City of Vancouver records suggest strong opposition to Commercial-Broadway tower

Joanne Lee-Young
The Vancouver Sun

A revised rezoning application turned more of the rental units into below-market ones and made slight height and density changes that mean the project aligns with the City’s Grandview-Woodland Community Plan.

Proposed redevelopment site at the Safeway store on West Broadway and Commercial. Photo by NICK PROCAYLO /PNG
A Commercial Drive citizens’ group recently obtained City of Vancouver records that suggest strong local opposition to a proposed, transit-friendly, mostly market rental tower and retail project.
The group made a Freedom of Information request to the city that uncovered documents showing that for a one-week period in November 2021, input to the municipality from the public was overwhelmingly negative for a redevelopment proposal at 1780 Broadway by developers Westbank and Crombie REIT.
Of the 157 replies the city received during that week, 118 respondents opposed the project proceeding as planned, while 16 were mixed, and 23 supported.
“Those who checked the ‘mixed’ box on the city’s feedback site nevertheless expressed highly critical views of the existing proposal,” said a release from the ad hoc citizens’ group, No Megatowers at Safeway, which also released the FOI documents.
The group directed comments to Craig Ollenberger, who isn’t a member, but is the president of the Grandview Woodland Area Council, which is the local residents’ association.

Ollenberger said he didn’t know how large the ad hoc group was, but that “as far as my history with community issues goes, it’s a rather substantial group for the neighbourhood.”
Many of the comments submitted by the public to the city focused on the lack of public spaces for such a large site, said Ollenberger. “It doesn’t reflect anything about Commercial Drive, things the city has said they value in terms of small-scale retail.”

Proposed development site at West Broadway and Commercial in Vancouver. Photo by NICK PROCAYLO /PNG
The community response comes after the developers tweaked a rezoning application in November 2021 so there would be fewer overall units and more below-market rentals. In total, the proposal is for 653 units, with 215 condos and 438 secured rental units, of which 345 are market rental and 93 units are below-market rental.

The revised rezoning application turned more of the rental units into below-market ones and made slight height and density changes so that the project aligns with the city’s Grandview-Woodland Community Plan.
The city said the rezoning application is currently under review and that the process includes considering council-approved community plans, current priorities, policies and guidelines, as well as input from the public, advisory committees and other city departments.
The continuing consultation on the project, which sits beside the Commercial-Broadway SkyTrain station, comes as provincial Minister of Housing David Eby has been expressing frustration with community opposition and municipal red tape getting in the way of significantly increasing the supply of housing units that is necessary for future population growth.

“While the final decision on this site will be up to Vancouver city council, as housing minister I support Vancouver approving and getting built as much rental housing as possible given the depth and breadth of our current housing crisis in the region and the city,” Ebe said late Monday. “We also need the Broadway corridor plan approved before the next municipal election.
“At least 100,000 new people will be arriving as new residents in British Columbia this year — 25,000 arrived in the last three months of 2021 alone. All of these new residents are going to need housing, and housing like this that is close to transit will help us meet our affordability, sustainable transportation and climate goals all at once.”

University of B.C. economics professor Tom Davidoff said people who live near the development are more likely to oppose it and take the time to write to the city. Allowing it to proceed would give more housing choice to those who can afford it, and maybe relieve some pressure on rents, although not by much since it is only one building.

It may be that “you have to hurt a few people, a lot, in order to help more people, a little bit,” he said.
Ollenberger said it is the role of municipalities to figure out what citizens want and help them to build it.
“There are all kinds of projects going all across Vancouver that nobody has a problem with, so when people have problem with one, ask them why,” said Ollenberger.

© 2022 Vancouver Sun

Busting the myth of Canada’s million or more vacant homes

Murtaza Haider
The Vancouver Sun

A deep dive by Murtaza Haider and Stephen Moranis reveals the alarmists have misinterpreted the data

 It turns out that the percentage of vacant homes is actually low, and even lower in high-demand urban areas, writes Murtaza Haider and Stephen Moranis. Photo by National Post

Recent media accounts and development agency reports suggest Canada’s housing affordability problem is being made worse by more than a million homes sitting empty, but a deep dive into the vacancy data reveals the alarmists have misinterpreted the information.

Many believe investors and those owning multiple homes contribute to worsening housing affordability by keeping dwellings empty that could house tenants or new millennial owners. Hence, critics say, housing conditions would improve if these million-plus “vacant homes” were made available for buying or renting.

