“The Unusual World of Pandemic Economics? ? Why BC?s Housing Market Remains Strong Despite COVID-19

Brendon Ogmundson
BCREA

Vancouver, BC – September 9, 2020. The British Columbia Real Estate Association’s (BCREA) latest Market Intelligence report, The Unusual World of Pandemic Economics, points to uneven job losses across sectors, an increase in many households’ rate of savings, swift government aid, a tighter-than-ever housing supply and low interest rates as the drivers behind BC’s 

recent housing market highs. 

“The COVID-19 recession has battered many sectors of the BC economy. However, looking at recent data in the housing market, it would be difficult to tell there was a recession at all,” says BCREA Chief Economist Brendon Ogmundson. “In a typical recession, we would see falling demand and rising supply, but this recession is anything but typical.” 

Previous BCREA forecasts
anticipated housing prices would return to the pre-COVID-19 baseline in early 2021. However, a surge of pent-up demand into an undersupplied market has prices at pre- COVID-19 levels well ahead of schedule. 

“Pandemic economics are proving to be very unusual. Many of the trends we are seeing are without precedent and significant uncertainty remains, but we are cautiously optimistic that this housing recovery will continue,” notes Ogmundson. 

   

Copyright © 2020 British Columbia Real Estate Association 

Home price increases: A temporary shock for Canadian buyers?

Kasi Johnston
Mortgage Broker News

The Canadian real estate market is recovering much faster than anyone predicted. The average price of a Canadian resale home in June was $539,000, up from 6.5% the year before, according to the Canadian Real Estate Association. Home sales in June rebounded by a further 63% compared to May, which is also 150% above where they were in April when the housing market went into a deep freeze because of the coronavirus pandemic.

These numbers are heavily influenced by sales in Greater Vancouver and the Greater Toronto Area (GTA), two of Canada’s most active and expensive housing markets. July was a record-breaking month for Toronto real estate sales, as more than 11,000 homes changed hands. The Toronto Regional Real Estate Board says average home prices were also up 16.9% with low-rise homes, with properties outside the downtown core being most popular.

At the start of the pandemic, economists expected the recovery of the housing market to take about 18 months, but remarkably, within three months, it went from a complete shutdown to normal volumes again.

“The supply and demand imbalance remains and is driving prices higher,” said Will Granleese, director at Antrim Investments. “There is still a shortage of supply of real estate in major cities. The federal government is pursuing its high immigration policy, with 350,000 to 400,000 new immigrants a year and all those people are still coming. As a result, we are seeing a shortage of space.”

Granleese believes this quick recovery is a temporary supply and demand shock, fueled by record-low interest rates. While new listings are increasing as more time passes, demand never waned throughout the pandemic creating a buildup that pushed prices upward. As we move into the fall and the economy continues to reopen, there are several factors that could contribute to a leveling out in pricing.

“There will be more houses for sale, combined with the fact that many of the government assistance programs like CERB and bank deferral programs are ending. There will be people that will simply need to sell. The rapid rise right now is temporary,” he said.

Rental trends

What has been slightly less surprising is the decline in rental rates seen across cities like Toronto and Vancouver. In both cities, rents hit another record month of declines with Toronto one and two-bedroom prices down 8.3% and 5.3%, respectively compared to July last year, according to PadMapper. Meanwhile, Vancouver’s one-bedroom rent fell 5.9% and two-bedroom rent dropped 10.3% year-over-year. As work and leisure travel completely halted due to the pandemic, and a lot of short-term rental properties were left sitting empty, rental supply began to flood the market. Granleese says once universities reopen, some of that demand will return, but in the meantime, if some of these condos can’t be rented, there may be some buying opportunity heading into 2021.

“Signs are pointing toward a slight softening in the condo market,” says Granleese, as realtors are reporting an increased interest in more square footage. “Young families may choose to move out of the urban core, but I think that demand will eventually return for short-term rentals, foreign students, and young people still working in the core. I don’t see people turning the lights off in downtown condos.”

Going forward

Drastic changes are more likely on the commercial side, with retail and office space under a lot of pressure to transform, according to Granleese. Rather than major structural changes, he says residential developers may choose to market properties differently, turning nooks or small closets into home office spaces.

With rates sitting at where they are and concern around instability of the commercial real estate sector, another potential outcome is the residential real estate market becoming more attractive from an investment standpoint. Granleese says the residential market may be viewed as a safe haven.

“Our rates are lower than they’ve been in years,” said Granleese. “When the pandemic hit, there were a lot of lenders that restricted their guidelines and loan to values dropped dramatically. At Antrim Investments, that didn’t happen; we took a more bank-like approach and we were comfortable with the market.”

