$15m funding announced for more BC housing supply

Ephraim Vecina
other

A new affordable housing complex is set to arise in Gibsons, BC

Federal and provincial governments have announced an investment of over $15 million to construct a new tranche of affordable rental homes in Gibsons, British Columbia.

The funding, which will go towards the development of a four-storey housing complex offering 40 affordable rental homes at 571 Shaw Road, is a joint effort between the government of Canada (through Canada Mortgage and Housing Corporation), the BC government (through BC Housing), the Gibsons municipal government, and the Sunshine Coast Affordable Housing Society (SCAHS).

“The homes include a mix of bachelor, one-, two- and three-bedroom units, with nine units completely accessible and the remaining 31 adaptable to suit individual needs,” CMHC said.

Read more: BC to replace Mortgage Brokers Act with new legislation

“This project goes back eight years to when [Gibsons] council partnered with an earlier incarnation of the Housing Society to identify town land for affordable housing,” said Mayor Silas White. “We are grateful to the Society for their perseverance, and to BC Housing and the federal government for making this vision happen. These units will make a significant impact on our community.”

The Sunshine Coast Affordable Housing Society will own and operate the project. Construction is slated for completion by fall 2023.

Copyright © 1996-2022 KM Business Information Canada Ltd.

Cadillac Fairview, Hopewell acquire 146-acre Calgary industrial park

Western Investor Staff
Western Investor

Joint venture eyes future development of 2.3 million square feet of industrial at the Rosemount Business Park in Balzac

Cadillac Fairview (CF), of Toronto, has announced the purchase of the 146-acre Rosemont Business Park in Balzac, Alberta through a joint venture with Calgary-based Hopewell Development LP (Hopewell) for an undisclosed price.

The business park site is close to the Calgary airport in the Balzac Industrial sector and will be developed into 2.3 million square feet of industrial gross leasable area, according to a Cadillac Fairview-Hopewell joint statement issued November 7.

CF and Hopewell confirmed plans for the construction of up to five buildings, occupying 45 per cent of available land area and featuring 40-foot clear height, to be built in phases between 2024 and 2029. The project is aimed at the distribution and logistics industrial sector.

“The Rosemont Business Park is attractively situated in a high-potential market area, served with solid transportation links,” said Wayne Barwise, executive vice-president of development for Cadillac Fairview, in the announcement. “Major players such as Walmart, Sobeys and Home Depot all have distribution hubs nearby and Calgary is emerging as a robust-growth, up-and-coming market for key logistics uses, with limited inventory available in the foreseeable future to meet increased demand.”

Calgary could welcome the new space. The Calgary region now has a tight industrial vacancy rate of 2.2 per cent, according to Colliers, and lease rates increased to an average of $11.65 per square foot, as of the third quarter of 2023.

Financial details of the purchase have not been released, nor has information about the structure of their partnership. 

© 2022 Western Investor

B.C. home sales to fall a further 11.4 per cent in 2023: BCREA

Frank O’ Brien
Western Investor

Real estate association forecast says record-setting market is “unwinding”

British Columbia home sales will fall 34.4 per cent this year from the record-setting pace of 2021 and stumble down a further 11.4 per cent in 2023, according to the most recent forecast from the BC Real Estate Association (BCREA).

The factors that led to unprecedented sale and price increases since the pandemic began two years ago are “unwinding” said BCREA Chief Economist Brendon Ogmundson.

Record low mortgage rates and a buyer preference for extra space, which helped drive sales higher across the province, have collided with six interest rates hikes so far this year as the government tries to tame high inflation.

“As a result, there has been a significant shift in the housing market, which we anticipate will continue through 2023,” Ogmundson added.

The BCREA released its 2022 Fourth Quarter Housing Forecast November 8. Multiple Listing Service residential sales in the province are forecast to decline to 82,345 units this year and fall to 72,960 next year. This is down from 124,800 transactions in 2021 and nearly 100,000 in 2020.

“With continued high-interest rates and what looks like a difficult 2023 ahead for the Canadian economy, we anticipate that market activity is going to fall below normal levels next year. On the supply side, slow sales activity has led to an increase in inventory, but from record lows,” the BCREA forecast noted.

The average price of a home in B.C. will increase 4.6 per cent this year to $970,000 compared to a year earlier, but prices are already down about 12 per cent from the peak in February of 2022.

The average B.C. home price will decline a further 5.4 per cent to $917,900 in 2023.