Vancouver imposed a vacant home tax in 2017 and Toronto is doing the same this year. But the vacant tax in Vancouver has not netted tens of thousands of empty properties. A similar outcome is expected in Toronto, where the local government expects to find 6,500 to 9,600 vacant dwellings, though some or many would qualify for an exemption from the vacant home tax.

But it turns out that the percentage of vacant homes is actually low, and even lower in high-demand urban areas. Furthermore, some dwellings are temporarily vacant for a reason, for example, transitioning from one occupant to the next.

The myth of a million or more vacant homes or empty bedrooms are nothing but smokescreens

The reason many believe in the fable that more than a million homes are lying vacant in Canada is a cavalier interpretation of Statistics Canada data. To get to the origins of the exaggerated assertions, we reverted to the primary source of the claim, which is a report distributed by the Organisation of Economic Co-operation and Development (OECD). The report suggested that around eight per cent of the housing stock in Canada was vacant, or more than 1.3 million “vacant dwellings.”

The OECD vacancy estimates sparked subsequent news media accounts that this was causing affordability to worsen. The OECD reportedly sourced data from the Canadian government and pointed to a Canadian data portal, CensusMapper, as the source of vacant dwelling data.

The CensusMapper data is essentially sourced directly from Statistics Canada. But a quick look at the data portal reveals that some well-meaning individuals erroneously confused unoccupied dwellings with vacant dwellings, thus contributing to the widely exaggerated estimates of empty homes despite the posted caveats.

CensusMapper defines unoccupied dwellings as being either unoccupied or temporarily occupied by a person with a primary residence elsewhere in Canada or abroad. Similarly, Statistics Canada described an unoccupied dwelling for the 2016 census as a private dwelling fit for year-round living, but no one was residing there on May 10, 2016.

Were these dwellings unoccupied or vacant? Even if no one resided there on census day, did it remain unoccupied for a week, a month or the entire year? And what about the several hundred thousand cottages scattered across Canada that might be labelled unoccupied on census day, but were certainly not vacant.

Jens von Bergmann, who has previously taught at the University of Calgary, said some dwellings labelled as unoccupied by CensusMapper might actually be occupied, just not by the usual residents. For example, residences used as temporary housing for students or workers are not vacant, but are considered unoccupied by the usual residents.

The Canadian census, relying on input from enumerators, designates dwellings as vacant or otherwise on census day. Regrettably, these statistics are not part of the standard release by Statistics Canada. Fortunately, CensusMapper obtained special tabulations from the agency and has made the data available online.

A breakdown by the structural type of housing and city (Census subdivision) revealed the vacancy rate was much lower than eight per cent in urban Canada. Consider that while the overall vacancy rate in the City of Toronto was 4.6 per cent, census enumerators in 2016 identified a mere 2.2 per cent of the 276,630 single-detached dwellings as vacant. Even lower shares of single-detached homes were found to be empty in Montreal and Calgary, at 1.8 and 1.4 per cent, respectively.

The City of Vancouver reported a larger share of vacant dwellings (7.1 per cent), and the vacancy rate was relatively higher for apartments in duplexes, and low-rise and high-rise structures, a trend also seen in Calgary, Edmonton, Montreal and Toronto.

Even the empty dwelling counts by the enumerators are likely to be exaggerated because of how the census defines an apartment in a duplex, which is one of two dwellings located one above the other. If an owner decided to absorb the secondary suite into the primary dwelling or decided against renting the secondary suite, census enumerators may still count the secondary suite as vacant. Hence, the highest share of vacant dwellings is for apartments or flats in duplexes.

A small percentage of dwellings will always be unoccupied or vacant. For example, a private rental home between successive tenants, a dwelling undergoing renovations or owners being temporarily away for work will cause dwellings to be unoccupied.

Striving for 100 per cent of the dwellings to be occupied all the time is neither practical nor useful. The supply skeptics, however, continue to lobby the governments against building more homes.

The myth of a million or more vacant homes or empty bedrooms are nothing but smokescreens. A prudent way forward for the federal Liberals is to ignore supply skepticism and focus on building millions of new homes in a short period of time to address the housing deficit that has accumulated over decades.

Murtaza Haider is a professor of Real Estate Management at Ryerson University. Stephen Moranis is a real estate industry veteran. They can be reached at the Haider-Moranis Bulletin website, www.hmbulletin.com.

