers enjoyed deeply discounted fixed mortgage rates, which outpriced even their variable counterparts at some of the nation’s most competitive lenders. With renewed purchasing power in hand, this drove buyers back into the market, causing year-over-year sales and price growth to spike in most of Canada’s major cities.

According to several real estate analysts and associations, home buyers and sellers can expect this trend to extend well into 2020. In its most recently revised forecast, the Canadian Real Estate Association expects the year to close out with 486,800 transactions, up 6.2% from 2018, before climbing to 530,000 sales next year, at an increase of 8.9%. The national average home price is expected to climb 2.3% to $500,000, and up 6.2% to $531,000 in 2020.

This optimistic outlook is echoed by the Canada Mortgage and Housing Corporation, which forecasts both sales and prices will “fully recover” from their recent declines, supported by growth in income among buyers, as well as population booms in Canada’s busiest job markets.

“Overall, economic and demographic conditions will remain supportive of housing activity over the forecast horizon, halting the declines in starts, sales, and average home prices that followed the highs of 2016 – 2017,” it states in its most recent Housing Market Outlook. Nation-wide, the CMHC expects 2020 sales to fall between 480,600 – 497,700 units, a year-over-year uptick of roughly 6%. The average price will fall between $506,200 – $531,000, up 5.6 – 6.7% from this year.

2. BC and Ontario Will Lead Housing Market Growth

However, as has been the long-term trend, the strongest action will be seen in the Ontario and British Columbia markets, particularly in the latter as it recovers from a slew of foreign buyer and non-resident speculation taxes. BC sales are expected to jump a whopping 20 – 22.6% next year with 74,600 – 84,400 transactions, with prices up 2.8 – 3.6% at an average of $675,000 – $749,500, says CMHC.

In the Ontario real estate market, sales will hit between 204,200 – 213,800 units (+4.2 – 7.3%), with prices between $614,000 – $633,700 (+5.4 – 6.5%).

In contrast, overall volumes and growth will be much lower in the Prairie markets, where economic performance and spending power remain challenged by a downturn in the energy industry and housing markets are plagued by oversupply. In Alberta, 2020 sales will hit between 52,300 – 56,900 units (+4.1 – 4.2%), while prices will inch up to the $379,700 – $383,400 range (+1.9 – 2.9%). In Saskatchewan, sales are forecasted to reach between 10,800 – 11,200 (+3.8 – 5.6%), with prices between $275,100 – $283,900 (+0.5 – 1.5%).

Quebec, however, will continue to experience stable sales growth and faster-than average price surges; CMHC calls for a total of 91,500 – 96,500 transactions in 2020 (+0.3 – 2.5%), with the average price between $341,000 – $348,000 (+6.2 – 6.4%).

3. It’ll Be a Sellers’ Market – Especially in the GTA

It’s no secret that market conditions in Canada’s largest cities have been largely defined by a growing supply and demand gap. While factors such as foreign and domestic investment have also contributed to too-hot-to-handle price growth, that there have been too few homes to satiate demand, particularly in the GTA markets, set the stage for bidding wars and a stratospheric rise in home values over the course of 2016. That infamously led to the implementation of the Ontario Fair Housing Plan, which included a number of measures including a foreign buyers’ tax and rent controls, to cool the demand end of the market. 

For a time, these new policies were effective in chilling the market; combined with the federal mortgage stress test, the measures thoroughly spooked sellers, leading to a 33% drop in new listings following their announcement. As well, home prices plunged across the province, with York Region bearing the brunt with double-digit declines.

While sales and prices have rebounded steadily over the past year, the same can’t be said for new listings. From a national perspective, Canadian real estate as a whole could be considered a sellers’ market in November, with a sales-to-new-listings ratio of 66.3%, as new supply shrank by -2.7% year over year. As well, the total months of inventory – the length of time it would take to completely sell off all available homes for sale – currently sits at 4.7 months, its lowest level since 2007.

However, recent reports out of the GTA show that lack of supply is a far more acute issue. The end-of-year numbers from the Toronto Real Estate Board reveal the SNLR for the region was 81%, indicating just under 20% of all new listings brought to market were sold in November.

TREB’s analysts are raising concerns that should undersupply persist, it could set the stage for the type of unsustainable price growth seen in the 2016 market, which was what prompted new regulatory change in the first place.

“Strong population growth in the GTA coupled with declining negotiated mortgage rates resulted in sales accounting for a greater share of listings in November and throughout the second half of 2019,” says Jason Mercer, TREB’s chief market analyst. “Increased competition between buyers has resulted in an acceleration in price growth. Expect the rate of price growth to increase further if we see no relief on the listings supply front.”