In Greater Vancouver, the composite home price will drop 5.2 per cent to just over $1.16 million, while the Fraser Valley will see the biggest year-over-year decline, at 7.8 per cent, to an average home price of $959,200 in 2023, according to the BCREA.

© 2022 Western Investor

B.C. hotel operators hopeful after successful season

Peter Mitham
Western Investor

Despite labour shortages, cost pressures and a still-slow conference trade, rising occupancies and revenues point to a “remarkable recovery “

 Most B.C. hotel sales this year are in outlier markets, such as the Kanata Hotel & Conference Centre, Kelowna, which sold in June for what is said to have been a record price for the Okanagan. | Submitted

A wildly successful tourism season has Western Canadian hoteliers looking to build on the lessons of the past three years as a recession looms.

Occupancies rose 60 per cent nationally in the nine months ended September versus a year ago, pushing average daily room rates to $183.76, or 34 per cent above last year. This boosted revenue per available room (RevPAR) to $110.11, up 113 per cent versus a year ago.

“It’s been a remarkable recovery, and for us it’s been right across the country,” said Brian Leon, CEO of Choice Hotels Canada, speaking at the Western Canada Lodging Conference in Vancouver on October 25. “We’re going to end this year with RevPAR probably a little more than 10 per cent higher than it was in 2019. We would never have expected that.”

Vancouver led the country, with an average occupancy rate of 70.3 per cent in the period. Room rates followed suit, rising 49 per cent to a nation-leading $243.72 a night. RevPAR increased a stunning 153 per cent to $171.34 from just $67.69 a year earlier despite ongoing border closures.

“This market has really seen great recovery over the past year,” said Jim Chu, executive vice-president and chief growth officer of Hyatt Hotels Corp. “And that’s without China.”

The strength of demand in Vancouver stands out next to Calgary, where hotel performance continues to lag Western Canada. Occupancies averaged 57.1 per cent in the first nine months of 2022 while room rates are also below average at $153.63 a night. This compares to 62.5 per cent occupancy in the same period of 2019 when rates averaged $145.92.

RevPAR in most major markets has yet to return to pre-pandemic levels but hoteliers have also reopened with an eye to keeping costs in check. Shorter wine lists, smaller menus, and offerings tailored to visitors  – primarily leisure and group stays – have been critical.

“A lot of job-sharing, a lot of engineering of processes and tasks” took place, said Jiri Rumlena, president of SilverBirch Hotels & Resorts, which saw its workforce fall to 18 per cent of normal during the pandemic. It rebuilt its staff to 80 per cent of normal this summer, but guest experiences took longer to recover.

“Standards didn’t come back in certain areas as they normally should have,” Rumlena acknowledged.

Labour woes

While consolidation of roles has helped address the labour shortage, and cutbacks in housekeeping helped control costs, Cindy Schoenauer, vice-president, hospitality and gaming with Cushman & Wakefield, isn’t sure it’s a strategy for long-term success.

“I don’t know if that’s something hotels want to keep doing because at the same time you’re talking about really rapid [room rate] growth,” she said. “There needs to be value to what you’re paying as well.”

The sector’s revival should be good news for workers after two years of turmoil.

“We’re not blind to the fact that the entire hospitality industry, ski included, have been in the forefront of media over the past two years and the basic narrative has been lack of stability,” said Christopher Nicolson, CEO of the Canada West Ski Areas Association, based in Kelowna. “As stability returns, that will definitely help recruiting as well.”

It won’t be easy, though. The sector was down 400,000 workers during the pandemic but recouped about 200,000 people this summer before returning to a deficit of 300,000 workers this fall.

While the federal Temporary Foreign Workers program has been tweaked to allow the sector to bring in up to 30 per cent of the workers it needs, the sector needs to continue working to secure domestic workers.

“We have to get out and tell our story,” said Susie Grynol, president and CEO of the Hotels Association of Canada.

Part of that story is that 90 per cent of hoteliers increased wages this past summer to attract workers.

“We want to be the sector people want to work in,” she said.

“We’ve seen leisure recover, but we have yet to see corporate [incentive travel] and meeting, conference group demand recover,” Schoenauer added. “It’s started, it’s just taking a little longer.”

Asset sales

Leon believes this year’s recovery will support fresh investment in properties that will improve the guest experience and position hotels for the future.

“Our hotels this summer, from a financial perspective, are in a lot better shape than they were a year ago,” he said.

