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REMAX forecasts Canadian markets in 2019

According to the REMAX 2019 Housing Market Outlook, the country’s average sale prices will get a 1.7% boost, an indication that the balance has finally returned to Canada.

The report notes that markets throughout the country stabilized this year after the 2017 aberration that saw prices in markets like Toronto’s surge beyond reasonable levels. Stabilization is expected to continue through 2019, a likely consequence of interest rate hikes that are believed will increase as the year goes on.

Thirty-one percent of REMAX survey respondents don’t believe interest rates have hitherto affected their ability to afford a mortgage, but that optimism doesn’t extend beyond December. Another REMAX survey of its brokers and agents revealed 83% expect interest rates to make Canadians’ home purchases cumbersome next year.

The report also expects sale prices in Vancouver to decline 3% in 2019 because obtaining a mortgage in the Metro region is becoming well-nigh impossible.

"The drop in sales in key markets across British Columbia can be partially attributed to Canadians' increasing difficulty in getting an affordable mortgage in the region," says Elton Ash, REMAX of Western Canada’s regional executive vice president. "The situation created by the introduction of the mortgage stress test this year, as well as continually increasing interest rates, means more Canadians will be priced out of the market."

The Greater Toronto Area, on the other hand, is expected to fare better next year as REMAX predicts sale prices will rise 2%, thanks to high demand for homes priced below $1 million. Demand will be weaker for homes above $1.5m, though. According to Christopher Alexander, REMAX’s vice president and regional director for Ontario-Atlantic Region, looming rate hikes might be spurring the restraint.

“People are a little more cautious than they were in the past because interest rates are starting to rise,” he said. “Government said it would be more aggressive with interest rates and people are waiting to see how it will all shake out.”

Alexander added that Toronto remains a popular destination, which should balance out weaknesses in its market.

“It’s not surprising [November sales in the GTA] were down year-over-year, but because Toronto is such a big destination, both domestically and globally, there will be good pockets of the city that balance everything gout.”

by Neil Sharma12 Dec 2018 | www.canadianrealestatemagazine.ca

New small-space flex offices push $1,000 a square foot

Metro’s high-tech sector driving demand for new office-industrial strata projects

New light industrial/office strata projects springing up from Mount Pleasant to East Vancouver may have tapped into a profitable path, despite per-square-foot prices ranging from $800 to $1,000.

The most recent manifestations include a four-storey project on Yukon Street at West 6th Avenue – formerly the 3 Vets outdoor store – by Chard Development, which bought the site last year for $20.4 million.

Now under development, the 49,000-square-foot Yukon project will feature a high-ceiling ground floor for light industrial, with bay access for trucks, capped by three floors of stylish office space.

Chard recognized a demand for smaller office sizes from the area’s tech, finance and retail services industries. As a result, Yukon will feature smaller unit sizes (1,000 to 5,000 square feet) to adapt to this new Vancouver real estate reality, according to Byron Chard, Chard’s principal and CFO.

A similar Chard project at 34 West 7th Avenue sold out all 48,000 square feet while still under construction.

Nothing has pre-sold yet at the Yukon, where strata space starts at $1,000 per square foot.

The building will include a freight elevator, bike lockers, showers and 83 parking stalls, and it could prove popular, according to the type of high-tech tenant Chard is targeting. Completion is expected in 2020.

“I can definitely see the demand,” said Dogu Taskiran, a partner and founder at Stambol Studios, a virtual-reality startup that concentrates on the real estate market.

Taskiran said the Mount Pleasant location and ample parking would be among the draws.

Stambol is currently splitting 2,000 square feet of space in False Creek Flats, where the total monthly rent is $3,000, which Taskiran described as “a very good deal, very cheap.”

Chard noted that a startup could buy office or industrial space at Yukon and lease out part of it until it expands, but he expects most of the buyers will be sole owner-occupiers.

“Our goal is to make the space as flexible as possible,” he said.

Alliance Partners is trying the same concept in East Vancouver with a five-storey, 55,000-square-foot light industrial/office strata project on Clark Drive at Adanac Street.

Kevin Kassautzki, vice-president at Avison Young, which is handling sales of the project, expects per-square-foot prices to be in the $700 range for industrial space and $800 for offices.

“I think this area is on its way to becoming the next Mount Pleasant,” Kassautzki said.

There is an appetite for buying strata office space from larger players in the tech community, Taskiran said, but he added that Stambol and other startups often prefer to lease. A common theme, he said, is to stay out of the downtown, where higher lease rates and a lack of parking are considered obstacles.

Frank O’Brien | Western Investor
November 21, 2018

Mortgage stress test could become election issue

The Conservative Party of Canada plans to make the mortgage stress test a hot button issue in time for next year’s election, but explaining such a convoluted issue to Canadians could pose a challenge.