4. Mortgage Rates Will Remain Cheap

The BoC – the national central bank that sets the cost of borrowing for consumer lenders – has kept mortgage interest rates relatively low and stable for the entirety of 2019, keeping its trend-setting overnight lending rate at 1.75% in each of its eight announcements. As a result, banks and credit unions were able to keep their variable mortgage and line of credit products competitively priced. As well, yields for national bonds, which lenders use to set the cost of fixed-rate borrowing, hit historic lows, indicating increased popularity with no imminent risk of a devaluing rate hike on the horizon.  Due to this, borrowers have had access to some of the lowest mortgage rates on record in 2019 – and this is likely to persist throughout the new year, according to the latest communications from the BoC. In the Bank’s year-end speech, Governor Stephen Poloz outlined the major long-term forces that will shape the economy and interest rates over the next year – and they look to stick to status quo.

Overall, the BoC will take to the same cautious stance it did in 2019; economic factors at home and abroad aren’t quite strong enough to warrant higher interest rates, but are stable enough to prevent a rate cut. Avoiding a cut also leaves some wiggle room in case global trade and recession risks do materialize, and the BoC needs to take action.

The BoC points to ongoing trade wars – and particularly tensions between the U.S. and China – as the biggest risk that could upend the global economy and stall growth. It also points out that slowing populations in many economies is holding back global output. “Because slow growth is likely to persist, interest rates will stay lower than usual,” the BoC states.

Other factors that make a rate hike less likely include the latest fiscal update from the federal government, which reveals there will be a $26.6-billion deficit recorded for 2019, and $28.1-billion expected in 2020. This, combined with Canada’s notoriously high levels of household debt, remain key vulnerabilities should the economy go belly up – and the BoC acknowledges that lower interest rates will help fuel irresponsible borrowing.

“When interest rates are low, households, firms and governments tend to borrow more. That supports the economy, but high debt means more vulnerability if something bad happens,” it states.

5. It Might Get Easier to Qualify for a Mortgage

Another interesting development is renewed scrutiny for the aforementioned mortgage stress test – in December, a letter from Prime Minister Justin Trudeau indicated Federal Finance Minister Bill Morneau will take a second look at the controversial test’s criteria, and potentially make tweaks to allow for more flexibility when qualifying borrowers.  While no details have been released as of yet, this could include lowering the qualifying rate from its current 5.19%, or making it more dynamic based on individual borrowers’ profiles, As well, they could remove the current requirement for borrowers to be re-stress tested when switching lenders, a measure that has drawn heavy criticism from the mortgage industry for discouraging consumer empowerment and competitiveness.

© 2015-2017 Zoocasa Realty Inc.,

Storytelling is part of the selling process

Connie Adair
REM

How do you make your listing stand out? A list of features alone, no matter how impressive, won’t do the trick. It’s the storytelling that draws potential buyers, especially those in the market for houses $5-million and up, says real estate agent Voula Argyropoulos of Hammond International Properties in Toronto.

“Storytelling is part of the selling process,” says Jerry Hammond, broker of record. “People relate to stories” and they add to the emotional experience of buying a home.

Hammond has made storytelling mandatory practice, which gives a whole new meaning and approach to marketing a property, regardless of price.  Although the agents may already know the home’s history, they sit down with the homeowners, who elaborate and have good stories of their own. Those memories are packaged into a story that will create attraction and appeal. They can include distant or more recent “history” and fun tales, to pique a buyer’s interest.

Potential buyers loved the background of a $5-million plus home that the brokerage sold recently. Argyropoulos says relating the story of the owner and the Disney design team that created the home’s resort-like ambiance, was a great talking point. So was the owner’s background as a toy creator and his work with the Muppets. Some of his original puppets, including Kermit and Animal, were conversation starters when potential buyers toured the lower level.

Rock band Rush’s guitarist Alex Lifeson, who built the house, was another topic of conversation. Although the home had been completely renovated (the recording

studio where the band worked is now a gym) the owner has some of Lifeson’s gold records on display so the memories of Rush remain.

It’s a visual world, Hammond says, so adding points of interest is important.

Their storytelling worked – the artistic vibe of the Richmond Hill, Ont. house appealed to an international buyer. The buyer, an artist, liked hearing the story about the past artistic owners, Argyropoulos says. “High net worth people want to know what the current owners do for a living. The buyer fell in love with the home and it had a lot to do with the history.”

When it comes to features, interesting tidbits help. For example, the 10,000-square-foot home’s elm plank floors weren’t just any elm floors. The wood came from two barns dating back to the 1800s. The exterior pebble dash stucco was created by artisans, who were flown in from France. Five furnaces and air conditioning units promise to keep the occupants comfortable.