© 2022 Vancouver Sun

Posthaste: Home sales set for the second ‘most remarkable’ year in Canadian real estate history

Pamela Heaven
The Vancouver Sun

RBC forecasts ‘super strong’ sales in first half of year

 RBC forecasts 579,600 existing homes will be sold this year. Photo by National Post

2021 by all accounts was a record-breaking year for Canadian real estate — a blockbuster for sales, prices and low inventories.

Such a pace is unsustainable, most agree, but how much of a comedown are we in for?

“Canada’s housing market isn’t about to buckle,” writes RBC senior economist Robert Hogue in a recent report.

The market will cool from the torrid heights of ’21, says Hogue — a view shared by most economists and industry experts, but a continuing shortage of supply and unmet demand are expected to drive “tremendous activity” this year.

RBC forecasts 579,600 existing homes will be sold this year. That’s down 13.1% from the record 667,000 transitions in 2021, but it’s still the second highest number in history, he said.

Most of the slowing will happen in the second half of the year, says RBC, with the outlook for prices in the first half to remain “super strong.”

Canada’s perennial problem of short supply is the biggest driver.

A report by Bank of Nova Scotia chief economist Jean-François Perrault says that Canada has the lowest average housing supply per capita among the G7. Within Canada, the housing shortage is most severe in Ontario, Alberta and Manitoba.

RBC estimates that the Canadian market was short 180,000 to 250,000 listings at the end of 2021. To achieve a better balance between supply and strong demand, active listings would need to triple, wrote Hogue. 

In the meantime, sellers maintain a tight grip on just about every market in Canada, with many smaller centres seeing bidding wars for the first time.

Inventories were at record lows for most provincial markets at the end of 2021 and RBC expects competition between buyers to remain “fierce” even beyond Toronto and Vancouver.

Demographics should keep demand strong, says Hogue. Millennials, now in their mid-20s to early 40s, are swelling the ranks of Canadians in their prime years for buying a home. RBC says there were 10.5 million people aged 25 to 44 in Canada in 2021, an increase of 8.3% in the past five years. “If historical ownership patterns hold, millennials will remain a major force in the housing market in 2022 and beyond,” wrote Hogue.

Immigration is also set to increase with the government target rising to 411,000 this year. Immigration typically hits the rental market first, but RBC also believes some skilled workers coming to fill labour gaps will be ready to buy as soon as they arrive.

The big event that will tap the brakes on the housing market is Bank of Canada rate hikes. RBC expects six hikes totalling 150 basis points over about 18 months, causing both variable and fixed mortgage rates to rise “materially” — even to the point of pushing up the mortgage qualifying rate.

This alone should dampen demand, especially in expensive markets like Toronto and Vancouver.

At the same time more supply is expected to come on the market, said RBC. Housing starts climbed last year to levels not seen since the mid-1970s. All going well, that could boost completions to almost 250,000 units in 2022, up from the average of 190,000 units over the past five years.

That increase along with slightly slower demand should “noticeably” ease the imbalance, said Hogue.

Yet, RBC doesn’t think the housing market will see abrupt changes. “These will be the first steps on a long road to normalization. We do expect 2022 will be a remarkable year by almost any standard … unless you compare it to 2021,” wrote Hogue.

The global outlook for real estate returns also looks strong. Oxford Economics forecasts that total returns for direct real estate and REITs will average 6.5% to 7% a year over the next five years, significantly outperforming bonds and equities that it projects will return 0.7% and 2.5% a year, respectively.

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OTTAWA UNDER SIEGE Big rigs and their supporters descend on Parliament Hill on Saturday. Thousands of truckers from across the country and protesters opposed to COVID-19 vaccine mandates and restrictions descended on the capital over the weekend . Much of downtown Ottawa was snarled by parked vehicles and crowds of protesters. The protest started against the federal government’s vaccine mandate for cross border truckers, but expanded into a larger movement against broader public health measures to limit the spread of the virus. Transport Minister Omar Alghabra told the CBC the federal government stands by its vaccination rule for cross-border truckers.

