Vancouver home buyers settle into the driver’s seat

Frank O’Brien
Western Investor

 

November sale and price data remains dismal, but Metro Vancouver housing market could be ripe for buyers right now, analysts say

Buyers should take advantage of “stuck” Metro market, some say. | Chung Chow

November housing sales and price data continued a downward spiral seen over the past seven months, with total transactions down 52.9 per cent from a year earlier and homes shredding more than 10 per cent of value since the spring price peak, according to the Real Estate Board of Greater Vancouver (REBGV).

Greater Vancouver sales in November were the lowest since 1967 and nearly 37 per cent below the 10-year average, while another increase in interest rate hike is expected December 7, the seventh from the Bank of Canada this year.

Yet, some claim to have seen the bottom of the Metro Vancouver housing market and that buyers should be taking advantage of today’s market because low supply and increased demand from population growth could soon push prices and sales higher.

“In our view, sales are likely at or near bottom with some downside risk if interest rates move higher than expected,” said Brian Yu, chief economist with Central 1 Credit Union, following the release of October sale data, which was nearly mirrored in November.

“Higher mortgage rates continue to price a large swath of buyers out of the market, but lower pre-approved rates, steady fixed rates and lower prices may be drawing some buyers back in. A strong provincial labour market and robust population growth are also supporting confidence,” Yu stated.

Kevin Skipworth, managing broker and partner at Dexter Realty, Vancouver, noted that some markets, including Vancouver’s Westside, North Vancouver and Richmond – where the sales-to-new-listing ratio hit 68 per cent in November – are seeing steady or rising sales despite a shortage of listings.

“This is more of a stuck market than a down market,” Skipworth said.” Buyers waiting for further price declines and sellers waiting for the next rise. In reality, at the rate we are going, flat will be the new up and down. So, if you are trying to plan your move around it being the right time based on market dynamics, don’t wait.”

“There is life creeping back into the real estate market,” he added. “Just don’t tell the Bank of Canada.”

The condominium market, which accounted for half of all the November sales, is also stronger than most suspect, according to Ben Smith, president of Toronto-based Avesdo, a software firm that tracks real estate data. He noted in a recent column in Storeys that price comparisons between pre-pandemic 2019 and today shows Metro Vancouver condos proved a solid investment, with price gains of up to 150 per cent for new units in the past three years.

“When reviewing recent data from the REBGV  it’s not difficult to be swept away by the descriptions of decreased year-over-year sales or lowered month-over-month prices. But industry insiders know that real estate – and new home development in particular – is a long game, and comparisons between astronomical mid-COVID-19 activity and today’s more typical market  simply can’t lead to reality-rooted conclusions,” Smith said.

“If you’re waiting for big price drops, they are unlikely to materialize, and you may just find yourself perpetually on the sidelines as the cost of housing continues to inflate … just like everything else.”

Still, it may take steely nerves for buyers to ignore the recent data.

The REBGV reports that residential home sales in the region totalled 1,614 in November 2022, a 52.9 per cent decrease from the 3,428 sales recorded in November 2021, and a 15.2 per cent decrease from October 2022.

“With the most recent core inflation metrics showing a stubborn reluctance to respond significantly to the furious pace of rate increases, the Bank of Canada may choose to act more forcefully to bring inflation back toward target levels,” said Andrew Lis, REBGV’s director, economics and data analytics. “While it’s always difficult to predict what the bank will do with certainty, this persistent inflationary backdrop sets up the December 7 rate announcement to be yet another increase.”

But Lis added that the extremely low supply –  new listings in November were down 24 per cent from a month earlier and 21 per cent lower than November 2021 – and the recent increase in immigration means “our market remains one demand surge away from renewed price escalation, despite the inflationary environment and elevated mortgage rates.”

Prices, meanwhile, are tracking lower but at a slow decline considering the dramatic year-over-year drop in housing sales.

The benchmark price for a detached house in Greater Vancouver is $1,856,800, down 1.7 per cent decrease from November 2021 and a 1.9 per cent decrease compared to October 2022.

The benchmark price of an apartment property is $720,500, a 3.5 per cent increase from November 2021 but down just 0.9 per cent  compared to October 2022.

Townhouse sales in November  totalled 281, a 54.2 per cent decrease compared to the 613 sales in November 2021. The benchmark price of townhouse is $1,027,900. This is a 2.7 per cent increase from a year ago and a 1.5 per cent decrease compared to October 2022. 