Story telling can be used for any house, regardless of price. Give potential buyers something to think about, something to remember and something to enjoy.

© 2019 REM Real Estate Magazine

Christmas in jail for Vancouver condo developer facing fraud trial in new year

Dan Fumano
The Province

Vancouver real estate developer Mark John Chandler is spending Christmas in a California jail as he awaits a trial on felony fraud charges.

And for many of those in Metro Vancouver who knew Chandler through his dealings in the local real estate market, this comes as welcome news.

Chris Stanley, one of many aggrieved presale buyers at Chandler’s beleaguered Langley condo project, said the developer deserves “a mine’s worth” of coal in his stocking this year.

Chandler, 56, had spent more than three years battling extradition to the United States, where he faces felony charges in connection with an alleged fraudulent real estate investment scheme.

Chandler’s last hope of preventing extradition was extinguished in October, when the Supreme Court of Canada declined to hear his appeal. He was then transferred to the U.S. in November, where Federal Bureau of Prisons records show he’s now incarcerated at the Los Angeles Metropolitan Detention Centre.

Upon learning this week that Chandler is in jail, Stanley said: “Honestly, I feel relief. Because I know that the United States’ legal system has teeth. It’s karma. … He’s locked behind bars, so he can’t hurt other people.”

Earlier this month, a U.S. District Judge ordered Chandler to stand trial before a jury in April of 2020. He faces six felony counts of wire fraud, a charge that carries a penalty of up to 20 years in prison.

None of the U.S. charges against Chandler have been proven in court. In B.C., Chandler’s real estate dealings have been the subject of regulatory action and piles of lawsuits, but he has not been charged with any criminal offences.

In March 2018, during one of the hearings connected to Chandler’s extradition, it was revealed in court that the RCMP was investigating his Langley condo development. At some point, the investigation was transferred from the Langley RCMP to the RCMP’s Federal Serious and Organized Crime unit, but B.C. RCMP spokesman Cpl. Christopher Manseau confirmed this week there is no longer any ongoing local criminal investigation into Chandler and Murrayville.

Chandler’s alleged “fraudulent investment scheme” in California dates back to 2009, according to the FBI evidence relied upon in the extradition request. But Chandler was active in Metro Vancouver real estate both before and after his time in L.A.

After his arrest in May 2015 in connection with the U.S. charges, Chandler got back into the real estate game in Metro Vancouver.

Many people here, like Stanley, wish he never had.

In the first two years after Chandler’s arrest on the U.S. charges and his return to Vancouver, his company developed a 91-unit condo project in Langley called Murrayville House. But, in 2017, B.C.’s real estate watchdog issued an urgent notice ordering Chandler’s company to cease marketing the Murrayville development, citing a “serious concern” the developer had sold some units to multiple buyers.

Later, after the B.C. Supreme Court ordered the Murrayville project into receivership, the receiver reported some of the same individual units had been sold two, three and even four times to different buyers.

In January of this year, B.C.’s Office of the Superintendent of Real Estate issued a notice of hearing for Chandler and his company. Superintendent of Real Estate Micheal Noseworthy said this week that dates are being considered for a two-week hearing in spring 2020.

Asked if the B.C. hearing would proceed even if Chandler is still incarcerated in the U.S., Noseworthy said: “If he is unable to attend in person but wishes to give evidence, possible options include video conferencing and sworn affidavits. The superintendent’s hearing is independent and may proceed despite other legal proceedings.”

Chandler is being represented on the U.S. charges by a deputy federal public defender in Los Angeles.

Kelly Burke, a retired train conductor, and his wife tried to buy a Murrayville unit in 2017. After the project fell through and the presale contracts were cancelled amid a tangle of litigation, the Burkes spent almost a year moving around the Fraser Valley. In an affidavit filed in court, Burke wrote “as our closing date was constantly pushed back, we had to live in our trailer … forcing us to move our trailer daily and weekly and to occupy Costco and Walmart parking lots, side streets and friends’ driveways.”

Reached this week, Burke said: “That made my Christmas — hearing that (guy) is in jail. … That’s where he should be.”

Gary Janzen and his wife Karen sold the home they’d owned for 15 years and signed a presale agreement in April 2016 to buy a Murrayville condo. While the Janzens waited through repeated delays to take possession of their condo, Metro Vancouver home values soared. They lived out of suitcases in 15 different places over 31 months, while Murrayville was ensnared in several lawsuits until, last year, a B.C. Supreme Court judge ruled the presale contracts would be cancelled so the units could be resold at market rates so the private mortgage lenders could recoup their debts.

Janzen, who runs a charity doing anti-poverty work in 39 countries, said this week that the Murrayville fiasco meant he had to delay his planned retirement.