• International Energy Agency releases quarterly report on global natural gas markets
• Omar Alghabra, minister of transport; Francois-Philippe Champagne, minister of innovation, science and industry; Marie-Claude Bibeau, minister of agriculture and agri-food; and Mary Ng, minister of international trade, export promotion, small business and economic development, will hold a news conference following a national summit to strengthen Canada’s supply chain
• The Association for Mineral Exploration Roundup 2022 runs from Jan. 31 through Feb. 3 in-person and online in Vancouver. Opening day includes virtual comments from Energy Minister Bruce Ralston
• Sean Fraser, minister of immigration, refugees and citizenship, will make an announcement on improving and modernizing the immigration system
• Parliamentary Budget Officer releases costing note “Underused Housing Tax Act” 
• Ontario eases COVID-19 restrictions. Indoor dining, gyms, retailers, shopping malls, and cinemas can reopen at 50 per cent capacity
• Today’s Data: Canadian industrial product and raw materials price indice 

         FP Dealmakers 2021: Equities steal the show in                     bonanza year for dealmaking

• FP Dealmakers: How a ‘rocket fuel’ tech sector drove the year of the IPO to new heights
• Stocks rebound but head for worst January since 2016
• Time to defuse the bomb that will explode when boomers turn 85
• What rate hikes mean for the housing market
• Goldman’s top strategist sees risk of further stock market pullback
• Shell to begin trading under simpler, single-line share structure

2021 turned out to be a year for dealmaking, Financial Post data has revealed. Low interest rates and record-breaking stock markets fuelled 17% more deals than in 2020. The dollar value of $517.3 billion was slightly lower than the year before as governments eased off from the early days of the pandemic, but it was well above 2019, writes the Financial Post’s Barbara Shecter. Corporate markets flourished, racking up 32% more corporate debt and equity deals than in 2020, with a total value of $332.73 billion, up nearly 17%. For more on the blockbuster year for deals and the top dealmakers, read on. 

It’s that time of year again when the task of doing your taxes begins to nag at the back of your brain. It’s tempting to ignore it until the the April 30 deadline is upon us, but as our content partner StackCommerce points out, that just makes the task that much more stressful. The trick is getting out ahead of it and doing them early.

StackCommerce can help, whether you are an individual, family or business. The 2022 Complete Tax Preparation Bundle features over 600 lessons on how to get ahead of your taxes. From breakdowns on how to create financial reports in Microsoft Excel to lessons on how to enter tax data for an S corporation, the answers to your filing questions can be found here.

Today’s Posthaste was written by  (@pamheaven), with files from The Canadian Press, Thomson Reuters and Bloomberg.

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© 2022 Vancouver Sun

Asking price for Vancouver luxury home first listed at $34.8 million now reduced to $24.8 million

Carlito Pablo
The Georgia Straight

 The owner of an unsold Vancouver mansion looks to be a determined seller.

The vendor of 1126 Wolfe Avenue has again reduced the asking price for the multi-million-dollar custom-built home.

The new tag for the three-storey residence is now $24,880,000.

That’s almost $10 million off the original selling price more than four years ago, or $9,920,00 to be exact.

The seven-bedroom and eight-bath home first came on the market on August 25, 2017.

At the time, the listing price was $34.8 million.

This Vancouver real estate offering expired on March 2, 2018 with an unchanged price.

The 1126 Wolfe Avenue property returned to the market on September 2, 2021 with a new and reduced price of $28 million.

Despite the massive $6.8 million reduction from the original $34.8 million price, no sale was made.

It seems that the offer needs to be more attractive.

On January 24, 2022, the $28 million price was reduced by 11.1 percent for a modest $3,120,000 discount.

Is $24,880,000 a good price?

It depends on how one looks at it.

Per B.C. Assessment, the home was built in 2014.

This piece of Vancouver real estate has a 2022 assessment of $16,143,000.

This means that the new selling price of $24,880,000 is more than 54 percent over the property’s current assessment.

The old home at 2116 Wolfe Avenue was last sold in 2013 for $4,528,000.

The current listing states that the “exceptional newly completed grand-scale luxury estate residence is situated on a prized .53 acre view property”.

It is “located in the confines of Vancouver’s ultra- exclusive and most prestigious First Shaughnessy enclave boasting spectacular views of the city’s downtown skyline and North Shore Mountains”.

“The architectural elegance and grandeur with its bold white brick exterior and beautiful landscape create an impressive majestic presence and features over eleven thousand three hundred square feet of formal and informal living on three expansive levels,” the listing also notes.

Moreover, “Exquisite design, master craftsmanship and opulent finishes blend seamlessly to create an international masterpiece while embracing the security and convenience of today’s most up-to-date technology.”

© 2022 VANCOUVER FREE PRESS.

Dan Fumano: Six-homes proposal latest in Vancouver’s housing ‘evolution’

Dan Fumano
The Vancouver Sun

Opinion: After controversially legalizing basement suites, laneway houses and then duplexes, Vancouver’s new six-units-on-one-lot proposal is the latest shift.