As for permanent or longer-lasting changes to the housing market, he says it’s just too early to tell.

“What I can say is we’re going to continue to see borrowers do everything they can to make their mortgage payments, and we’re going to continue to see low levels of mortgage default in Canada, because housing has never been more important.”

 

Copyright © 2020 Key Media

Current recession exceeds BoC’s worst-case scenario ? wealth manager

Ephraim Vecina
Mortgage Broker News

This year, Canada has entered a recession that is at least as bad as the worst-case scenario predicted by the central bank last year, according to wealth manager Hilliard MacBeth.

In a recently released client note, MacBeth said that by every measure, the Bank of Canada’s adverse scenario in its 2019 forecast considerably outstripped any of the previous three recessions.

The central bank pegged the duration of a worst-case recession at seven quarters, GDP decline at 8.2%, peak unemployment rate at 12.6%, and home price contraction at 40.9%. Even the recession that stemmed from the Great Financial Crisis would appear benign in comparison, with a three-quarter duration, a 4.5% GDP drop, an 8.6% peak unemployment rate, and a 7.8% decline in housing prices.

MacBeth said that as of August, the ongoing recession has already exceeded the adverse scenario numbers for GDP drop and unemployment. Statistics Canada figures showed that real GDP declined by 8.2% as early as May, while peak unemployment reached 13.7% during the same month.

“Most observers expect that GDP will not recover to 2019 levels before 2022 or 2023, exceeding the seven quarters of recession parameter,” MacBeth said.

Fortunately, the situation so far has a silver lining.

“The last parameter, a decline in house prices of 40% is the only one that, so far, is not near the worst-case scenario model,” MacBeth said, adding that any major losses on the central banks would be because of consumer and business loans.

“According to BoC assumptions, very few Canadians would default on their mortgages, even with a 40.9% drop in prices.”

Nevertheless, MacBeth stressed that this recession will be “much worse” than anything the Canadian financial system has encountered before.

“Canadian banks are unprepared in their provisions for the size of losses that appear in an average recession, much less the more severe one contemplated by the BoC,” MacBeth said. “We can expect that as mortgage, credit card, business, and consumer loan deferrals start to expire in about one month, impaired loans will soar and in the next reporting cycle in late November, or perhaps in February 2021, Canadian banks will have to get more realistic about the severity of the current downturn and substantially increase their provisions.”

 

Copyright © 2020 Key Media

Current recession exceeds BoC’s worst-case scenario ? wealth manager

Ephraim Vecina
Mortgage Broker News

Arrears rate might double without deferral extension ? analysts

Ephraim Vecina
Mortgage Broker News

Canada’s arrears rate might double to a level higher than that seen during the Great Financial Crisis if mortgage payment deferrals aren’t extended, according to veteran markets observers Murtaza Haider and Stephen Moranis.

With the recent restarts, sustained support from the government and lenders can help speed up the recuperation of the national financial system, the analysts said.

“As the economic engine restarts, most full-time workers, who are more likely to be homeowners, are expected to be able to meet their financial obligations, including meeting housing and shelter costs,” Haider and Moranis wrote in their recent contribution for the Financial Post. “Hence, the majority of those who opted for mortgage deferral as a precaution, are expected to exit the program without going into arrears.”

The duo cited data from the Bank of Canada and Ryerson University, which indicated that without deferral extension, mortgage arrears might go high as 0.53% in Q2 2021, far outstripping the pre-pandemic level of 0.25%.

“Mortgage deferrals and other support measures have flattened the arrears curve,” Haider and Moranis said. “The six-month deferral deadline was set in March with considerable uncertainty about how long the recovery would take. Realizing now that the labour market recovery will take slightly longer, a prudent approach would be to try matching the expiry of deferrals and emergency benefits with the labour market recovery.”

 

Copyright © 2020 Key Media

B.C. rents can rise just 1.4 per cent after freeze ends

Glen Korstrom
Western Investor

Residential rental rate freeze ends in December but landlords will have to keep rental increases at low level into next year, province says

The B.C. government plans to end its freeze on rent increases starting in December, 2020.

Starting in 2021, landlords will be allowed to raise rents by a maximum of 1.4 per cent. The freeze on raising rents went into effect in March, and landlords are only able to raise the rent once a year, so the freeze on rent hikes did not help all renters, but impacted all landlords.

Any tenant who received a notice to increase rent that would have gone into effect after March 18 is allowed to pay their current rent until November, 2020, the B.C. government said in a statement on September 3.

