Sicamous, B.C., 41-pad manufactured home park sells for $3.3 million

Western Investor Staff
Western Investor

The park is on 6.56 acres and close to two lakes in the Okanagan, about a 4.5-hour drive from Vancouver.

 

William Wright Commercial, Langley, B.C., for Western Investor

 

Property type: Manufactured Home Park

Location: 501 Kappel Street, Sicamous, B.C.

Number of units (pads): 41

Land size: 6.56 acres (approx.)

Potential: Six more pads could be added

Sale price: $3.35 million

Brokerage: William Wright Commercial Real Estate Services, Langley, B.C.

Broker: Marianne DeCotiis

 

© 2022 Western Investor

Vancouver’s luxury real estate market returns to balanced conditions

Claire Wilson
Western Investor

After two years of ‘over-exuberance,’ the luxury market is seeing a slow down that represents a return back to normal
According to Sotheby’s, Vancouver’s luxury home market is experiencing balanced conditions this fall.Photo by priceypads.com.
Vancouver’s luxury real estate market is seeing balanced conditions after an era of “pandemic over-exuberance” that saw the most acceleration over the past two years, according to Sotheby’s International Realty Canada. 
According to its recent report, inventory for Canada’s luxury market evaporated during the third quarter of 2022, leaving demand with little promise of supply. Luxury sales in Vancouver over $4 million continued to decrease from historic highs with a 51 per cent year-over-year decline in July and August, while numbers from September indicate a decrease of 58 per cent from the previous year’s levels.
Despite this decline, the market is returning to a balanced place after two years of what can only be described as an “anomaly,” says Don Kottick, President and CEO of Sotheby’s. The “anomaly” years combined with rising interest rates, inflation and general market volatility is causing many buyers and sellers to remain on the sidelines. 
“I think what we’re gonna see over the next little while is some of those buyers and sellers are going to have to come off the sidelines due to the need, probably personal. And as this happens, I think we’re going to start to see inventory levels grow,” Kottick said. 
The report says that price and activity stickiness will prevail as buyers and sellers adjust to the market, despite the greater financial ability for luxury and ultra-luxury consumers to absorb the impact of rising rates and inflationary pressures. 
Overall, sales over $1 million were down 37 per cent year-over-year to 512 properties. Sotheby’s says that this is representative of the normalization that the market is seeing. 
The report also notes that while multiple offers on a listing is now rare, the homes that were priced competitively for the market saw success in selling. However, those that were not prices according to market conditions needed price reductions in order to get buyer interest. 
“With top-tier inventory remaining low in relation to the city’s strong undercurrent of housing demand, competitively priced properties in premier neighbourhoods have continued [to] attract bids, and on rare occasion, bidding wars,” the report said. 
Kottick says that while rising interest rates certainly have an effect on the market, they aren’t as detrimental in the luxury and ultra-luxury real estate crowd. 
“The one thing about the interest rate increases is that they really impact the first time buyer. That’s where you really take away the spending power of the consumer,” he said. 
Sotheby’s report says that as more sellers price their homes in line with market conditions and inventory levels begin to rise, prospective buyers will be more inclined to re-enter the market and overall activity will resume.

© 2022 Western Investor

Home building slumps as construction costs soar up to 30%, says CMHC

Shantae Campbell
The Vancouver Sun

Rising costs threaten to make housing affordability even worse

A big part of the decline in home construction was apartment starts which fell nine per cent in the first half of the year. Photo by Tyler Anderson/National Post
Canada’s metropolitan areas experienced a five per cent decline in housing starts in the first half of 2022 as construction costs soared and concerns about supply and affordability dominated debate.
The Canada Mortgage and Housing Corporation’s semi-annual Housing Supply Report attributed the decline in large part to a nine per cent decrease in apartment starts (including condominiums), which have accounted for almost two thirds of all housing starts in census metropolitan areas (CMAs) since January 2022.
The slowdown, which followed strong growth in 2021, was not felt equally across the country, with Edmonton, Calgary and Toronto experiencing an uptick in starts and Vancouver, Ottawa and Montréal posting declines.
Increases in construction costs were widespread, but also varied by market.
“Depending on the CMA, the cost of constructing a residential building had increased anywhere from 15 per cent to 25 per cent over the same quarter in the previous year,” the report found. Some centres even experienced successive increases of around 30 per cent over previous quarters.