 

© 2022 Western Investor

Keltic closes on multimillion-dollar Burnaby land deal

Frank O’Brien
Western Investor

The site: A 1.8-acre land assembly in Burnaby’s Metrotown sold November 30 for more than $100 million. | Google Earth

Vancouver real estate agent Goran Bucan brokered two of the biggest real estate deals in Metro Vancouver this year, including the sale of an entire city block in Burnaby’s Metrotown that closed November 30.

The 1.8-acre site was purchased for “in excess of $100 million” under a share-sale agreement, according to Rachel Li Lei, CEO of Keltic Canada Development, the buyer.

The transaction of 4444 and 4488 Kingsway, Burnaby, includes an Esso gas station and a smaller adjacent lot, both of which had previously been purchased by Bosa Properties. Bosa acquired the Esso gas station from 7-Eleven Canada in 2018 for $24 million.

The entire 80,000-square-foot site is planned for a one-million-square foot residential and commercial development, which will now proceed under the new owner, Keltic Canada Development of Vancouver.

Bucan said the deal is linked to the earlier sale of Bristol Estates in Central Surrey, a 6.5-acre parcel purchased by Bosa Properties in July for $170 million and approved for approximately two million square feet of residential and commercial construction in five towers. Bucan facilitated the off-market deal during a five-hour meeting between Bosa and the vendor, Landmark Premiere Properties Ltd., which had spent four years getting the site rezoning and permits in place, the agent said.

In return, Bosa provided Bucan with the opportunity to sell its 1.8-acre Burnaby site, which Bosa had spent seven years on land assembly and planning.

“Bosa gave me 30 days to sell it, with an unconditional offer,” Bucan recalled.

He immediately pitched the site to Keltic Canada Development and two out-of-province developers. Less than a week later, Keltic accepted the offer and the multimillion-dollar unconditional sale closed at midnight on November 30.

Bosa’s plan for the property, at the corner of Kingsway Avenue and Willingdon Street in the Metrotown area of Burnaby, included two towers, with one potentially as high as 70 storeys, covering approximately one million square feet with 553 condos, 385 rental housing units, a 160-room hotel and commercial square footage. The maximum allowable density is 14.3 floor-space ratio (FAR).

According to Lei, Keltic may change the configuration to replace the hotel with more office and other commercial space, including a small grocery outlet and upscale restaurants.

Bucan, of Sutton Group Vancouver, also brokered the single largest commercial transaction in Metro Vancouver in 2021. That transaction involved the sale of a 27-acre property in Richmond to Keltic Canada Development for $300 million.

 

© 2022 Western Investor

Port Moody 14.8-acre land assembly closes at $157.2 million

Western Investor Staff
Western Investor

Assembly sale composes 56 detached-house lots in Coronation Park neighbourhood proposed for high-density mixed-used development

London Pacific Property Agents, Vancouver, for Western Investor

 

Property type: Development land assembly

Location: Coronation Park neighbourhood, Port Moody, B.C. 

Number of units: 56 (detached houses)

Land size: 14.8 acres

Sale price: $157.2 million (includes 3 lot sales that closed separately)

Date of sale closing: September 30, 2022

Buyer: Wesgroup Properties, Vancouver

Brokerage: London Pacific Property Agents Inc., Vancouver

Brokers: Grant Gardner and Thomas Trowbridge, assisted by Dean Andag and Jerry H. Lee.

 

© 2022 Western Investor

Growth-minded lenders tighten terms of new debt as costs rise

Peter Mitham
Western Investor

Multifamily, industrial lending poised to grow in 2023

Virtually all lenders say they want to grow their real estate loan portfolios in 2023, but just a few key sectors are the focus as borrowers eye rising interest rates and development plans stall.

According to a national lender survey undertaken by CBRE Ltd. this fall and released Nov. 28, 93 per cent of lenders expect to grow their loan portfolios in 2023.

“Relative to last year, however, the pressure to put out more money has been dialled back,” Carmen Di Fiore, executive vice-president, debt and structured finance with CBRE, said in an online presentation of the report’s findings this week.

A year ago, 67 per cent of lenders expected to increase their allocations to real estate, while this year just 21 per cent intend to do so. The survey spoke to 29 companies managing more than $200 billion in loans.

