Architect files rezoning application for modestly designed project

Western Investor

A 23-storey office tower with retail space at street level is proposed for 450 West Georgia at Richards Street in Vancouver.

W.T. Leung Architects has filed a rezoning application for the project. If approved, it would be built next to Westbank’s 24-storey Deloitte Summit architectrually striking office building under construction at 400 West Georgia, which features clusters of four-storey cubes. The site is also not far from the central library.

The application for the office building envisioned for 450 West Georgia notes that it “will help the city meet the future projected demand for office space outlined in the metro core jobs and economy land use plan.” It cites a July 2019 report highlighting that Vancouver and Toronto had the lowest office vacancy rates in North America.

The proposed height for the tower is 286 feet, with a floor space ratio of 15.65, as well as 270 parking spaces and 236 bicycle spaces.

The application is being considered under the City of Vancouver’s rezoning policy for the Central Business District (CBD) and CBD shoulder.

An open house runs from 5 to 7p.m. in Salon B of the Queen Elizabeth Theatre, March 31.

© Copyright 2020 Western Investor

Lower gasoline prices could affect the economy

Nelson Bennett
Western Investor

Canadians will enjoy lower gasoline prices in the wake of a dramatic oil price plunge. But other than that, it’s going to be bad news all around for the global economy.

And Canada may suffer disproportionately, due to some self-inflicted wounds.

The failure of OPEC and Russia to agree on production cuts in response to the COVID-19 virus’ impacts on China’s economy triggered a 30 per cent drop in global oil futures that shocked global stock markets March 9.

The Canadian crude oil index dropped 29 per cent Monday to US$19.81 per barrel, while West Texas Intermediate dropped 21 per cent. Billions in market value were wiped out for major oil and gas companies in a single day of trading.

The oil price crash pushed the Toronto Stock Exchange to a 14-month low on March 9. Canada’s loonie, which has been described as a petro-dollar that tends to move with oil prices, fell to a three-year low, and Canadian resource companies saw massive declines in their market value.

“The challenge posed to this province, and to Canada, could not be more serious,” said Alberta Premier Jason Kenney, who added that his government might have to reconsider plans to balance its budget, and go into deficit in order to stimulate the economy through increased spending on infrastructure.

“I understand this is the first time since 1930 that the world has seen a significant decline in energy demand met concurrently with a significant increase in energy supply. We are in uncharted territory.

Wood Mackenzie also describes what is happening in global oil markets as “uncharted.”

“This is not the first time we’ve seen a price war,” said Tom Ellacott, senior vice-president of corporate upstream for Wood Mackenzie. “But this time, oil demand is also weak as the coronavirus outbreak depresses global economic growth. The macro-economic backdrop is completely uncharted waters for oil and gas companies.”

The oil price plunge will be good for consumers. Gasoline prices in Vancouver had already dropped by $0.10 per litre between March 4 and March 8, according to Dan McTeague, president of Canadians for Affordable Energy.

That was before the plunge in oil futures. McTeague said prices should drop another $0.10 per litre in Vancouver, as a result.

Otherwise, Canadians are about to be reminded of just how important the oil and gas sector still is to the Canadian economy, McTeague said.

“We’ve heard for years that oil will be gone, we’re going to wish it away, it’s a past economy,” McTeague said. “And clearly, as evidenced by today, everybody’s panicked, and it has a lot to do with oil.”

Cenovus Energy Inc. saw its share prices cut in half March 9, erasing roughly $2 billion worth of market cap. Canadian Natural Resources Ltd. and Suncor Energy Inc. experienced share price drops of 27 per cent and 17 per cent respectively.

Teck Resources, B.C.’s largest publicly traded mining and energy company, took a 21 per cent hit to its share prices.

The company building the Coastal GasLink pipeline, TC Energy Corp., experienced an 11 per cent share price drop, and Royal Dutch Shell, the lead partner in the related $40 billion LNG Canada joint venture, had a 17 per cent drop in share prices.