Rising costs can complicate efforts to improve affordability, the agency said, because they end up reflected in the cost of units coming to market and the rents owners demand.
“This lack of predictability or control over costs can reduce the number of housing starts or the speed with which new housing units come onto the market,” the CMHC noted.
Eric Bond, CMHC’s Vancouver senior specialist and economist, said rising rents were a problem in B.C. markets.
“There is rent control for existing tenants in British Columbia but if that tenant was to move to a new construction, they are facing quite a change in their housing expenditures because they are, of course, going to pay market rent,” Bond said in an interview.
In Toronto, the cost of building towers, which are generally cheaper than lower-density building, has been accelerating, the agency said.

“We’re seeing the rising cost to build is also likely pushing the asking rents for new projects higher and that’s also kind of eroding affordability,” CMHC economist Dana Senagama said.
Home prices have risen sharply in many parts of the country in recent years, and the Bank of Canada’s interest rate hikes have made homeownership more difficult. Even condominiums have moved further out of reach cost-wise.
The environment has stimulated the construction of rental units, one category that saw consistent growth in starts across the country.
In June, CMHC concluded that the country would need to build 3.5 million new homes by 2030 to reduce its shortfall and improve affordability. Canada is averaging only 200,000 to 300,000 new units per year.

CMHC said the impact of these challenges will be felt most by units currently under construction and will affect the construction cost and time.
“I think we should all be worried about affordability,” Senagama said.
“I don’t think there’s many options if you’re looking to enter into ownership or even rental for that matter right now. The concept is prohibitive for many, so affordability is a key factor.”
Housing start data for September that was released separately Tuesday was a bright spot.
The annualized rate of housing starts jumped 11 per cent to 299,589 units for the month from 267,443 in August, reaching its highest monthly level since November 2021.

© 2022 Vancouver Sun

Scotiabank: Canada to see “technical recession” in 2023

Ephraim Vecina
other

This will particularly affect the Bank of Canada’s rate-hike trajectory, Scotiabank says

A potent combination of internal and external factors is likely to trigger a “technical recession” in Canada next year, according to Jean-François Perrault, senior vice president and chief economist at Scotiabank.

“Lower commodity prices, elevated uncertainty, lower equity values, and a weaker US are all acting as brakes on growth,” Perrault said.

Scotiabank is now expecting growth to slow from 3.2% in 2022 to 0.6% in 2023.

Read more: Bank of Canada sees worst drop in business outlook since 2020

This has serious implications on the central bank’s rate-hike trajectory, Perrault said.

“The Bank of Canada will need to tighten rates to 4.25% by the end of this year and keep rates at that level through much of 2023,” Perrault said. “This, along with weaker US growth, largely accounts for the negative revision to the outlook.”

This level is significantly higher than Scotiabank’s previous terminal rate forecast of 3.75%, an adjustment that is a reflection of “the fiscal support measures being rolled out domestically, as well as the impact of a rapidly depreciating Canadian dollar.”

“Both developments will put upward pressure on inflation, though we take comfort from the fact that there are some signs that inflation is moderating in Canada, in contrast to the US,” Perrault said.

Scotiabank pegged Canadian inflation to average 6.9% in 2022 and slow to 3.9% in 2023.

“The BoC’s inflation target is unlikely to be reached until 2024 and should mildly undershoot the target in the second half of 2024,” Perrault said, while also warning that “the global outlook continues to hinge critically on inflation.”

“If inflation shows no signs of moderation in the coming months, policy makers would likely need to engineer a great slowdown in economic activity to bring inflation under control.”