Vancouver is the top market for investment in Western Canada, with 82 per cent of lenders voicing strong or moderate interest in lending here. Victoria ranks second at 45 per cent while Winnipeg is in third with 37 per cent of lenders expressing strong or moderate interest.

The focus for lenders is the tech sector, especially data centres and life sciences, two smaller segments of the market in Canada where lenders feel under-allocated. CBRE’s lender survey indicates 56 per cent of lenders want to grow their business in these areas.

But in terms of volume and potential, much of it anchored by the sector’s fundamental stability, are multifamily properties.

With high homeownership costs making rental a more attractive option, and rents general rising in step with household income, lenders feel confident lending on these investments. It ranks as the sector of lowest concern among lenders.

“With the winds of a recession circulating, lenders will lean on the multifamily sector for growth next year,” Di Fiore said, noting that 54 per cent expect to increase exposure to the sector in 2023.

Logistics and warehousing is close behind, maintaining a solid position in terms of perceived risk among lenders. Approximately 36 per cent of lenders anticipate increasing their exposure to the sector in 2023.

Tech, multifamily and industrial lending is not expected to be pared back, according to responses to the CBRE survey, unlike for every other asset type.

Hardest hit by the retrenchment as recessionary influences hit is Class B office space, the top-ranked sector for lender concern.

This is driving retrenchment among lenders, 59 per cent of whom plan to reduce exposure to the office sector. The skittishness is on par with the depths of the pandemic, as questions about the death of the office made the rounds. With the latest office development cycle ending and the persistence of hybrid work arrangements becoming clearer, lenders have become more cautious.

“The path to renewed debt availability for office will progress as follows: firstly, increased office attendance is needed,” Di Fiore said, adding that vacancies will also need to come down.

“Short of developing a fully pre-leased, credit-tenant office deal, the chances are very slim lenders will entertain any new construction requests,” he said.

A significant slide in confidence also hit land deals.

“Last year, only 17% had concerns, this year almost 52 per cent of lenders are raising their eyebrows when dealing with land financing requests,” Di Fiore said.

The old saw, “Buy land, they’re not making any more of it,” has shifted for lenders, Di Fiore said.

“This year, lenders are responding, ‘Don’t buy land, because we’re not lending as much on it,’” he said, with survey results indicating 28% of lenders are looking at reducing exposure.

This is noted in not only greater concern in single-family building sites but also condos, despite a generally more favourable outlook for high-density development sites.

While demand for housing is strong, supported by higher anticipated immigration under new federal targets, construction cost inflation and interest rates are having a significant impact on proformas.

“The condo market could see a slowdown based on the changing arithmetic,” Di Fiore said.

CBRE’s survey indicated 39 per cent of lenders will want to see greater deposits while 28 per cent want to see presale assignments curtailed to ensure the stability of presale contracts.

“A tightening in underwriting is on the way,” he said. “The single biggest change coming is that 67 per cent of lenders will require greater equity in projects going forward.”

But industrial deals appear to be largely immune to the skittishness, thanks to strong demand for logistics and warehouse space and few opportunities for developers, investors or occupiers.

“The parade towards industrial will continue,” he noted. “Lenders have no designs on lightening exposure.”

 

© 2022 Western Investor

North Van 6,907 square feet of retail sells $400K over assessed value

Western Investor Staff
Western Investor

The modern, prime two-storey package, on 0.16 acres in Edgemont Village, traded at $5.3 million in a deal closing November 30.

Macdonald Commercial, Vancouver, for Western Investor

 

Property type: Retail

Location: 3012 Edgemont Boulevard, North Vancouver, B.C.

Size of property: 6,902 square feet

Size of lot: 7,212 square feet

Lot size in acres: 0.165 acres

Zoning: C-1 (General commercial Zone 1)

BC Assessment value: $4.9 million

List price: $5.7 million

Sale price: $5.3 million

Date of sale: November 30, 2022 (closing)

Brokerage: Macdonald Commercial, Vancouver

Broker: Sam Emam

 

© 2022 Western Investor

RBC to purchase HSBC Bank Canada

Fergal McAlinden
CMP

The mega deal is the largest ever reached between two domestic banks in this country

Royal Bank of Canada (RBC) has struck a deal to buy HSBC’s Canadian unit for $13.5 billion in cash, the largest ever agreement between two domestic banks in Canada.