B.C. landlords must provide tenants with three months’ notice using a notice-of-rent-increase form so the earliest that the new 1.4 per cent increase could kick in would be January, 2021.

Before 2018, B.C. landlords were able to raise rents by the rate of inflation, plus an additional 2 per cent This translated into a maximum 2.6 per cent increase in 2020, before the rent freeze came into effect.

B.C. landlords must provide tenants with three months’ notice using a notice-of-rent-increase form so the earliest that the new 1.4 per cent increase could kick in would be January, 2021.

The B.C. government removed the ability to add the extra 2 per cent rent hike in 2018 – a tweak that means that renters living in a $1,320-per-month apartment, which is the cost of the average two-bedroom rental unit in B.C., will save up to $317 in 2021, and people living in an average two-bedroom apartment in Vancouver will save about $420, according to the B.C. government. It said the end to the freeze on rent hikes enables property owners to make investments and repairs to maintain safe housing, while ensuring rent increases are moderate and predictable.

 

© Copyright 2020 Western Investor

Dr. Bonnie Henry issues last call for nightclubs

WI Staff
Western Investor

B.C. Provincial Health Officer Dr. Bonnie Henry announced that, effective immediately, all liquor sales in bars must end by 10 p.m., and all nightclubs must close

 

After more than 400 new cases of COVID-19 were confirmed in a four-day period across B.C., new restrictions on bars and restaurants have been put in place, while nightclubs and banquet halls have been closed entirely.

On September 8, Provincial Health Officer Dr. Bonnie Henry announced that effective immediately, all liquor sales in bars and restaurants must end by 10 p.m. Unless restaurants continue to serve a full menu, they must now also close by 11 p.m., but regardless, liquor service must end by 10 p.m.

Dr. Henry has also ordered the immediate closure of all nightclubs and banquet halls.

Additionally, a public health order has been put in place to ensure all music and television volumes in bars and restaurants must be kept to below “normal conversation” levels, in effort to keep patrons and staff from needing to raise their voice in establishments.

While the new orders have come into place Tuesday, Dr. Henry says there will be a “grace period” over the next day or two, to allow establishments to adjust.

These new restrictions come after 429 new cases of the virus were identified in the province since September 4, bringing the total active cases to 1,386.

Dr. Henry said these growing cases have been largely fuelled by the use of alcohol at private parties, nightclubs and other similar environments. She said we are now seeing these cases spill over into “other parts of the community,” and the government has been using many contract tracing resources related to these exposures.

After restaurants, bars and nightclubs were ordered closed to in-house dining back on March 20 due to the COVID-19 pandemic, they were allowed to reopen under certain measures in May, after new cases flattened out. Since late July, new cases have risen steadily, largely in the Lower Mainland. reported at several Kelowna restaurants and bars .

Three new exposure events were announced at Vancouver bars and clubs over the past few days. 

Dr. Henry says they are working to find a balance that will allow British Columbians to live with COVID-19 over “the next few months to a year.”

With files from BIV, Castanet

 

© Copyright 2020 Western Investor

Commercial rent relief extended one month

Emma Crawford Hempel
Western Investor

The federal government is extending the Canada Emergency Commercial Rent Assistance program for small businesses by one month.

 

The federal government announced September 8 that it is extending the Canada Emergency Commercial Rent Assistance (CECRA) program for small businesses by one month.

Deputy Prime Minister and Minister of Finance Chrystia Freeland and Minister of Small Business, Export Promotion and International Trade Mary Ng made the announcement, saying application deadlines will also be extended.

The program provides forgivable loans to commercial property owners who meet the required criteria. To qualify, businesses will have to have had at least a 70 per cent revenue drop for April, May and June. This will not need to be reassessed for July, August or September.

New and existing applicants are able to apply.

The forgivable loans cover 50 per cent of month rent payment for three to six months during the April-September period.

According to a government news release, the program has provided rent support thus far to 106,000 small businesses Canada-wide, which employ 994,000 workers, to the tune of $1.32 billion.

Those who have qualified so far will be able to apply soon for a one-month extension. 

B.C. Minister of Finance Carole James said, “As the CECRA program will be extended through the month of September, the Province’s emergency order protecting eligible businesses from being evicted continues. The restriction will remain in place for the duration of the federal rent assistance program.”

The Canadian government announced it will post more details on the extension on the CMHC website.

 

 

© Copyright 2020 Western Investor

Vancouver real estate: city staff note to developer seen to suggest land lift for controversial Broadway rental tower

Carlito Pablo
The Georgia Straight

On July 21 this year, Vancouver city council cast a close 6-5 vote to approve a rezoning application for a 28-storey rental tower.