“But you’ve got to keep going, you’ve got to pick up and take what you’ve been given,” he said. “Because otherwise, bitterness and anger can really chew you up. So we’ve had to let go of that stuff.”

© 2019 Postmedia Network Inc.

Loved and loathed, Vancouver developer Ian Gillespie lures the world?s wealth with luxury towers

Natalie Obiko Pearson
The Vancouver Sun

If it bothers Ian Gillespie that he’s the most vilified developer in Vancouver — a city with a particular disdain for real estate moguls — it’s not apparent. In fact, he has critiques of his own for his hometown.

“We’ve risen to a high level of mediocrity,” Gillespie declares as he gestures toward the window of his office at Westbank Corp., the company he founded 27 years ago. Outside, a slew of glass towers are crammed along a cobalt harbour, set across picturesque mountains.

“Three-quarters of the buildings in this city look like a piece of s—,” Gillespie says. “We’ve been sitting on our laurels because we got lucky, right?”

By luck or not, Vancouver’s pristine backdrop has made it a magnet for global wealth, particularly from Asia, transforming a once-sleepy town into an increasingly unaffordable cosmopolis. And no developer has capitalized on the phenomenon more so than Gillespie, whose opulent buildings designed by star architects have become a symbol of the city’s extreme wealth and deep divides.

Now, he’s embarking on his most ambitious project yet — a decided statement against mediocrity.

At 11.5 hectares, Oakridge is set to be as big as New York’s Hudson Yards, the largest private real estate development in North America. Gillespie, 58, sees the project as his defining oeuvre — a once-in-a-generation shot at elevating his town into a pioneer of sustainable, urban living. It’s the type of vision that inspires supporters and inflames the critics of his grandiose approach to city-building that, for better or worse, has helped make Vancouver what it is today.

But Gillespie’s mind is clearly focused on posterity, not the mundane present. “If future generations don’t look at this and say, ‘They were thinking about what this means a hundred years from now,’ then I think we’ve been short-sighted.” He adds more prosaically: “We better not f— this up.”

Oakridge, co-developed by real estate investment firm QuadReal Property Group and estimated to cost $5 billion, will create a futuristic enclave of glass-canopied condo towers about seven kilometres south of downtown. A mall will nestle under a four-hectare park and a forest of newly planted trees, restoring the old-growth grove that once stood at the site. Amenities will include the city’s largest daycare, community centres and a library.

Central to the project’s vision is the ability for “man and nature to coexist.” Residents are expected to have half the carbon footprint of the average urbanite. Silos will lower bikes underground for subterranean mechanics to service, clean and store. In this carefree, carbon-reduced haven, 6,000 people will flit from home to work in a state of perpetual cultural enrichment provided by 200 live performances a week and a prestigious ballet academy partly owned by Westbank.

The company has sold $1 billion worth of units at Oakridge in less than a year — more than the combined presales of all downtown Vancouver developments during the same period. It’s particularly remarkable as the city is in the midst of its deepest real estate slowdown in three decades, triggered by policies and taxes aimed at dampening foreign investment

Gillespie describes the project, scheduled for completion in 2027, as the culmination of everything he has “ever attempted or imagined.”

“The metaphor of the Renaissance prince comes to mind,” Gordon Price, an urban planner and former Vancouver city councillor, says of Gillespie. “There’s a self-awareness of a very high order. He sees it through the lens of civilization — it’s bigger than just a single building.”

Still, with condos starting at $600,000 for a 450-square-foot studio, Oakridge is doing little to quell criticisms that Gillespie has fuelled the city’s evolution into a haven for wealthy investors. While Westbank also builds hotels and office buildings, its $30-billion portfolio is most associated with luxury residential towers that have been heavily marketed at shows in Singapore, China and Hong Kong and in dreamy ads flashing across the screens of first-class cabins on Asian flights.

Gillespie himself has embraced a role as an elite tastemaker, writing a 629-page manifesto titled “Fight For Beauty” that was meant to mark Westbank’s transformation into a “culture company.”

“In my mind, the pursuit of beauty and the pursuit of our advancement as a society are one and the same,” Gillespie said in the 2017 publication (priced at $260 at the time), in which he unselfconsciously places Westbank in a timeline of artistic struggle stretching back to the Italian Renaissance, China’s Ming Dynasty and Ancient Egypt.

The book was accompanied by a pop-up exhibition to celebrate Westbank as a patron of the arts. It featured gowns by Alexander McQueen and Yves Saint Laurent from Westbank’s collection, installations commissioned for Westbank projects including a million-dollar one-off Fazioli piano, and 3D models of Westbank towers.