The transaction is expected to close in late 2023 subject to regulatory and government approvals, with the move set to solidify RBC’s status as the country’s biggest bank. HSBC has around 130 branches and 4,200 full-time employees in Canada with $134 billion in assets, but has been seeking to shed its Canadian unit in recent times following a strategic review.

The move will incur acquisition and integration costs of around $1 billion, according to RBC, with the company also set to purchase HSBC’s preferred shares and subordinated debt for just over $2 billion. It’s expected to generate around $740 million in cost savings before tax for RBC.

In a statement released on Tuesday, RBC chief executive Dave McKay indicated that the acquisition would give the company the opportunity to add a complementary business and client base in a familiar market while also allowing it to further its client value and potential for strong returns.

“This also positions us as the bank of choice for commercial clients with international needs, newcomers to Canada and affluent clients who need global banking and wealth management capabilities,” McKay said. “It will help us better serve global clients looking to invest and grow in Canada.”

HSBC Group CEO Noel Quinn said that the company’s review had assessed its relative position within the Canadian market, and decided that there was a “material value upside” to selling the business.

“The deal makes strategic sense for both parties, and RBC will take the business to the next level,” he said. “We look forward to working closely with RBC’s leadership team to ensure a smooth transition for our clients and colleagues.”

Quinn added that closure of the transaction would free up additional capital to invest in growing the company’s core business and return to its shareholders.

 

Copyright © 1996-2022 KM Business Information Canada Ltd.

What will the impact of the current interest rate hikes be?

Ephraim Vecina
CMP

Former BoC head outlines possibilities

The full impact of the central bank’s rate hikes have yet to manifest, Stephen Poloz says

The Bank of Canada’s interest rate hikes have yet to reveal their full impact on the financial system, and are likely to be “even more powerful” than expected, according to the central bank’s former governor Stephen Poloz.

In a speech at Western University’s Ivey Business School in Ottawa, Poloz said that the hikes might have a less than desirable interaction with mounting debt levels.

“I think that the actions that are being taken to get us there will turn out to be even more powerful than a lot of people think,” he said.

Read more: What happens to Canada’s inflation next?

Poloz is anticipating inflation to ease to around 4% amid growth deceleration in metrics like commodity prices. As of October, Canada’s annual inflation rate stood at 6.9%.

The central bank’s hikes, which began in earnest in March, are widely expected to have a chilling effect on the national economy – particularly since it has become especially sensitive to interest rate movements, Poloz said.

“Does anybody here think the sensitivity of the economy to interest rate movements is less today than it was five or 10 years ago?” he said. “I think it’s more sensitive today than it was before.”

When asked if the BoC’s hikes have become overkill, Poloz responded, “It’s impossible to say.

“It takes a long time to actually slow down and so you stand on the brake really hard. Well, then you’re going to cause an accident too.”

 

Copyright © 1996-2022 KM Business Information Canada Ltd.

Port Kells 2.29-acre industrial site sells for $15.3 million

Western Investor Staff
Western Investor

Industrial land was listed as the market began to shift downward, agents say, which caused a mid-launch strategy adjustment to a successful sale at $6.7 million per acre in the Port Kells area of Surrey, B.C.

Frontline Real Estate Services, Langley, for Western Investor

 

Property type: Industrial land

Location: 10202 177A Street, Surrey, B.C.

Land size: 2.29 acres

Date of sale: October 6, 2022

Sale price: $15.34 million

Brokerage: Frontline Real Estate Services, Langley, B.C.

Brokers: Todd Bohn, Alex Girling and Braydon Hobbs

 

© 2022 Western Investor

Avison Young highlights GTA commercial market’s Q3 performance

Ephraim Vecina
CMP

New report pinpoints market’s strengths and challenges

Deviations from market trends established earlier this year were observed

Activity in the Greater Toronto Area commercial real estate market slowed during Q3 2022 following a strong first half, according to Avison Young.

In its latest market report, Avison Young cited elevated interest rates and ongoing economic uncertainty as the main drivers of deceleration.

“Many of the transactions that closed during the third quarter were negotiated in earlier months, and the market is expected to undergo a period of adjustment as stakeholders seek a new equilibrium in the current economic landscape,” Avison Young said.

Industrial property continued to be the region’s top commercial asset class in terms of dollar volume, amounting to roughly $1.4 billion during the third quarter.