The last time oil prices dropped this sharply, Shell and its joint venture partners pressed the pause button on the $40 billion LNG Canada project. Asked if the latest price plunge could result in another reset, LNG Canada spokesperson Susannah Pierce said it wouldn’t.

Construction is already well underway, and Pierce said the company is moving ahead with the first phase of the project – a two-train LNG plant in Kitimat. But oil and gas companies will likely be reining in spending and putting large capital projects on hold elsewhere in Western Canada.

Canada’s economy was already starting to feel the impacts of railway blockades over the Coastal GasLink pipeline – the full economic impact of which are still not known – and from interruptions in the movement of goods and people over the COVID-19 virus, when OPEC and Russia landed what may have been the knockout punch that triggers a recession.

“This is not just about Alberta,” Kenney said. “Energy is the single largest sub-sector of the entire Canadian national economy. It is by far Canada’s largest export industry. Hundreds of thousands of Canadians depend on the energy sector directly for their livelihoods.”

“The coronvirus has caused the global economy to slow down, and with it the global demand for energy to decline for the first time in over a decade.”

Wood Mackenzie estimates that every US$10 drop in oil prices translates into a US$40 billion reduction on cash flow for oil companies. As a result, S&P Global Platts now predicts oil majors will be forced to slash spending on major projects.

“The impact is global and Canadian producers might suffer even more if the oil that Saudi Arabia sends to the U.S. is medium and heavy,” said global oil consultant Anas Alhajji. “This might last longer than what people think.”

That’s not just a problem for Alberta – it’s a problem for Canada as a whole.

Canada’s oil and natural gas sectors contributed more than $100 billion to Canada’s gross domestic product (GDP) in 2018, according to the Canadian Association of Petroleum Producers (CAPP). It sustained 530,000 jobs across Canada in 2017 and provided $8 billion in tax revenue.

Recent rail blockades over the Coastal GasLink project meant that deliveries of oil by rail were held up. And now that Canada’s trains are moving again, that oil will be delivered at much lower prices now, said CAPP CEO Tim McMillan.

“If we have built up inventories in our storage of oil that we should have been selling last week at global prices, and today, now that the rail lines are moving again, we’re selling at substantially lower, that is a self-inflicted wound that Canada has to bear,” McMillan said.

Canada may suffer disproportionately, compared to other oil producing nations, from the oil price crash, and McMillan said it will be largely self-inflicted pain.

Pipeline projects that were either killed (Northern Gateway) or delayed (Trans Mountain expansion) have left Canadian oil producers vulnerable to a single market and a steep discount.

“We are uniquely vulnerable,” McMillan said. “When you have global prices that change radically, you can’t control that. But when you have Canadian prices that are at a steep discount to global prices, that is most certainly something we, as a nation, can and should be addressing, and we haven’t. In fact, we’ve been exacerbating the problem.

“In the past we’ve had a strong industry that could weather price fluctuations, but because of decisions made in recent years, we’re uniquely vulnerable to price fluctuations like this.”

Copyright © Western Investor

The fourth quarter of 2019 brought a rise in the overall consumer-level delinquency rate

Phil Hall
Mortgage Broker News

The fourth quarter of 2019 brought a rise in the overall consumer-level delinquency rate, although average non-mortgage debt balances per consumer were down, according to new data from TransUnion.

During the final three months of last year, Canada’s overall consumer-level serious delinquency rate – defined as consumers with delinquent payments 90 or more days past due, including 12 month rolling charge-offs – was 5.61%, up 37 basis points (bps) from the fourth quarter of 2018. Delinquency rates increased across the country, but TransUnion opined that the higher rates recorded in Saskatchewan, Newfoundland and Manitoba could be attributed to trade embargos on agriculture, while mining and oil prices bumped up delinquencies in the Prairies and high unemployment levels impacted Newfoundland.