The effort, which blanketed Vancouver in an onslaught of fuchsia ads, triggered a counter-movement, The Real Fight for Beauty, including a protest, a parody website, and a bawdy Facebook profile, Bestwank Corp.

Underscoring those criticisms is a refrain by now familiar to anyone in Vancouver: developers are responsible for accelerating a housing crisis by selling condos to offshore investors, inflating values, and pushing out longtime residents. And who is Gillespie, anyway, to impose his idea of beauty on the city?

“‘Fight for Beauty’ is basically the equivalent of ‘let them eat cake’ — it’s in the face of the inequality, homelessness and deep poverty that have occurred in a very short amount of time in Vancouver,” says Andy Yan, director of The City Program at Simon Fraser University, whose research has shown Vancouverites face San Francisco-like home prices on Omaha-level incomes. “A lot of the housing produced by Westbank is Ferraris when the local economy can really only support Hondas.”

Gillespie has little time for his detractors — only enough for some typically expletive-laced candour. “It’s an insular, little f—ing village we live in sometimes.”

And yet a discomfiting reality for his critics is that Gillespie has arguably done more to address two of the city’s thorniest problems than most of his industry peers. He’s already one of Vancouver’s largest private builders of affordable housing and is a leader in sustainable building.

At Oakridge, condos will be powered by geothermal wells and waste-heat recovery systems. It also will include 580 rental and subsidized housing units out of about 2,500 total, exceeding the city’s 20 per cent affordable housing mandate in new neighbourhoods.

Gillespie’s ambitious projects, meanwhile, have won him fans across the design world. Bjarke Ingels, the architect of Westbank’s gravity-defying Vancouver House, credits the developer for breaking “cities designed by cookie cutters.” Japan’s Kengo Kuma is working with Gillespie on a Tokyo building that will be Westbank’s first outside of North America, and says the Canadian is the only developer who’s ever thrown back a design at him for not being bold enough.

And if Vancouver doesn’t want Gillespie, others do.

“I want to work with him to change Tokyo,” Kuma says.

© 2019 Postmedia Network Inc.

Colliers has controlling interest in Dougherty Financial

Steve Randall
Canadian Real Estate Wealth

Colliers International has announced a significant expansion of its US debt financing platform and the formation of a US securities business.

The Toronto-headquartered global real estate firm is to acquire controlling interests in four subsidiaries of Dougherty Financial Group LLC, namely Dougherty Mortgage LLC, Dougherty & Company LLC, Dougherty Funding LLC and Dougherty Insurance Agency LLC.

Dougherty provides mortgage banking, brokerage and investment banking services across 21 U.S. states.

“This investment firmly establishes Colliers as one of the leading players in multifamily debt and public finance capital markets in the U.S., marking a significant milestone as we continue to grow and develop our full-service capital markets capabilities,” said Gil Borok, President & CEO, Colliers International | U.S. “Combined with our current capabilities in investment sales and debt capital markets, this acquisition provides Colliers important depth, experience and growth opportunities to provide our clients with the best solutions in debt finance and advisory services.”

The deal is expected to close in the first half of 2020 with Dougherty Mortgage then being rebranded as Colliers Mortgage while the firm’s securities operations will be rebranded as Colliers Securities.

Management remains

The current senior management of Dougherty will continue to drive the operations.

“Our partnership with Colliers is an exciting next step in our evolution and given our shared enterprising culture and commitment to excellence, we could not be happier with the new partnership,” said David Juran, who will assume the role of Chief Executive Officer and largest management shareholder of Colliers Mortgage and Colliers Securities LLC, upon closing. “Our firm has enjoyed tremendous success over the years since our founding by Mike Dougherty. We look forward to accelerating our success and growth trajectory in the future by leveraging Colliers’ best-in-class platforms and relationships for the benefit of our clients.”

Copyright © 2019 Key Media Pty Ltd

November house sales increased 27.5 percent from last year

Sean MacKay
Livabl

The BC housing market’s recovery has continued late into the year with sales activity in November recording a 27.5 percent increase compared to the same time last year.

There were 6,616 sales across the province last month at an average price of $746,939, according to the latest monthly data from the British Columbia Real Estate Association. The double-digit sales increase and 5.5 percent price jump meant that $4.94 billion worth of residential real estate changed hands in November, over $1 billion more than the same month in 2018.

Bottom of Form

While it was a strong monthly result when compared to 2018’s lethargic pace and the dismal activity levels observed through early 2019, BC’s November sales total was only about average from a historical standpoint.

“After several months of strong gains, home sales [in BC] are now firming around long-run averages,” said BCREA Chief Economist Brendon Ogmundson in a media release. “We expect 2020 will be a much more typical year for markets compared to the volatility of recent years.”