 A design by MA+HG Architects showing a four-unit front building beside older single-family residents. This plan also includes a two-unit laneway building. Photo by MA+HG Architects. /PNG

Sandy James remembers taking an informal poll of her city hall colleagues in the 1990s and learning every one who owned a house in Vancouver had a basement suite, or “mortgage helper.”

At the time, those suites were illegal.

It wasn’t until 2004 that Vancouver legalized secondary suites in single-family houses citywide. Such homes already formed an important part of Vancouver’s housing stock — the city estimated in late 2003 there were more than 20,000 illegal suites. But the debate around legalizing them, James recalls, was “extremely contentious.”

It might seem surprising or even bizarre to younger Vancouverites to imagine a heated debate around basement suites less than 20 years ago. But such is the nature of a city’s evolution. There has often been tension between how some people want to live, what some others want in their neighbourhoods, and what city halls allow.

James, who worked in Vancouver’s planning department from the 1980s until 2012, reflected on this history Thursday following council’s decision Wednesday night to explore a pilot project to allow up to six strata units on a single residential lot.

James is skeptical the policy will go far enough to have the desired effect. Many planners and development experts have expressed similar thoughts. City staff will now try to create the actual policies, and the details will, of course, be crucial. If the program eventually receives final approval, time will tell if these projects are actually viable.

But James called it “a good first step.”

Backers of this direction say Vancouver needs to add smaller, relatively more affordable homes in low-density neighbourhoods where secure rental housing is scarce and ownership is unattainable for all but the very wealthy, or those who bought in an earlier era.

“This is just evolution,” James said. “The city is dynamic. The way we use space is dynamic.”

Mayor Kennedy Stewart, who introduced the motion, called it “the single biggest shift in housing policy Vancouver has seen in a generation.”

Every generation has had its own debates.

In the fierce opposition to legalizing basement suites, James recalls, “parking was always the big thing.”

In Vancouver and elsewhere, parking is one of the issues raised most frequently in opposition to new development or proposals to explore different kinds of housing.

Addressing council on Wednesday night, Elizabeth Murphy of the Vancouver Character House Network said: “This motion raises more questions than answers. What about parking?”

The proposal, which directs staff to develop policies to target up to 2,000 lots currently zoned for houses or duplexes to be redeveloped for up to six stratified units, would have “a major effect on neighbourhood character,” said Murphy, who is also the vice-president of TEAM for a Livable Vancouver, a new political party.

In 2018, Murphy was a prominent opponent of the direction under Vancouver’s previous Vision-majority council to allow duplexes in almost all the low-density areas previously called “single-family neighbourhoods.”

In 2009, Vancouver gave the green light to laneway houses, and faced similar backlash.

There was a time when much of Vancouver hated the housing type that now bears its name, recalls civic historian John Atkin.

So-called “Vancouver specials” started popping up by the thousands in the mid-1960s. These houses often had two kitchens, one upstairs and one down, and were therefore “an incredibly efficient house form” that was widely popular, particularly with multi-generational immigrant families, Atkin said. But a backlash to the Vancouver special had formed by the 1980s.

In 1987, then-councillor Carole Taylor introduced a motion to ban second kitchens in new homes, as “the first step toward ensuring that single-family neighbourhoods survive in at least some parts of Vancouver, and stopping the ‘exponential growth’ of illegal suites,” The Vancouver Sun reported at the time.

At that 1987 public hearing, then-councillor Libby Davies “drew howls of outrage, as well as some applause, when she said she found an ‘element of racism’ in the debate,” Sun reporter Carol Volkart wrote.

“I find it very disturbing that every speaker from the Indo-Canadian community who got up here and spoke tonight was booed or hissed,” Davies said at the meeting. “Some of the comments that were made about ‘they’ and ‘their big families’ — I think you have to understand that Vancouver neighbourhoods have changed with new Canadians who have come to live in Vancouver and there are cultural differences.”

Council voted 9-2 to eliminate second kitchens.

Peter Whitelaw, a senior planner with Simon Fraser University’s Renewable Cities program, spoke in favour of the latest direction on Wednesday evening. Whitelaw said Vancouver’s leadership needs to reckon with the fact the population density of many low-density areas — once called the “single-family neighbourhoods” — has actually dropped since the 1970s.

During that time, most of Vancouver’s population growth happened in a relatively small chunk of its land, such as the downtown peninsula, the Broadway corridor, and a few other hubs.

Much of the city’s residential land, especially in its southern half, haven’t experienced much physical change in the past few decades.