Among credit products, the serious delinquency increases for captive auto loans and lines of credit were relatively small – up 8 bps and 1 bps, respectively – while credit card delinquencies declined 24 bps. TransUnion also found the fourth quarter insolvency rate was up by nearly 3% from the previous quarter and up 11.5% from the prior year, with much of the rate increases driven by borrowers in near prime and prime risk tiers.

“We are now starting to see increased pressure on personal finances, especially within certain segments of the population that have a higher sensitivity to interest rate changes,” said Matt Fabian, director of financial services research and consulting for TransUnion Canada.

“Rate rises in 2018 may be beginning to squeeze household budgets and drive higher delinquency and insolvency rates, although other macroeconomic factors, such as the impact of trade embargos, auto plant closures and rail strikes, have also played their part.”

But while delinquency and insolvency rates were going up during the fourth quarter, the level of average non-mortgage debt balances per consumer took a mild 0.5% year-over-year drop $30,106 while new account originations for many consumer credit products slowed. Fabian speculated that this stabilization “indicates that some borrowers may be stretched to manage their current debt levels and other household expenses, and consequently are shying away from taking on new debt.”

As for the mortgage market, TransUnion found new mortgage origination volumes in the third quarter of 2019 rose by more than 17% from the prior year’s volumes, with the strongest upward motion in Ontario (21%) and British Columbia (19%). Overall mortgage loan balances increased 3.4% year-over-year nationally, with Ontario leading the provinces with a vibrant 4.8% growth. At the other end of the spectrum, British Columbia – specifically in the Vancouver GTA – lagged behind with a nearly 4% year-over-year decline.

“The 17% surge in mortgage origination volumes compared to the same period the year prior suggests the mortgage market has fully adjusted to the new qualifying rules,” said Fabian. “Although growth in the average newly-issued mortgage amount was generally subdued, Ontario showed a healthy 4.8% growth, suggesting house prices in the region are once again on the rise.”

Copyright © 2020 Key Media

Reverse mortgage debt increased 13 per cent over one year, as more seniors choose to stay in their homes

Vancouver Courier

Reverse mortgage debt in Canada has topped $4 billion for the first time, according to Office of the Superintendent of Financial Institutions (OSFI) filings analyzed by housing blog Better Dwelling.

A reverse mortgage is a mechanism for those who have paid off their mortgages to tap into their home’s equity, receiving a monthly or lump-sum payment. It is popular among retirees as it allows them to stay in their home while giving them an income. It is usually only payable upon sale of the home, or death, which means that it is paid off before the rest of the estate is passed to the beneficiaries.

The latest OSFI data shows that there was $4.01 billion in reverse mortgage debt in December 2019, up 0.69 per cent from November 2019, according to Better Dwelling.

This is a 13 per cent increase from one year previously and the first time in Canadian history that reverse mortgage debt has topped $4 billion.

However, the blog pointed out that the rate of growth for reverse mortgage debt is slowing, as the 13 per cent year-over-year increase for December was the lowest growth rate in many years (see graph below). It added that residential mortgage credit is growing at 5.1 per cent as of January 2020.

he report came at the same time as a Sotheby’s International Realty Canada survey found that the vast majority of older Canadians want to stay in their current homes, in preference to downsizing or moving, for as long as possible.

Glacier Community Media © Copyright ® 2013 – 2020

CMHC data shows a decline in housing starts

Phil Hall
Mortgage Broker News

Last month saw a decline in housing starts, according to new data form the Canada Mortgage and Housing Corporation (CMHC).

The seasonally adjusted annual rate (SAAR) of housing starts totaled 210,069 units in February, a 1.9% decline from the 214,031 units recorded in January. Urban starts were also down by 1.9% from 203,220 units in January to 199,304 units in February. Within the urban sector, multiple urban starts fell by 6.1% to 146,072 units while single-detached urban starts increased by 11.9% to 53,232 units. Rural starts were estimated at a seasonally adjusted annual rate of 10,765 units.

The SAAR measurement of housing starts has seesawed over the past few months: January saw an 8.8% increase from December, but December recorded a 3% decline from November.