In a research note published earlier this week, TD economist Rishi Sondhi noted that the current strength of the Canadian housing market has a lot to do with the ongoing recovery in BC. It wasn’t so long ago that housing was considered a drag on the national economy, but Sondhi writes that residential investment is again supporting economic growth during 2019’s final quarter thanks in no small part to renewed energy in the BC market.

As has been the case for several months now in major markets across Canada, new home listings were down 6.6 percent across the province with 31,310 residential units on the market.

It appears that Vancouver is following Ottawa, Montreal and Toronto in steadily marching towards seller’s market territory for 2020, but the province as a whole remains balanced at this time according to BCREA data.

© 2019 BuzzBuzzHome Corp.

BCREA Commercial Leading Indicator unchanged compared to same time last year

BCREA

The BCREA Commercial Leading Indicator (CLI) fell slightly to 135.3 in the third quarter of 2019. The index remains unchanged compared to the same time last year.

Provincial economic activity continued to slow in the third quarter of 2019, with declines in retail and manufacturing sales more than offsetting a gain in wholesale trade. This left the economic activity componentof the CLI negative for the fifth consecutive quarter. Office employment was up for the fifth consecutive quarter, edging out a decline in manufacturing employment, which resulted in a positive change in the employment component of the CLI. The financial component of the CLI was positive for a third straight quarter. The underlying trend in the CLI has been relatively flat over the past five quarters, suggesting a stable environment for commercial real estate activity in the province.

Following several years of robust growth, the BC economy continues to slow in 2019. Weak manufacturing

sales in petroleum and coal, and lower retail sales at gasoline stations and auto dealers, put a drag on economic activity in the third quarter. Wholesale trade sales were positive in the third quarter due to a large expansion in machinery and equipment.

Employment growth in key commercial real estate sectors such as finance, insurance, real estate and leasing continues to be strong, up by 7,600 jobs in the third quarter. This measure of office employment now sits at an all-time high, signalling strong future demand for office space. In contrast, manufacturing employment fell by 4,200 jobs from the previous quarter.

The CLI’s financial component was positive in the third quarter due to an increase in benchmark Canadian REIT prices, which more than offset the expansion of short-term credit spreads.

PropertyGuys.com recently released a list of six trends that will transform real estate

Clayton Jarvis
Canadian Real Estate Wealth

Thankfully, success in real estate doesn’t require an ability to predict the future. But having an idea where the market is heading is critical to making the right decisions.

PropertyGuys.com recently released a list of six trends that the company feels will have a lasting, potentially transformative effect on Canada’s real estate market in the coming years. Based on consultations with PropertyGuys’ network of agents, developers and customers in both Canada and the US, the trends presented paint a picture of a rapidly changing real estate environment where fulfilling tenant desires will require more of investors than simply adhering to the status quo.  

PropertyGuys co-founder and lead analyst, Walter Melanson, says the trends identified suggest fundamental changes in the real estate market “that have us believing that this is more of what the future has to hold.”

Co-living

 Before its catastrophic public flameout, We Work changed how the owners of commercial properties could exploit the sharing economy to drive rents for properties that were otherwise either vacant or failing to achieve the rent appreciation they needed to remain profitable.

Melanson says residential landlords are now considering using rental properties in the same way.

Most young city dwellers expect to have roommates anyway. By providing this new generation of renters what they’re looking for – furnished apartments, bigger shared spaces, free cleaning and wifi, and the company of likeminded people – landlords can charge premium per room rents. It’s like running a student rental, minus the holes kicked in the wall.

“The whole idea is that it builds community, it gives landlords a boost on rents that were going the wrong way for them, and it gives the people who rent the upside of having a way better place than they could ever afford on their own,” says Melanson.

Climate change impacting sales of new builds

As changing environmental standards force developers to alter how they build their properties, the cost of doing so will only increase over the short-term.

“We see this as one of the things that puts a lot of pressure on new development and new construction,” Melanson says. “The world’s becoming way more complex as it relates to building – getting permits, getting through the red tape. It changes so quickly, and it just gets harder and more expensive.”

Higher prices for new product could put a damper on sales of pre-construction properties, but the built-in appreciation associated with such assets should ensure that, by delivery date, an investor will have paid far less than the going rate.  

New builds are old news

The increasing cost of new product and the built-out status of many urban communities has forced developers to move further and further away from city centres. Buyers still want new product, but the distances being placed between where they work and where they can afford to buy are becoming untenable. Melanson’s prediction is that buyers will see less value in new builds if it means being locked into an exurb lifestyle hours from where they actually want to live.

“What we’re seeing is people’s flight for affordability is pushing them as far as humanly possible from the city because there’s nowhere else to build,” he says.