The development site is at the southeast corner of West Broadway and Birch street, the former location of a Denny’s Restaurant.

About two years earlier, council enacted a comprehensive development zoning bylaw for the property at 1296 West Broadway.

This was to enable the construction of a 16-storey market rental tower with 153 housing units, and commercial uses on the lower levels.

The developer later returned with a new application, this time with the property addressed as 2538 Birch Street.

The company 1061511 B.C. Ltd (Jameson Development Corporation) wanted a taller building with more rental units.

It was now going to be a 28-storey rental tower, meaning an additional 12 storeys.

There will be a new total of 258 rental units, of which 22 percent or 58 units will be under the city’s  Moderate Income Rental Housing Pilot Program or MIRHP.

Among the materials considered by council in the second rezoning application was a July 9, 2020 memo by Gil Kelley, the city’s general manager of planning, urban design and sustainability.

In his memo, Kelley wrote that there is “no additional land lift generated by the additional height proposed under the MIRHPP application”.

“The costs to secure 22% of the residential floor space at below-market rates equates to the value of the additional storeys,” Kelley stated.

The Kelley memo was in response to a query by councillor Jean Swanson.

Because there is no land lift, or an increase in the value of the property, the developer does not have to make a community amenity contribution or CAC.

“By way of comparison, “ Kelley explained, “if the project was permitted to achieve 28-storeys at 100% market rental rates, the additional storeys would have generated a CAC of approximately $9 M[illion].”

“Therefore the costs to secure 58 MIRH units over 60 years at this location is $9 M,” Kelley continued.

The Fairview/South Granville Action Committee represents citizens who opposed the new rezoning.

The grassroots-based organization did not want a taller building, and preferred Jameson Development Corporation to proceed with its original 16-storey rental project.

One of the documents the Fairview/South Granville Action Committee secured through Freedom of Information was an email by Brian Lightfoot, a property development officer with the City of Vancouver.

The Lightfoot email dated January 14, 2019 was addressed to Tom Pappajohn of Jameson Development Corporation.

“Further to your recent conversation with Brian Sears, please find attached the City’s revised version of your proforma indicting the potentially far greater land lift that could be achievable from this proposed rezoning which would suggest a potential capacity to increase the provision of MIRHPP units,” Lightfoot told Pappajohn.

(Sears is another member of city staff.)

Ian Crook of the Fairview/South Granville Action Committee provided the Georgia Straight a copy of the Lightfoot email.

According to Crook, there seems to be “discrepancy” between what the Lightfoot email stated and the assertion to council of the Kelley memo.

“This begs the question whether council was given correct information by staff,” Crook said in a phone interview.

Crook said that he finds it “quite troubling” that councillors are being “told one thing, and when you actually get a chance to reflect on what you discovered through Freedom of Information reqest, they’re saying something entirely different to the developer”.

“So on the one hand, theyre saying to council there’s no landlift here, and on the other hand, ‘we reworked your proforma…and we think you can get far greater landlift’,” Crook said.

Most of the one-page Lightfoot email was redacted.

The Straight asked city hall for a phone interview with a staff member who can talk about the matter.

No interview was granted, but the city provided a written statement.

According to the city, the Lightfoot email was “in response to a pre-application enquiry proposing a higher density”.

“The actual form of development proposed had changed by the time the application was formally submitted, with lower density and fewer units,” according to the statement.

When asked to comment on the city’s response, Crook described it as “wrong”.

According to Crook, the Lightfoot email dated January 14, 2019, and which talked about a land lift, came after the developer’s open house in late 2018.

Crook recalled that the proposal at the time had “already been accepted into the MIRHPP Program with the 28 floor proposal in June 2018, and had a response to their rezoning enquiry in October 2018”.

The Fairview/South Granville Action Committee has yet to decide what to do next.

 

 

© 2020 VANCOUVER FREE PRESS. BEST OF VANCOUVER,

 

 

 

Prince Albert self-storage property sells for $4 million

NAI Commercial
Western Investor

Type of property:industrial

Location:RR2 Site 4, Comp 121, Prince Albert, Saskatchewan

Number of units: 298

Property size:41,890 square feet

Land size:5.34 acres

Zoning:M-industrial

List price:$4.75 million

Sale price:$4 million

Name of vendor:Secure Choice Storage

Name of buyer:Avenue Living

Dale of sale:August 4, 2020

Name of brokerage:  NAI Commercial, Vancouver

Broker:Ken Kiers

 

© Copyright 2020 Western Investor