“The national trend in housing starts declined in February, driven by lower-trending multi-unit starts.” said Bob Dugan, CMHC’s chief economist. “Single and multi-unit starts in Toronto both trended lower, while activity in Montréal declined due to lower-trending multi-unit starts. This offset a slight up-tick in Vancouver, which follows four consecutive declines in that CMA.”

Among the provinces, Saskatchewan recorded the steepest percentage decline in month-over-month housing starts, toppling from 3,270 units in January to 1,966 in February, a 40% fall. Quebec had the second greatest percentage decline during that period, with 44,991 in February compared to 73,304 in January, a 39 percent plummet.

On the flip side, Nova Scotia recorded the greatest percentage increase between the months: a 227% leap from the 2,378 housing starts in January to 7,771 in February. Prince Edward Island also recorded a three-digit percentage upswing, rising 163% from 429 housing starts in January to 1,127 last month.

Among the nation’s major metropolitan areas, Guelph recorded the steepest percentage decline with an 80% drop from 667 housing starts in January to 133 last month. Saguenay recorded the second steepest drop, with a 72% plunge to 313 housing starts in February from 1,117 in January.

The major metropolitan areas that saw the most vibrant activity in housing starts during the year’s first two months included Halifax (a 340% increase form 1,319 in January to 5,800 in February), Windsor (a 331% spike from January’s 264 total to 1,137 in February) and Hamilton (a 307% rise from 1,734 in January to 7,061 in February).

The CMHC data follows a recently published report by Altus Group that found total housing starts in Canada during the 2010s were virtually identical to the previous decade. According to Altus Group’s data, housing starts reached 201,000 units on an average by the end of the 2010s, tying for the second-best decade ever recorded, after the 1970s. The decade recorded the lowest volume of housing starts in 2013, with just under 188,000 units, while the highest starts of the decade were recorded in 2017 at 220,000 units. The 2010s were also the strongest decade ever for apartment starts, with around 92,000 apartment units being started and most of the focus being given to condominium apartments developments.

“In general, the 2010s were not a very volatile period for annual total housing starts at the Canada-wide level,” the report stated. “In fact, it was the least volatile of any of the past six decades for annual total housing starts.”

Copyright © 2020 Key Media

Investing in a pre-construction condominium might be a viable strategy

Gerv Tacadena
Canadian Real Estate Wealth

Investing in a pre-construction condominium might be a viable strategy, but there could be potential downside risks, said an expert.

John Pasalis, president at Realosophy Realty, said there are three key things investors should consider when thinking of buying a pre-con condo: price, rents, and risks.

Pasalis said investing in pre-con condos only works in circumstances when the prices are rising.

“If you buy a pre-con condo and prices fall 20%, unless you have a lot of money saved up, you’ll be unable to even take possession of that unit to live in it or rent it out because banks only finance what the property is worth, not what you paid for it,” he said in a think piece in Move Smartly.

Pasalis cited what happened with the buyers of pre-con detached homes in Oakville in Halton Region and in Durham Region in the Greater Toronto Area. After paying the peak price in 2017, buyers eventually found that their homes were worth significantly less than what they paid for.

“Many lost their life savings because they did not manage that downside risk. Given the potential risks, it’s critical to ask yourself tough questions before you are enticed by the ‘sure-fire’ promises of Toronto’s condo marketers,” he said.

The average price per square foot for a pre-con condo was 30% higher than units for resale last year. Pasalis said buyers are often not worried about qualifying for a mortgage until the building is completed, making pre-con condos a popular choice.

“The idea is that you just put down a deposit on a condo and you’ll double your money in the five years it normally takes for a building to be completed. But with the high prices investors are currently paying, there’s no guarantee that market will even catch up to what they paid when it comes time to sell,” he said.

Rents are also an important consideration. Pasalis said the rent forecasts for pre-con condos seem “unrealistic”. He said investors would need to charge significantly high rents to tenants to justify the prices they are currently paying.