That may be, but in Ontario and British Columbia, two provinces with surging populations, it’s safe to assume that there will always be someone willing to drive two hours to work if it means they can get a foot on the property ladder. And there is still plenty of room to build within minutes of most cities in Atlantic Canada.

Condos for families

Investors commonly think that the smallest property a family will be interested in renting is a townhouse. Melanson says that is no longer the case, and that new arrivals from overseas are frequently choosing condos as an affordable, convenient alternative to single-family properties.

“Newcomers don’t all have the same view as you and I on what a home’s supposed to be,” he explains. “We want all this space, and it doesn’t make sense for a lot of people moving from other parts of the world where they never had this space.”

Investors basing their choice between one- and two-bedroom units based on demand, take note.

Prices on the rise

Bad news for anyone hoping for a slowdown in the price increases affecting major markets like Montreal, Toronto, Vancouver and Victoria: increased demand will keep pushing home prices higher. The flatness in prices witnessed in Vancouver and Toronto over the first half of 2019 was a blip, a mirage. Investors looking for value will have to set their sights on less densely populated cities.

“Everyone in the world wants to live in Toronto, it would seem,” says Melanson. “And there’s nothing you or I could ever do to stop them. I don’t see anything in the foreseeable future that could change that fact.”

PropertyGuys also predicts noticeable price increases in Edmonton and Calgary. Based on recent government cuts and the headwinds that are still battering the province’s oil sector, CREW respectfully disagrees.

The move away from real estate agents

“Real estate is a hundred-year old business,” Melanson says. “The big brands trade the same way today they did almost a hundred years ago. The dynamics of their business being so agent-centric worked when the agent had the goods. They had the listing, they had the smarts, they had the data, and they had the secret data.”

Those days are over. With buyers growing more confident in the data they have access to, paying a realtor to provide similar, if not in identical, information will no longer be an automatic choice – particularly for new investors who may have never dealt with an agent before.   

“You can learn more, do more, understand more and play the market a lot different than you would have 10 or 20 years ago when your reliance on a real estate agent was at its highest,” says Melanson.

CREW sees a day when buyers and sellers choose to market and list their own properties through an app rather than having to sit through a realtor’s sales pitch. But in our opinion, investors hoping to build a rock-solid, diversified portfolio are better off paying commissions to an investor-focused realtor than paying the higher long-term costs associated with choosing the wrong property. 

Copyright © 2019 Key Media Pty Ltd

Direct affordability support to Ontarians who are in housing need

Kimberly Greene
Mortgage Broker News

Today, the Honourable Ahmed Hussen, Minister of Families, Children and Social Development and Minister responsible for the Canada Mortgage and Housing Corporation (CMHC), along with the Honourable Steve Clark, Ontario’s Minister of Municipal Affairs and Housing, announced that both governments will provide direct affordability support to Ontarians who are in housing need. The joint investment of $1.4 billion will be the first under the Canada Housing Benefit.

“Our government knows how important it is for the people of Ontario to have housing they can afford. We are working with the federal government to deliver on provincial priorities – including making housing more affordable,” said the Honourable Steve Clark, Minister of Municipal Affairs and Housing.

The Canada-Ontario Housing Benefit takes a different approach than other initiatives in that the money goes directly to those in need to help them afford their housing costs. In Ontario, the Canada-Ontario Housing Benefit will prioritize households in need that are on, or eligible to be on, a social housing waiting list and households in financial need living in community housing. This includes survivors of domestic violence and human trafficking, persons experiencing or at risk of homelessness, Indigenous persons, seniors and people with disabilities.

“We’re giving people more flexiblity and more choice,” Clark said, adding that they expect that 5,200 households will benefit in the first year.

In 2017, the Federal Government launched the National Housing Strategy (NHS) and in 2018 the Province of Ontario signed the bilateral agreement on housing.

The Canada-Ontario Housing Benefit builds on the Canada-Ontario Bilateral Agreement under the National Housing Strategy which will provide more than $5.75 billion to protect, renew and expand social and community housing, and support Ontario’s priorities related to housing repair, construction, and affordability. Today’s announcement demonstrates a shared commitment between Canada and Ontario to prioritize making housing affordable for Ontarians.

“We can only be successful as governments if we find a way to work together,” said Bill Morneau, Canada’s Minister of Finance. “Ontario may be first, but I think it’ll be replicated across the country.”

“Through the National Housing Strategy, more middle-class Canadians – and people working hard to join it – will find safe, accessible and affordable homes. The Canada Housing Benefit is a key pillar of the National Housing Strategy that will help families across Canada. Together, we will build strong communities where Canadians can prosper and thrive, now and for the future,” said the Honourable Ahmed Hussen, Minister of Families, Children and Social Development and Minister responsible for the Canada Mortgage and Housing Corporation.