The market is also benefitting from the removal of 6,800 rooms, primarily older product, since 2020, when governments stepped in at the onset of the pandemic to snap up properties for alternative uses, primarily social housing.

“You have rooms coming out that’s going to help our recovery,” McCluskie said.

However, with urban hotel markets still challenged by a lack of business travel, many of the 15 sales seen in B.C. this year have been in smaller, secondary markets outside the main centres. An example is the Kanata Hotel & Conference Centre in Kelowna, which sold this year for what is said to be highest price paid for a hotel in the region.

Just one hotel property changed hands in Vancouver, that was not purchased for redevelopment or an alternative use.

© 2022 Western Investor

Douglas Todd: Luxury homeowners in Metro Vancouver pay low income taxes, says UBC study

Douglas Todd
The Vancouver Sun

Analysis: The owners of Greater Vancouver homes with a median value of $3.7 million pay income taxes of just $15,800 – which is exceedingly low for North American cities

UBC’s Paul Boniface Akaabre, Craig Jones and Tom Davidoff have produced a research paper about the prevalence of low income-tax payments among owners of expensive homes in Vancouver and Toronto. Photo by Arlen Redekop /PNG

The owners of Greater Vancouver’s expensive homes tend to pay a “tiny” amount of income taxes relative to their wealth, according to a new study by University of B.C. specialists in business and planning.

 

The owners of Vancouver-area homes with a median value of $3.7 million pay income taxes of just $15,800 — the lowest correlation of property values to income tax contributions of any North American city, concludes the analysis by UBC’s Tom Davidoff, Paul Boniface Akaabre and Craig Jones.

The authors suggest it could be “politically popular” to impose a minimum income tax on the owners of the most pricey homes in Canada. In Greater Vancouver alone, they calculate, a minimum surcharge would bring in $3 billion annually in income taxes. The payoff from Greater Toronto would be at least $2 billion.

The UBC report, titled The prevalence of low income-tax payments among owners of expensive homes in Vancouver and Toronto, states that, “Most luxury homes in Greater Vancouver appear to be purchased with wealth derived from sources other than earnings taxed in Canada.”

Their research builds on peer-reviewed work by former Simon Fraser University prof. Josh Gordon, who found that home prices in Metro Vancouver began “decoupling” from local incomes between 2011 and 2016, in part due to increasing foreign ownership. Gordon’s findings, along with those by Rhys Kesselmen and the late real-estate analyst Richard Wozny, encouraged the B.C. NDP to bring in the speculation and vacancy tax.

“Canadian governments have revealed through their policy choices a preference that homes be occupied by Canadian taxpayers,” according to the UBC report. “B.C.’s speculation and vacancy and foreign buyer taxes punish homeowners who are neither landlords nor regular residents, and the speculation tax also targets homeowners who earn most of their income outside of Canada.”

In an interview, Davidoff said, “It is not clear to me that the source of untaxed wealth matters much. … (But) as we cannot rule out outside-of-Canada wealth as a source of our peculiar tax-paid/property value relationship, I suppose to the extent this would be an important question for tax authorities, there is more that could be done prior to implementation. With more access to confidential data, perhaps students and investor immigrants could be compared to the larger pool” of owners of costly properties.

The study, which is to be published in The Canadian Tax Journal, refrains from recommending a specific tax rate. But the authors calculate, based on the “reasonable, if arbitrary” idea that if one per cent of a property’s assessed value was paid in income taxes, it would mean inhabitants of a $4-million home would need to pay a minimum $40,000 a year to the Canada Revenue Agency.

 

The authors concluded, based on their study of 2016 census data, that the majority of super-expensive homes are not owned by retired people who were lucky enough to buy early and just watch the value of their house grow over the decades.

The researchers employed methods to determine whether “Vancouver’s odd pattern of income in property value can be explained by the presence of long-time owners who were able to buy in at low prices with modest incomes. The answer to that question is clearly, ‘No.’” Regardless, the paper recommends giving many retired homeowners an exemption from its suggested tax.

A portion of Vancouver mansion owners, such as B.C.-based billionaire Chip Wilson, founder of Lululemon, would likely “pay incredibly high” income taxes in Canada, Davidoff said. But, based on median values, Canadian Housing Statistics Program data from 2018 showed the largest cohort of high-end owners do not pay significant income tax.