 

Copyright © 1996-2022 KM Business Information Canada Ltd.

Canada’s inflation rate falls again

Fergal McAlinden
other

September’s yearly price growth was still stronger than economists had expected

Canada’s annual rate of inflation was 6.9% in September, marking a third consecutive monthly decline but still coming in higher than most economists had anticipated.

The figure, reported by Statistics Canada on Wednesday, saw the consumer price index inch downwards from 7.0% in August, although economists had predicted ahead of the announcement that it would fall to 6.7% in September.

That surprisingly small decline seems to copper-fasten the likelihood of an oversized interest rate hike by the Bank of Canada next week, with the central bank having made no secret that reducing inflation is currently its overwhelming priority.

Read next: Scotiabank: Canada to see “technical recession” in 2023

Food prices continued to grow in September, jumping at an annual pace of 11.4% – the highest pace for over 40 years.

Gasoline prices are still around 13% higher than a year ago, although they continued to trend downwards, falling by over 7% in September and declining for a third consecutive month.

Inflation surged to a four-decade high of 8.1% in June, well above the Bank of Canada’s stated target rate of 2%. That’s been driven by a host of factors including supply chain snarls and geopolitical factors such as Russia’s ongoing invasion of Ukraine.

 

Copyright © 1996-2022 KM Business Information Canada Ltd.

Broad-based activity spurs Calgary investment sales higher in Q2

Peter Mitham
Western Investor

 

Multifamily deals underscored strength outside the office sector

Concert Properties Ltd. acquired 111 Lowes Road in Balzac, Alta., from Highfields Investment Group in April 2022 for $133.8 million.Concert Properties

An “astonishing” increase in investment transactions in the first half of 2022 had broad underpinnings in the second quarter, according to data released this week by Altus Group.

Commercial real estate investment surged to $3.73 billion in the first six months of the year, a 147 per cent increase versus 2021.

Deal-making was led by the office sector, where 21 deals accounted for $1.84 billion in transactions in the period, led by sales of the landmark Bow and Western Canadian Place office towers. Together, the two tower sales totaled $1.7 billion.

The activity trounced the $67.1 million worth of office transactions that took place a year earlier. With the two tower sales removed, office transactions totaled just $165 million, still a significant increase from the previous year but not exponentially greater.

The outsized impact of the two office sales was further underscored by more normal transaction volumes in the second quarter.

Office transactions fell back to $89.6 million on a volume of 10 deals, while total investment totaled $1.25 billion, double what changed hands a year earlier. Transaction volumes increased to 182 from 125 a year earlier.

Despite slowing in the second quarter, commercial investment was broad-based, with industrial and multifamily deals topping the rankings.

The strength of industrial isn’t unique to Calgary, with Edmonton also seeing activity in the sector pick up as vacancies fall and institutional investors reallocate funds to these assets.

“A resurgence of more traditional industrial uses have resulted in investors pursuing industrial assets not only within Calgary, but also in surrounding communities such as Airdrie and Balzac,” Altus reported.

Key deals include Concert Properties Ltd.’s acquisition of 111 Lowes Road, a newly built 1.2 million-square-foot warehouse and distribution centre in Balzac. Highfields Investment Group sold the property for $133.8 million in April 2022.

The deal, little more than a tenth of the size of the Bow transaction, was the largest deal of the quarter and highlighted the return to more normal activity. This was reinforced by the second-biggest industrial deal of the quarter, Anthem Properties Group’s purchase of 3201 Ogden Road SE, a 195,585-square-foot multitenant industrial building built in 2007, for $35.1 million from the Mancal Group.

Occupants of the property at the time of sale included long-term tenants Coast Appliances, Daltile and Steel-Craft Door Products.

But industrial space means jobs, and with the economy in Calgary and Alberta positioned for growth as commodity prices rise and new companies seek space in the province, multifamily rental properties are also attracting interest.