“Making sure people have access to affordable housing is a top priority for me as Mayor and that requires the cooperation and support of other levels of government,” said John Tory, Mayor of the City of Toronto. “The City of Toronto has continuously advocated on behalf of our residents for increased investments in housing and the Canada Housing Benefit to the provincial and federal governments. This agreement helps respond to that request and will help more families have access to housing that is safe, secure, and affordable.”

Increasingly, business people are realizing that this kind of investment is important to allow people that work in the city to actually live in the city, Tory added.

The Government of Canada will invest $2 billion in the Canada Housing Benefit across the country, which will be cost-matched by provinces and territories for a total $4 billion investment over 8 years, starting in spring 2020. The federal government and provinces and territories are working together to co-develop 13 housing benefit programs, one for each jurisdiction, that will respond to local housing affordability challenges.

The Government of Canada is currently rolling out the NHS, a 10-year, $55 billion plan that will create 125,000 new housing units and lift 530,000 families out of housing need, as well as repair and renew more than 300,000 housing units and reduce chronic homelessness by 50%.

Ontario is investing in the community housing system that was neglected for years, investing more than $1 billion in 2019-20 to help sustain, repair and grow community housing in Ontario.

Copyright © 2019 Key Media

Schedule 1 Canadian bank buys reverse mortgage portfolio

Kimberly Greene
Mortgage Broker News

HomeEquity Bank has announced that it has sold about $75 million of reverse mortgages to another Schedule 1 Canadian bank. This is the first-ever sale of reverse mortgages by HomeEquity Bank and the first such transaction in Canada involving reverse mortgages.

One of the reasons it hasn’t been done before is because it was never in their game plan, said HomeEquity Bank president and CEO Steven Ranson. When he and other members of the executive team started to look more closely at comparisons between the Canadian and UK reverse mortgage markets, however, they discovered that the market there for selling these products between originators, funders, life companies and pension funds was a “pretty active” one. If it worked in the UK, they thought, why couldn’t it work here?

“The thing we liked about it was that it was a third source of funding for us. Being a bank, we have access to the GIC market, we have a small, wholesale-oriented funding program where we sell debt to various institutions, and we just felt . . . that this would be an interesting opportunity for us to reduce the risk for our business,” Ranson said. “Also, there might potentially be a customer benefit; If we could fund loans on a capital-efficient basis, we’re looking at whether there’s an impact on customers because, possibly, we could lower rates.”

There are similarities between the Canadian reverse mortgage product and the “equity release loans” as they’re known in the UK, but there are some differences as well, such as the fact that equity release loans have interest rates that are fixed for the life of the loan as opposed to resetting periodically. With the right buyers, Ranson said, there could be an opportunity to explore an interest rate for life in Canada, “which we think customers would be really interested in at this point in the interest rate cycle.”

“This transformative deal paves the way for creating a new market for originating and selling reverse mortgages in Canada, similar to opportunities available to U.S. and U.K. investors,” said HomeEquity Bank EVP and Chief Financial Officer Atul Chandra. “It creates a new source of liquidity to support our continuing growth, in addition to further enhancing the profitability of our business.”

The sale also creates the opportunity for similar transactions with other potential investors, who Ranson said have an appreciation for what HomeEquity does, how the product works, the nature of their customers, and the nature of their risks.

HomeEquity Bank is a Schedule 1 Canadian Bank and the leader in the reverse mortgage space with around $4 billion in mortgage outstanding. Their size was a significant factor in the decision to sell portfolio loans, because Ranson says that a company would really have to have about $100 million to make it worthwhile. And even though $75 million on $4 billion in mortgages is relatively small, they didn’t want to do too big of a deal upfront.

“It was good to get the first deal done. It sets the precedent for the legal structure, it helps our back office people get comfortable with servicing mortgages, which we’ve never done before,” Ranson said. There’s a lot of moving pieces that go into selling a portfolio, and “starting small is better than going large.”

He adds that HomeEquity would like to do a larger transaction in the $100 million range in the first part of 2020. The expect to originate somewhere in the $900 million range, and they think that selling between 10-20% of that volume would provide a “nice, viable, third liquidity source that we wouldn’t be overly dependent on, but that would have an impact for us.”

HomeEquity was founded over 30 years ago as an annuity-based solution addressing the financial needs of Canadians who want to access the equity of their top asset – their home. HomeEquity Bank is recommended by The Canadian Association of Retired Persons (CARP) and The Royal Canadian Legion.

Copyright © 2019 Key Media