 

Davidoff, a business professor at UBC, Akaabre, a PhD candidate in UBC planning, and Jones, associate director of UBC law school’s Housing Research Collaborative, worked closely with Statistics Canada staff members Wendy Kei, Josh Gordon, Jean-Phillippe Deschamps-Laporte, Haig McCarrel and others to produce the study.

Officials at the Urban Development Institute Pacific Region declined comment. The Real Estate Board of Greater Vancouver and the Canadian Homebuilders Association of B.C. could not be reached.

The aim of the UBC researchers in their paper is to support the Canadian tradition of “progressive” taxation, which redistributes money from well-off to low-income people, while also recognizing that a person’s wealth is often best measured by their real-estate property.

 

“It is a very old idea that property values are more accurate signals of lifetime resources than fluctuating declared annual incomes,” states the study. “Using income as the sole basis for taxes may be undesirable due to tax evasion, legal but possibly socially undesirable avoidance, or inter-generational and international transfers not subject to taxation.”

Metro Vancouver’s most expensive homes are in West Vancouver and the West Side of Vancouver, Davidoff said, adding that Greater Vancouver “is at significant risk of becoming a playground for the rich.”

Along with B.C.’s natural beauty, temperate climate and generous taxpayer services, the business professor said Canadian jurisdictions traditionally demand low levels of property taxes. So the message to the wealthy, he said, is: “’Come here and buy a home and we’re not going to charge you very much. But, if you want to make a living here, then we’re going to really nail you with income and sales taxes.’ (Vancouver) attracts affluent people who are kind of done with working and want to chill — and Canada has a tax code that encourages it.’

© 2022 Vancouver Sun

RBC: Prolonged housing market deceleration in the offing

Ephraim Vecina
other

The central bank’s rate hikes served as significant headwinds to the market this fall

All current signs are pointing to a “generally soft” market over the next few months, according to Robert Hogue of RBC Economics.

The central bank’s recent substantial rate hikes have played a major role in cooling down the Canadian housing market this fall.

“Activity remains well below pre-pandemic levels in most markets and prices are softening further from peaks reached earlier this year,” Hogue said, noting that while signs of stability are gradually becoming apparent, “our view is the market will stay generally soft over the coming months.”

Read more: Lumber demand plummets amid housing market cooldown

“The massive interest rate increases to date and a further 25-basis-point hike expected from the Bank of Canada by year-end will continue to significantly challenge buyers,” Hogue added.

“Poor affordability poses a huge obstacle in many markets that only lower prices can ease in a meaningful way. We expect prices will keep falling until a bottom next spring.”

RBC is projecting the national benchmark price to drop 14% from (quarterly) peak to trough by mid-2023.

The market slowdown is likely to trigger a sharp decline in Canadian net wealth in the near future, RBC said in a separate analysis.

“We expect total net worth to fall by more than $1.1 trillion from peak pandemic levels by the end of this year,” the bank cautioned. “This decline in household wealth will come at a time when Canadians are already feeling the squeeze of higher inflation and rising interest rates.”

Copyright © 1996-2022 KM Business Information Canada Ltd.

Kerrisdale 10-unit multi-family rental sells for $4 million

Colliiers Vancouver for Western Investor
Western Investor

Apartment building in the heart of Vancouver’s Kerrisdale sold unconditionally for $408,000 per suite at a 2.35 per cent capitalization rate.

Property type: Multi-family rental

Location: 5607 Yew Street, Vancouver

Number of suites: 10

Sale price: $4.08 million

Cap rate: 2.35 per cent 

Brokerage: Colliers, Vancouver

Brokers: Trevor Buchan, Dan Chatfield, Courtney Lund-Murray and Sunil Suvana

© 2022 Western Investor

 

Affordability challenges show little sign of easing, says banking giant

Ephraim Vecina
other

Pandemic savings will only partly mitigate the impact of reduced purchasing power, according to economist

Borrowing costs across North America are not likely to fall any time soon, according to Sal Guatieri, senior economist and director at BMO Capital Markets.

While the Bank of Canada appears “somewhat more confident” than the US Federal Reserve when it comes to approaching the supposed ends of their tightening cycles, “it is also planning further rate increases even after lifting rates by 350 bps this year,” Guatieri said.

Canadians’ household savings, which swelled over the past two or so years, will only “partly cushion” the impact of the constricted financial conditions.

Some of these savings “will no doubt be used to lighten their heavier debt burden and to counter the ravages of inflation,” Guatieri said.