Buyers purchased $214 million worth of multifamily properties in the quarter, up 39 per cent from $154 million a year earlier.

“The investment dollar volume for multi-family residential in the second quarter of 2022 was the most recorded since the fourth quarter of 2018,” Altus reported. “Investors appeared to be taking note of the higher levels of net migration to Alberta that really started to accelerate in the third quarter of 2021.”

Colin Johnston, president of research, valuation and advisory at Altus Group, believes the multifamily sector may be the strongest element of the Calgary market given uncertainties in other areas of the economy.

“I still feel relatively bullish on purpose-built apartment buildings and multifamily. There’s such strong fundamentals there,” he said. “We’ve underbuilt apartment buildings for a decade, so we have a lot of catch-up to do, so the fundamentals remain strong.”

Strong growth in rents point to the resilience of the market. According to Rentals.ca and Bullpen Research and Consulting, the average one-bedroom rent in Calgary increased 29 per cent over the last year to $1,625 a month in September. A two-bedroom apartment increased 21 per cent to $1,895 a month.

Yet the city remained relatively affordable on the national scene, ranking 24th out of 35 cities surveyed.

The strength is attracting investors keen to reposition existing properties – most notably underutilized office space – for multifamily use.

“I think that’s a great opportunity to repurpose buildings that are not going to be competitive going forward, older B and C office buildings – into apartments, some of which will be more affordable,” Johnston said.

Andrew Petrozzi, director, commercial research for Western Canada with Altus expects the sector to benefit as investment continues to pour into industrial assets and others.

“While the focus of investors is expected to remain on industrial properties through 2022, positive migration trends will also likely drive investors to further consider the acquisition of apartment buildings and retail assets,” he said. “A slow shift in investor perceptions of Calgary appears to be underway and what remains to be seen is whether any economic or political upheavals could derail that progress.”

 

© 2022 Western Investor

Pace of housing starts surges 11% amid concerns of supply shortage

Shantae Campbell
The Vancouver Sun

Hits highest monthly level in almost a year 
Canada’s annual rate of housing starts jumped 11 per cent in September. Photo by Michelle Berg/Postmedia
Canada’s annual rate of housing starts jumped 11 per cent to 299,589 units in September from 267,443 in August, reaching its highest monthly level since November 2021.
Data from the Canada Mortgage and Housing Corporation released on Tuesday showed the rate of urban starts increased 12 per cent to 276,142 in the month while multi-unit urban starts surged 16 per cent to 216,549 units. The pace of urban starts of single-detached homes remained flat at 59,593 units.
Montreal, Toronto and Vancouver recorded large increases in multi-unit starts on a seasonally adjusted annual rate (SAAR) basis, which resulted in an overall increase in Canada, Bob Dugan, CMHC’s chief economist said in the report.

“An 85 per cent increase in single-detached units in Vancouver was offset by flat single-detached starts in Toronto and Montreal,” Dugan said, noting that starts remained elevated for the year.
Earlier this month, a CMHC report found Canada lacked the labour capacity needed to build the 3.5 million homes the agency says would be needed to restore housing affordability by 2030.

 

© 2022 Vancouver Sun

Edmonton investment sales rebound in first half of 2022

Peter Mitham
Western Investor

Slower times ahead but steady economy draws in buyers

Nexus REIT acquired 11250 189th Street NW, Edmonton, home to MTE Logistix, as part of a two-building purchase worth $91 million in the second quarter of 2022.MTE Logistix

Strong demand for industrial assets gave a lift to investment activity in the Edmonton market during the first half of 2022.

Recently released figures from the Altus Group show that total transaction value in the period was up 68% over the same period of 2021, totaling $1.7 billion on a volume of 424 deals. Deal volume was also up, rising 16% from 365 a year ago.

Within the second quarter itself, 249 transactions closed worth $1 billion.

The top three deals in the quarter all involved industrial assets or development sites.