“That’s very unlikely to happen. In some cases, when condo prices are so inflated, I’ve seen agents and builders craft lofty projections that guarantee investors will be able to rent out a 750 square-foot condo for over $5,000 a month as a furnished rental – but again, these are pretty lofty expectations,” he said.

Copyright © 2020 Key Media Pty Ltd

The government will respond appropriately as the economy develops

Steve Randall
REP

With the spring housing market imminent, many industry professionals are wondering what impact the COVID-19 coronavirus outbreak will have on sales.

The rout on the stock market – the TSX lost $218 billion in market value Monday – and wavering consumer confidence may be offset somewhat by lower mortgage rates helping to maintain demand as buyers consider the long game.

In a press conference Monday, federal finance minister Bill Morneau had a muted response to questions about economic stimulus.

“We’re looking at a series of measures that are appropriate for different fact patterns. You will see us move forward as we see those facts on the ground,” he said.

Canada’s oil producing provinces are likely to feel the impact as prices tumble on expectation of weakened demand. For many regions this new challenge comes as they are still trying to shake off the effects of the previous price slump in 2014.

With confidence fading, calls for a global recession are growing, but Morneau highlighted that Canada’s economy is starting from a point of strength relative to its G7 peers.

Following the cut in interest rates last week, the forthcoming budget could be the next time that the housing market – and the wider economy – is handed some help.

But don’t count on it.

“We shouldn’t think of the budget as the only way to respond,” said Morneau, adding that the government will respond “appropriately” as the economy develops.

Copyright © 2020 Key Media Pty Ltd

Thanks to lack of investor mania, fast-growing diverse city offers unusually stable prices

Douglas Todd
The Province

“We don’t have any billionaires getting off the plane at YVR and heading straight out to Bear Creek Park in Surrey to buy a house,” says veteran realtor Sukhi Kang.

Surrey has not been a mecca for wealthy offshore or domestic housing investors, say Kang and other realtors, who maintain the relative lack of speculators has been beneficial for the fast-growing city south of the Fraser River.

The preponderance of native-born and new-immigrant buyers who are simply searching for a home to live in is why housing values have remained unusually stable in Surrey compared to the high-end neighbourhoods of Metro Vancouver, where housing bubbles began popping in 2017.

According to an interactive Postmedia chart of more than 160 Metro Vancouver neighbourhoods, B.C. Assessment values for multi-million-dollar homes in posh neighbourhoods of West Van and the west side of Vancouver dropped by roughly one-fifth in just one year. So did neighbourhoods in Richmond.

In contrast, Surrey housing prices remained quite stable in most neighbourhoods, particularly in the large northern section where detached homes often sell for less than $1 million.

While luxury West Van houses in hillside neighbourhoods such as Chartwell, the British Properties and Upper Caulfield were pounded when prices plummeted between 18 and 25 per cent this year, north Surrey neighbourhoods like Newton, Cloverdale, Guildford, Clayton Heights, Whalley and Fleetwood experienced only minor dips of one to five per cent.

Some other Metro Vancouver neighbourhoods that escaped investor mania and remained fairly firm in value were the District of Langley’s Brookswood and Fort Langley, North Delta’s Kennedy West (next to North Surrey), New Westminster’s Queensborough and Brow of the Hill and North Vancouver’s Lynn Valley and Seymour Heights.

Sprawling north Surrey stood out for its across-the-board stability. “The affordability factor is big here,” says Bobby Bisla, one of more than 300 realtors working out of Century 21 Coastal Realty’s super-busy office in Newton.

“We don’t want a market that’s going berserk with multiple offers. It’s better for everyone, buyers and sellers, to have a stable market, a balanced market, for people who work here.”

Surrey, which has a population of more than half a million, is one of the fastest-growing municipalities in Canada, expanding by two per cent a year through a combination of intercity mobility and international immigration, mostly from South Asia.

“The foreign-buyers tax didn’t do a thing to slow down buying in Surrey,” when it was instituted in 2016, said Kang.