“But change is always happening, whether we see it or not,” Whitelaw said Thursday. “The loss of population, we don’t really see it, but that happened. And eventually you get these empty, unaffordable neighbourhoods.”

The motion directs staff to report to council in 2022 with recommendations on next steps. Considering council is scheduled to break in July before the October election, it seems likely final decisions will be made by whoever sits on Vancouver’s next council.

Whenever that happens, expect debates about parking.

© 2022 Vancouver Sun

Toronto closing on Vancouver as Canadas priciest real estate market

Joel Schlesinger
The Vancouver Sun

 Vancouver has had more listings recently than Toronto, helping to narrow the price gap between the two cities. Photo by Darryl Dick /The Canadian Press

Vancouver has a challenger in the title for Canada’s most expensive real estate market — Toronto — a new report finds.

TD Economics published a report on price movements in the nation’s two largest cities, finding the gap between pricing is today the smallest since 1991.

In December, average prices in Greater Toronto Area were about four per cent less than the Greater Vancouver Area, the report notes (though it did not provide a precise average price for either city).

Yet Canadian Real Estate Association data as of Dec. 31 suggested an even tighter spread between these markets with benchmark home price in the GTA at $1,208,000, compared with the GVA at $1,230,200. That is less than a two per cent difference in price.

The TD report attributes the tightening price gap to the 15 per cent foreign buying tax in the GVA in place since 2016. Additionally, higher land transfer and school taxes on expensive homes in the Vancouver region further dampened growth.

Prices in the GVA still rose about 13 per cent since 2018, but the GTA saw an increase of 40 per cent over the same span. Another factor has been supply, which was not as tight in the Lower Mainland in 2021. There, new listings grew by about 16 per cent compared with the Toronto region, which only saw listings grow by about six per cent.

Another tailwind for GTA’s price growth has been investor demand, making up about 24 per cent of buyers compared with the Vancouver region at about 21 per cent.

The report notes the price gap will likely narrow more in 2022, but investor demand could be “a wildcard” and may swing back with more investors favouring the Vancouver area.

© 2022 Vancouver Sun

Canada housing crash how likely is it

Fergal McAlinden
other

Mortgage debt in Canada is skyrocketing. How much is too much risk for Canadian borrowers?

 Total residential mortgage debt in Canada mushroomed to $1.77 trillion in 2021’s third quarter as the country’s housing surge showed no sign of letting up.

The ongoing COVID-19 pandemic has acted like rocket fuel for what was already a turbocharged housing market, with low interest rates, increased savings and a yearning for more space compelling many Canadians to make their move.

With no sign that house prices across the country are ready to halt their rapid upward climb, the question remains: Could homebuyers across the country be taking on more debt than they can handle?

According to a Canada Mortgage and Housing Corporation (CMHC) senior analyst, risk is increasing in the mortgage market – but there’s still little reason for undue concern thanks to emerging positive signs in borrowing trends. 

Seamus Benwell (pictured top right), who co-authored the body’s recently released Residential Mortgage Industry Dashboard alongside senior specialist, housing research Tania Bourassa-Ochoa, told Canadian Mortgage Professional that while mortgage debt was indeed continuing to rise, arrears were registering a decline at the same time.

“We see mortgage debt growth continuing to increase – it’s gone up about 11% year over year. We’re also seeing that total debt service [TDS] ratios of over 40% are increasing quite a bit in the market – especially since the second half of 2020,” he said.

Read next: Will declining consumer confidence impact the mortgage market?

“Those two suggest that there is higher risk in the mortgage market. However, the good news story is that we see mortgage arrears for all mortgage lender types going down – so despite mortgage deferrals and other pandemic-related aid programs coming to an end, borrowers are still able to make mortgage payments or take advantage of housing market conditions to sell their property rapidly to avoid default.”

That CMHC report showed that more than a quarter of uninsured mortgages in Canada now have a TDS ratio over 40%, with the percentage of uninsured new mortgages with a TDS of 40% or less further decreasing in 2021 after posting a decline the previous year.

Benwell said that while that trend isn’t an immediate cause for worry, it could develop into a bigger problem if the number of highly leveraged mortgage customers keeps growing.

“It hasn’t reached astronomical levels, but it’s definitely increasing,” he said. “If that trend continues, I think there is cause for concern.”

With markets currently pricing in a number of interest rate increases from the Bank of Canada this year, the possible impact on Canadians’ household finances has been noted.

An Angus Reid Institute survey at the beginning of January found that “any rise in rates threatens the financial situations of Canadians sitting on debts and loans – especially mortgages,” with 53% of respondents saying an interest rate hike of 2% would negatively impact their household finances.