Read more: Labour market strength builds the case for further rate hikes, experts say

BMO is anticipating an additional 75 basis points of increases by early 2023, which would push the BOC policy rate to 4.5%.

This level will be 50 bps higher than BMO’s previous round of predictions, an adjustment that was brought about by stubbornly high inflation.

“Policy rates are moving deeper into restrictive territory, putting the economy on course for at least a moderate downturn,” Guatieri said.

“In addition, more indebted Canadian households are particularly sensitive to rising credit costs, while most US homeowners have 30-year fixed-rate mortgages that shield them from tighter monetary policy.”

Copyright © 1996-2022 KM Business Information Canada Ltd.

Feds, NB government to fund affordable housing development organization

Ephraim Vecina
other

Housing market challenges are especially pronounced in the province’s rural areas, officials say

The federal government and New Brunswick authorities have announced that they are jointly funding an organization focused on boosting housing development in the province’s far-flung areas.

The non-profit organization, which will be called Housing Hub of New Brunswick Inc., will benefit from a pledge of $800,000 from each level of government, for a total of $1.6 million.

The organization will be responsible for acquiring funding, connecting with developers, and working with all levels of governments and private businesses to substantially improve the availability of affordable units in New Brunswick.

“In our rural regions, the lack of adequate housing is preventing companies from retaining and attracting the skilled workers that they need to grow,” said Ginette Petitpas Taylor, minister responsible for the Atlantic Canada Opportunities Agency.

Read more: Ten cheapest places to buy a house in Canada

Jill Green, minister of Service New Brunswick and minister responsible for housing, added that housing market challenges – which are already considerable in other regions of the province – are especially heightened in rural areas.

“The housing hub in New Brunswick will provide a much-needed coordinated approach to developing rental housing in rural communities,” Green said. “This is a market that we are not currently addressing.”

Copyright © 1996-2022 KM Business Information Canada Ltd.

Only 10% of Vancouver detached homes sold in past week fetched over asking price

Staff Reporter
The Vancouver Sun

Here’s a look at the four Vancouver detached homes that sold for more than 10 per cent under asking

File photo: A sold sign outside a home in Vancouver. Photo by Richard Lam /PNG files

Only three of the 30 detached homes that sold in the City of Vancouver over the past week got more than asking price — and even then only barely.

 

In what could be a sign of the times, those three properties fetched 0.3 per cent, 0.6 per cent and 1.5 per cent over asking price.

By contrast, four of the remaining 27 homes that sold for under asking price did so by more than 10 per cent.

This is based on information provided by real estate website Zealty.ca, which tracks original asking price and lists how much properties sold for and when.

Residential real estate values across B.C. have been falling since March 2022, when the Bank of Canada began interest rate hikes in a bid to stave off inflation.

These rates are adopted by commercial lenders so the monthly cost of servicing a mortgage goes up so buyers can afford less house. This also comes as potential buyers face other increased costs, like food and gasoline.

Here’s a look at the four Vancouver detached homes that sold for more than 10 per cent under asking:

6561 Heather Street — 13.9 per cent under at $5.15 million

Brand new Oakridge home on a large lot was listed for just shy of $6 million ($5.98 million) and sat on the market for 157 days before selling. The owners of this expensive home will have to pay more than $16,000 a year in property tax alone. This 4,700 square foot home had an assessed value of $4.85 million on July 1, 2021.

4763 West 2nd Avenue — 12.4 per cent under at $20 million

An 11,000 square foot house that almost no one in Vancouver could afford sits on a 32,000 square foot lot and has a pool and tennis court and is beautiful in every way. It was listed on May 1, 2022 for $22.8 million and was on the market for 165 days before selling. It is assessed at $14.6 million.

4357 West 16th Avenue — 11.3 per cent under at $1.86 million

This old small home on a full-sized lot on a busy street in Point Grey was listed for $2.098 million and sold after 32 days. The asking price was slightly higher than its $2.044 million assessed value. The owner had purchased the home in December 2020, at the start of the short-lived pandemic boom, for $1.5 million so made a couple of hundred thousand dollars.

6535 Maple Street — 10.5 per cent under at $3.4 million

This renovated 3,700 square foot home in Kerrisdale was listed for $3.798 million on Aug. 24, 2022 and sold 52 days later. The home was most recently assessed at $3.6 million so sold under that value.

According to the Real Estate Board of Greater Vancouver’s monthly market report for October, home sale activity across Metro Vancouver for all classes of homes was well below historical averages.

 

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