These included Nexus REIT’s acquisition of 14711 128th Avenue NW and 11250 189th Street NW for $91 million. The two warehouses total 555,689 square feet on 24 acres. The largest of the buildings is occupied by MTE Logistix, a growing tenant that also signed the largest industrial lease of the quarter with a deal for 548,000 square feet in Apex Business Park to the north.

Real Capital Solutions Inc., of Colorado paid $86.1 million for 8351 McIntyre Road NW, 13503 149th Street NW and 1705 90th Avenue, a portfolio of three industrial buildings on five acres.

On the development front, Air Products Canada Ltd. acquired a 150-acre parcel at 13004 and 13104 33rd Street NE from North Industrial Carriers for $60 million, or $339,733 per acre. The site will be the location for its a multi-billion-dollar net-zero hydrogen energy complex it says will make Edmonton “the centre of Western Canada’s hydrogen economy and set the stage for Air Products to operate the most competitive and lowest-carbon-intensity hydrogen network in the world.”

The activity underscored strong demand for industrial space in Edmonton, where CBRE Ltd. reports that the industrial availability rate fell to 5.6% in the second quarter and have held steady despite additions of new space. This is down from 8.4% a year ago.

“Industrial assets in the Edmonton market were far and away the most sought-after by investors with almost $594 million invested in 142 properties in the first half of 2022,” reported Andrew Petrozzi, director, commercial research for Western Canada with Altus. “The first half of 2022 marked the strongest six-month period of investment in terms of dollar volume in Edmonton’s industrial market since at least 2013 and comprised 35% of overall sale proceeds.”

One major industrial asset that has not traded hands is Oxford’s CityView Business Park.

“The park contains approximately 1.5 million square feet across 16 buildings, with an overall average vacancy rate of 8.4%,” Avison Young noted in its second-quarter report. “This would constitute one of the largest industrial building sale transactions in Edmonton.”

Oxford says it has no further updates on the property.

The activity on industrial sites was driven by institutional investors shifting allocations away from office and retail towards acquiring industrial assets.

Petrozzi said the trend has playing out in all Canadian markets, but the expanding role Edmonton’s industrial market is starting to play beyond supporting the traditional needs of Alberta’s energy industry is generating fresh interest in investment there, too.

Nevertheless, Altus’s investor sentiment survey found that Edmonton was the second-least favoured market for CRE investment in Canada among investors. The only market less favoured by investors was Calgary.

Outside industrial, Edmonton saw strong growth in multi-family residential investment, which surged 178% in the first half of 2022 to $448 million versus $161 million a year earlier.

Altus reported that the multifamily sales added up the third-highest tally of the past decade, after $547 million in the first half of 2020 and $480 million in the first half 2018.

“The region’s status as one of the most affordable major cities in Canada, combined with improving employment prospects and the lower risk associated with apartment properties, has proven attractive to investors,” Petrozzi said. “Many such investors may see the potential to achieve greater returns through improvements in rents generated by existing multi-family residential properties.”

Altus expects the activity to continue through the remainder of the year, albeit at a slower pace.

“While the focus for investors is expected to remain on industrial assets, ICI land and multi-family residential properties, investment activity is anticipated to slow in the back half of 2022 as investors continue to process the wide range of potential risks threatening to stall decision-making,” Petrozzi said.

 

© 2022 Western Investor

Is there a shortage of homes in Canada?