ICI land clocked in at $1.2 billion in investments during Q3, followed by multi-residential ($699 million), retail ($694 million), and office ($536 million) investment activity.

Read more: Avison Young: Office market dynamics have significantly evolved in the largest cities

“Through three quarters of the year, total investment volume of $18.5 billion already exceeds all previous full-year totals except 2021 ($23.5 billion),” Avison Young said.

“However, the decline in activity during the second half of the year indicates that result is unlikely to be repeated in 2022. Cap rates are still compressed by historical standards, but the GTA average for all asset classes increased 20 basis points (bps) quarter-over-quarter to 4.3% – the highest level since 2017.”

 

Copyright © 1996-2022 KM Business Information Canada Ltd.

2023 Canadian Mortgage Awards building connections

Fergal McAlinden
CMP

Attending the prestigious gala event opens up a host of possibilities, 2022 winner says

The Canadian Mortgage Awards (CMAs) are set to make their return for 2023, with Toronto’s Westin Harbour Castle to host the prestigious awards gala on April 20.

Nominations are open until January 13 for the much-anticipated annual event, which will see mortgage professionals from across the country come together to raise a glass to the industry’s best and brightest.

After two years being staged virtually due to the COVID-19 pandemic, the CMAs made their triumphant return this year as an in-person event – and one of the winners from 2022 told Canadian Mortgage Professional that the value of a live ceremony couldn’t be emphasized enough.

“In person to me is always the way to go,” said Reaza Ali (pictured top), broker relations manager for Eastern Canada at Fisgard Asset Management and winner of the 2022 CIMBC Award for Lender BDM of the Year (Private Lending).

“Even prior to winning the award for the first time back in 2016 and then each year being the nominee, I found it a great opportunity to connect with people that you may not necessarily always have the opportunity to connect with.”

Opening up opportunities

Winning an award at the CMAs can also represent a significant career boost, Ali added, potentially opening up new doors in the industry and elevating a winner’s status with peers and colleagues.

As a networking event, meanwhile, the CMAs offer the chance to rub shoulders with counterparts and other industry figures, and lets mortgage professionals “have conversations with some other executives that you may not have had the opportunity to within other organizations,” Ali said. “In-person is a definite advantage for that.”

For winners, the moment of hearing their name called out in a venue packed full of industry peers is one that lives long in the memory. For Ali this year, it was a “true surprise,” he said, even despite having already been named an Excellence Awardee in 2016.

“I did not expect that this year,” he said. “We had quite a field of nominees, all well deserving. When they did call my name, I was very surprised and happy with that. Standing in front of everyone, they probably saw it on my face. I had a big smile the whole night.”

Winning a CMA is an affirmation of years of hard work that for Ali reflected the strong effort he had put into not only developing strong relationships with broker partners, but also industry partners for Fisgard.

 

There’s no secret recipe to actually win an award – but Ali pinpointed some of the things he had focused on this year, namely focusing on service levels and setting as high a standard as possible in that area of the business.

“We may never always be the best priced, or may not have all of the product suite that others may have in our niche areas,” he said. “But that relationship-building and top-of-mind service was critical. I found as the entrants into this industry and into our space of the industry escalated, the competition became that much greater.

“So to me, the service was critical to be able to maintain, and actually exceed, all the goals that we set for ourselves.”

How to get involved

Nominating for the leading independent awards program in the industry is straightforward and free. Just click here to select the category you wish to submit an entry for, and follow the directions to enter your details and those of your nominee with a brief reason of why the nominee deserves to be recognized in that category.

Award categories are divided into brokerage awards, lender awards, industry awards, and broker awards, with the latter series including the prestigious Broker of the Year (Regional) and overall Broker of the Year gongs.

Industry awards include the Service Provider of the Year, Woman of Distinction, Excellence in Philanthropy & Community Service, Mortgage Industry Employer of Choice, and Lifetime Achievement in the Mortgage Industry categories.

Excellence Awardees are set to be announced across CMP’s online channels in February, and final winners will be revealed at the celebratory awards show and profiled in CMP magazine.

Attending the prestigious gala event opens up a host of possibilities, 2022 winner says

Remember – you have until January 13 to get your nominations in for what promises to be one of the most unforgettable nights in the Canadian mortgage industry calendar in 2023.

 

Copyright © 1996-2022 KM Business Information Canada Ltd.