His market analysis contrasts with that of realtors in West Van, who say the foreign-buyers tax, as well as the B.C. government’s speculation and vacancy tax, led to transnational investors, especially from China and Iran, drying up. West Van councillor Craig Cameron is among those who generally welcomes his municipality’s price correction.

“The Surrey market is different from West Vancouver. It’s basically made up of local people. People still need to buy houses to live in Surrey. But no one really needs to buy a $20-million house in West Vancouver,” said Kang, who is also with Century 21 Coastal Realty.

The veteran Surrey realtor said his region’s housing market remains solid because it’s affordable and because it’s attractive to immigrants from South Asia who choose to move into an ethno-religious culture that feels familiar.

Census Canada figures show that 40 to 60 per cent of the residents of the neighbourhoods of North Surrey where housing values remained quite stable — such as in Newton, Fleetwood and Kennedy — have roots in India.

“The cultural thing is significant,” said Kang. “Many new immigrants from India and Pakistan want to come to a place where they can feel comfortable, where they might be able to stay close to their families, where there are many gurdwaras, mosques and temples.”

And most people who want to buy in Surrey don’t have huge amounts of money, said Kang, whether they are people of colour or Caucasian. “You can still get a townhouse for $500,000.”

It’s typical for buyers in Surrey to show up with only small down payments, Kang said, which has made them vulnerable to the federal government’s financial “stress-test” for qualifying for a mortgage.

© 2020 Postmedia Network Inc.

Students in Halifax and Charlottetown have been forced to scramble for apartments

Phil Hall
Mortgage Broker News

When it comes to affordability issues regarding housing and quality of life, most attention has been placed on the quality of life within Canada’s largest metro areas. However, a new study on affordability released by Dalhousie University shines the spotlight away from the major urban centers and gives attention to four smaller Atlantic Canadian cities that rarely get considered in national discussions of affordability: Charlottetown, Halifax, Moncton, and St. John’s.

The study, authored by sociology professor Howard Ramos and sociology PhD student Emma Kay, was conducted from May through July of last year and sought to assess the changes Atlantic Canadians observed in their cities and neighbourhoods during the past five to 10 years. On the whole, the majority of respondents believed the economic change in their cities was “for the better” – except in St. John’s, where 55% of residents felt it was “for the worse.”

When focused on their individual neighbourhoods, the majority of survey participants reported no change in the overall economic state, perceptions of local wealth and employment opportunities, but perceptions of affordability were generally negative due to the perception of declining affordability.

However, in terms of demographic measurements, 67% of respondents between the ages 18 to 34 years said that their neighbourhoods became less affordable over time, versus 54% of those ages 65 years and older. In a column published on The Conversation website, the report’s authors pointed out that students in Halifax and Charlottetown have been forced to “scramble for apartments amid concerns of a housing shortage” and urged policymakers and communities to “pay close attention to concerns expressed by young people because they represent the very demographic Atlantic Canadian cities are trying to attract because they drive economic growth.”

The report also determined a perception split based on education levels, with 26% of those with less than a high school education and 67% of those with a professional or graduate degree citing negative change in their neighbourhoods. Immigrants were more likely than non-immigrants (64% to 57%) to indicate that their neighbourhoods had become less affordable compared to five to 10 years ago.

Within the four cities, 75% of Charlottetown residents lamented that their neighbourhoods are less affordable compared to five to 10 years ago, compared to 63% of Halifax respondents, 46% of St. John’s residents and 43% of the Moncton respondents. And while St. John’s residents expressed the most negative views on economic changes in the city, 24% of those surveyed believed their neighbourhoods became more affordable over time – a higher proportion compared to the residents in the other three cities.

Approximately three-quarters of the survey’s owned their homes and 69% reported living in single detached houses. The average age of the respondents was 58, with 57% stating they were married, 4% identifying as minorities, 7% identifying as immigrants or refugees and 2% identifying as Indigenous. The median individual employment income reported by participants was between $40,001 and $60,000, with 53% reported spending one-third or more of their incomes on housing and related expenses.

Copyright © 2020 Key Media