Jonathan Russell
Western Investor

Factors that are affecting Canada’s housing crisis
While it has been common to blame Canada’s houses crisis on a shortage of homes, there are reasons to believe that is not the case. One thing that is certain is there is a lack of affordable housing. Here are some things you should know about Canada’s housing crisis and so-called home shortage.
Some would argue that there is not really a housing shortage in Canada, and that the housing crisis in this country is better attributed to speculation, rather than housing shortages. A recent BMO study found that there were enough houses for everyone, even when the housing crisis was at its height. The issue was that investors were purchasing extra properties with the hopes that the prices would rise.
And while it may be tempting to blame the issue on foreign investors, BMO’s research found that many Canadians purchased second and third properties, usually to rent them out or with the aim of flipping them for profit. The result of all this is a sustained rise in prices in a short period of time—or a housing crisis (or bubble).
While Canadian banks did facilitate the crisis, Bank of Canada polices such as low interest rates further precipitated the rush to purchase properties in 2020-2021. Commercial banks, meanwhile, were mainly responding to policies set by Canada’s central bank. Interest rates have increased since 2021 and commercial banks are required more and more to scrutinize buyers’ finances prior to approving mortgages, meaning it is unlikely that banks will, ultimately, cause a housing market crash.
Building more houses is not a solution—affordability might be
One of the major housing issues facing Canadians is that it is a basic human right and a commodity that people and entities profit from, according to a research paper released by the University of Waterloo’s urban studies department. For this reason, for-profit developers would be happy to build more premium-priced homes—it is where the largest profit margins are.
It is also why Canada’s housing market needs more affordable housing rather than simply more housing. Toward that end, some proposed governmental solutions include open-ended grants and subsidies for both homebuyers and homebuilders, who will build and attempt to purchase the homes dictated by the for-profit housing market. 
Another proposed solution is known as up-zoning, which would do away with zoning rules requiring that a recently demolished home be replaced by a single-family dwelling, to maintain the aesthetics of the neighbourhood. The proposal would encourage building more types of houses, including townhouses, laneway homes, triplexes, and low-level apartments. Some argue, however, that rather than helping low-income families find affordable housing, the practice of up-zoning instead resembles gentrification.
Factors that impact the housing market in Canada
While a shortage of housing in Canada has often been blamed for the housing crisis, that mentality is now being challenged. Housing affordability is also commonly viewed as being a major factor. Home prices outpacing wages by about 50% in the past seven years have been cited as another factor in Canada’s housing crisis, as have fluctuating interest rates.
The housing crisis is no longer a homebuyer’s problem
The housing crisis in Canada is no longer simply a homebuyer’s problem—it is becoming a major issue for homeowners as well. House prices in Canada have, for most of the last decade, been rising more quickly than incomes. For instance, home prices have risen nearly 50% more quickly than wages since 2015. That essentially means that over the last seven years Canadian homes have become even more unaffordable.
In 2022, however, home price gains have been reversing, with property prices falling from their February peak by 18.5%, or $150,000. While that may be better for homebuyers, particularly homebuyers hoping to enter the housing market, it is creating problems for homeowners, who are seeing their net worth drop. Plus, anyone who has a mortgage with an interest rate that changes, otherwise known as a floating mortgage, are facing rising interest payments, as well.
In other words, the housing crisis in Canada is not only a problem for first-time homebuyers who are being forced out of the market by skyrocketing prices—homeowners are also feeling the pressure due in large part to rising interest rates.

Copyright © 1996-2022 KM Business Information Canada Ltd.

Sim elected new mayor of Vancouver in a landslide vote

Frank O’Brien
Western Investor

Ken Sim, a novice politician, is the first Chinese-Canadian elected as mayor of Vancouver.

Ken Sim thanks supporters in his election victory speech Oct. 15 in Vancouver. | CTV screen shot

Ken Sim was elected the new mayor of Vancouver in a landslide vote October 15.

 A Vancouver businessman who had never held a political post, Sim received the majority of votes, with 47.93 per cent. Incumbent Vancouver Mayor Kennedy Stewart followed in second, with 16.68 per cent of the total votes.

Sim and his ABC Vancouver party have promised to hire 100 officers, 100 mental health nurses and reinstate the police school liaison program. ABC says it will support a VPD graffiti abatement program and wants police officers on patrol to wear body cameras.

Sim’s party says it will also create a task force to address the dramatic rise in anti-Asian, anti-Semitic and anti-Indigenous hate crimes.

Vancouver’s new mayor is the co-founder of Rosemary Rocksalt Bagels and Nurse Next Door.

 

© 2022 Western Investor