Benwell said that Canadians with variable rate mortgages were likely to see some negative effects from those rate hikes – although the fact remained that a large number of mortgage holders are tied to a fixed rate.

Read next: Rate hikes, inflation to weigh heavily on household finances – poll

“We know that as soon as rates start to increase, we can expect borrowers with a variable rate mortgage to be paying higher monthly payments and [that’s] absolutely something we’re going to be keeping an eye on if those higher rates do arrive,” he said.

“The other side is that most Canadians are still on a fixed rate, so that does give us a bit of a transition period where the higher rates don’t affect all mortgage borrowers.”

Much will depend on the nature of Canada’s emergence from the pandemic, with many housing market trends – the so-called “exodus” away from urban centres and increased household savings leading to higher purchasing power, for instance – brought about by the realities of COVID-19.

If a significant rise in interest rates is accompanied by an end to all government support for workers whose employment has been affected by the pandemic, that could also have stark consequences for mortgage borrowing in the coming months.

“We can certainly expect that to affect the mortgage market again. What we’ve seen today is that borrowers are able to make their payments, so that’s the good news,” Benwell said. “As interest rates rise and other supports are removed, I wouldn’t be surprised to see some borrowers end up in stress – but how many remains to be seen.”

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Local landlords swallowed as market demands deeper pockets

Frank O’Brien
Western Investor

Six out of 10 rental apartment buildings in B.C. now bought by national REITs or other institutional investors as soaring prices, government restrictions convince local landlords to sell

 There is a changing of the guard amidst the churn in B.C.’s multi-family rental market which saw a record-shattering $3 billion in apartment building sales last year in Metro Vancouver and Greater Victoria.

Despite what appears the strongest rental market in Canada – with the highest average rents, the lowest vacancies and a consistent lack of supply – local landlords who have dominated the market for decades are selling, according to a new report from CBRE Vancouver, the leading multi-family broker in the province.

After a near year-long rent and eviction freeze and a capping of B.C. rent increases at 1.5 per cent for 2022, despite an official inflation rate at a 30-year high, many veteran owners are cashing out.

“B.C. government-imposed policies and rent freezes, escalating operating costs and potential increases in capital gains tax nudged more owners to make the decision to sell and take advantage of the market demand and record pricing,” said Lance Coulson, executive vice-president of CBRE national apartment group, in releasing the 2021 Annual Apartment Report for Metro Vancouver & Greater Victoria.

As of the end of last year, the average price per door of a Metro Vancouver rental apartment building hit an all-time high of $456,415 and had spiked to $530,980 in Vancouver’s West End and to $671,701 on the North Shore.

In Greater Victoria, prices per suite are $308,705, but are lower, at an average $260,758, in the City of Victoria, which accounted for more than half of the 48 apartment building sales in the capital region in 2021.

Vancouver has the highest average rent in Canada, with a one-bedroom apartment at $2,176 and the average monthly rent for a two-bedroom at $2,983, according to the December 2021 National Rental Report from Bullpen Research & Consulting. 

Victoria’s average rent for a one-bedroom home is $1,566 and average monthly rent for a two-bedroom is $2,453, third highest in the country, the report found.

Last year, 185 apartment buildings sold in Metro Vancouver and Greater Victoria for a total of $3 billion, up from $1.2 billion in 2020. Major institutional investors and real estate investment trusts accounted for 60 per cent of the 185 transactions. These big buyers are often seeking scale with the purchase of existing portfolios, according to CBRE.

An example is the 15-property, 614-unit Legacy portfolio in Vancouver that CBRE sold for $292.5 million in February 2021. The seller was Hollyburn Properties of Vancouver, which had owned most of the buildings for decades. The buyers were InterRent REIT of Ottawa and Toronto-based Crestpoint REIT.

While some tenants mourn the passing of local landlords, well-financed institutional owners can offer advantages to tenants, according to Coulson, who noted that the deeper pockets allow regular maintenance and upgrades in a region where the typical apartment building is 54 years old. Larger landlords with multiple properties are also better equipped to ride out rental income and renovation restrictions under B.C.’s Residential Tenancy Act. 

CBRE also noted that, despite rising immigration and political rhetoric, construction of new rental apartments is lagging population growth.

In 2021, only 6,269 new rental apartments were completed in Metro Vancouver, for example, despite an expected influx of 35,000 people moving into the region on average each year.

“The policy-based barriers restricting the development of new rental housing will continue putting demand on the rental market [and] continue to put downward pressure on vacancy rates and upward pressure on rents,” CBRE’s report concludes.

© 2022 Western Investor

New low-barrier REIT already owns Metro Vancouver land

Frank O’Brien
Western Investor

 For as little as $5,000, investors can share in projects backed by a veteran local developer holding 560 acres at 19 separate sites

For as little as $5,000, investors can share in projects backed by a veteran local developer holding 560 acres at 19 separate sites

Surrey-based Isle of Mann (IOM) Property Group launched a unique new real estate investment trust on Jan. 12, 2021.

Within 48 hours its PROPetual Real Estate Investment Trust (PROPREIT) had raised $750,000 linked to a 10-acre residential and retail development in South Surrey that will deliver 406 housing units and 30,000 square feet of commercial space.

Ravi Mann, president of PROPREIT, expects the entire offering to be quickly subscribed in a new investment format that, he says, has turned the REIT concept on its head.

“Historically, developers would present these opportunities exclusively to institutional or high-net-worth investors, with minimum investment in the hundreds of thousands of dollars, namely due to the high capital requirement and long-term nature of developing real estate projects,” Mann explained.

Instead, PROPREIT has established a low minimum investment starting at $5,000 in property developments that are already in process, most at final reading at city councils.

“We saw a gap in the market that required some innovation,” Mann said.

As an executive with the family-owned IOM Property Group, which began in 1994 and has developed dozens of residential and commercial projects across the Lower Mainland, Mann said a barrier for investors is the length of time it takes to get a project started and built.

“Ten years ago, a year was considered a long process.  These days you are lucky, very lucky, to get a big project through the pipeline in three years,” he said.

“We realized we had to relook at the whole model of how people invest in real estate.”

As a result, PROPREIT was established to provide investors with access to IOM’s steady pipeline of qualified, high-profile real estate development projects, which Mann said removed barriers to entry for retail and accredited investors alike.

“With the scarcity and difficulty of land development opportunities in Metro Vancouver, our vision was to provide an investment vehicle that afforded the same opportunities to anyone who is ready, willing, and able to invest in real estate,” Ravi said. “By leveraging the IOM pipeline of qualified land development, we believe PROPetual REIT will achieve this vision.”

The PROPREIT is eligible for registered savings programs, he added, such as RRSPs.

IOM has been buying raw land across Metro Vancouver for decades. It currently owns 19 development sites covering 560 acres, primarily in Surrey and Langley. According to Mann, who is also IOM’s director of finance and investment, the land is valued at $364.5 million.

IOM Property also owns 3,500 acres in Alberta’s Calgary region, but the original emphasis for PROPREIT is Metro Vancouver, Mann said.

Beyond the local land link, PROPREIT is different from most real estate investment trusts. It is private offering, not a public REIT listed on any stock exchange. And, unlike most REITs that rely on long-term lease income, PROPREIT acts more like a real estate limited liability partnership (LLP), with a share of profits and an exit strategy.

“The sole intention of this REIT is to sell everything it constructs,” Mann said. “This REIT is not retaining any income-producing properties,” he said, adding that IOM is planning an income REIT for the future.

Mann said the initial project, the 10-acre Sunnyside mixed-use development along busy 24th Street in South Surrey, is an example of how the REIT could pay off for investors.

The development involves 100 townhomes, 200 condominium apartments, more than 100 market rentals and 30,000 square feet of office and retail space.

Mann expects to get third reading and final approval on the project from Surrey Council in the first quarter of 2021. Last year, Surrey became the first B.C. municipality to guarantee timelines for development.

Mann estimates the the phased project will take five years to total build out. He said the strata townhomes and condos would be sold, while the residential rental buildings and commercial buildings would be packaged and sold as separate parcels, perhaps to an income-REIT.

Investors will receive a preferred 8 per cent per annum return based on how long they have participated and are paid before PROPREIT collects any management fees. PROPREIT then charges a sliding scale of fees based on the total returns, starting at 25 per cent for annual returns of 12 per cent. “If we knock it out of the park and each investor makes more than a 20 per cent annual profit, we’d collect 55 per cent.”

In typical real estate LLP offerings, investors are offered a preferred annual return of 8 per cent plus a 50-50 split on any profits above that.

“Whether you are investing $5,000 or $500,000, we treat everyone the same. We want the average citizen to become part of real estate opportunities, rather than just a passive observer,” Mann said.

© 2022 Western Investor