The party’s Deputy Shadow Minister for Finance tabled two motions this year to study the impact of the stress test, known as B-20, but they were both rejected by the Liberals. Nevertheless, MP Tom Kmiec has vowed to put the mortgage stress test on the agenda in time for the Oct. 2019 federal election.

“It will be an election issue, absolutely,” said Kmiec. “I’m willing to use procedural tools to get this study done. I’m not necessarily saying to get rid of B-20 completely; I’m saying take a look at the data and then make a decision on it. I’m asking the Liberals to provide any internal documents they have showing why the mortgage rules were introduced in the first place.”

Kmiec has started a website to pressure the Liberals into studying B-20’s effects. He claims that he was initially told B-20 wouldn’t be examined in the absence of more data, however, much has since come to light about Canadians being shut out of the housing market.

Kmiec is dogged, to be sure. He participated in the electoral reform committee’s filibuster.

“If it comes down to it, I’m happy to use up every two-hour time limit on every single committee until we agree to do a mortgage study,” said Kmiec. “I’m not asking for the moon, either. All I want are a few meetings in Ottawa where we can invite people with data who can then tell us what’s happening with the market.”

But communicating the message will doubtless be challenging for the Conservatives. Ron Butler of Butler Mortgage can attest to how difficult buying homes has become this year, but too few Canadians have born that brunt for the impact to truly be understood.

However, given that mortgage renewals are subject to the same stringent B-20 qualification rules, Butler believes it is still possible to make Canadians understand how detrimental the stress test is.

“It won’t be hot button, but if it’s messaged right, it could be,” he said. “If it’s presented properly as a group of themes about the incompetence, in terms of the ability to handle the file—why has Mexico settled NAFTA already and Canada hasn’t? Why did we buy a pipeline that got shut down? It’s a good thing to add to the general list of incompetence. On its own, it isn’t a hot button issue, but if you want to weave it into a tapestry of every day, practical fiscal management, it could work.”

 

by Neil Sharma01 Oct 2018, www.canadianrealestatemagazine.ca

Zoning could be key to funding downtown relief line

Toronto’s downtown relief subway line—should the political will needed to build it ever materialize—could partly fund itself, to say nothing of the skyrocketing valuations that will result.

According to Andy Manahan, executive director of the Residential and Civil Construction Alliance of Ontario, the municipal government can use zoning as a bargaining chip with developers to pay for the proposed network expansion by negotiating additional storeys.

 

“If a building is only zoned for five storeys but the developer is given 20 storeys, that extra 15 storeys is worth a lot of money and developers would be willing to pay it,”said Manahan. “If we build a relief line, we have to place more density at the station so that there’s more land value capture. If you do that link between land use and transit, you can do some creative financing in the long-run as well, and get some more developers on board.”

Many existing TTC subway stations were created as architectural monuments rather than into the sides of buildings, which is what would adequately succour density.  And if the mere rumour of below-grade infrastructure is enough to cause property values to rise, imagine what a unit 25 storeys above a subway platform would be worth.

“Typically, once an announcement is made about where the line will go, property values do increase, so the trick is how we ensure we can capture some of that increase in value,” continued Manahan.

However, more is at stake than optimizing real estate values. Toronto’s current subway network is overcapacity and its platforms dangerously brim with people. Given how many skyscrapers will continue sprouting downtown, not to mention the already low office vacancy rate, Manahan warns that the network’s capacity troubles are worsening.

“We have a lot of growth in the downtown core, and it’s not just residential,” he said. “There’s about 5.7mln square feet that will be added to the downtown office segment by 2020.”

Davelle Morrison of Bosley Real Estate echoed Manahan: “Right now, without further additional building of office space downtown, we already know we need the relief line. If you add more people working downtown and more people living downtown, because immigration numbers are high and more and more people are moving to Toronto in particular, it’s a no-brainer to me about why you would need the downtown relief line. It’s already needed, but 10, 15 years from now, it’s going to be needed even more.”

The RCCAO has been an outspoken proponent of the downtown relief line, taking out full-page newspaper ads and even launching a Twitter campaign called #GimmeRelief.

The earliest the downtown relief line could complete is 2031, however, there’s no official plan to build it. In fact, it’s as much of a pipe dream today as it was a decade ago—and making matters more frustrating for commuters, the Scarborough subway line has been given priority.

Backwards thinking, says Manahan, because sequencing is important and dictates building the network outward rather than inward, where support infrastructure is presently non-existent.

But he takes solace in Ontario’s political parties acknowledgment that the downtown relief line needs to be built.

“Over the last 50 years, the relief line is talked about occasionally and never gets built. It’s an important project and recognized by all four provincial parties. After June 7, no matter which party is in power, they will have to continue.”

by Neil Sharma30 May 2018 | Canadian RealEstate Wealth

Major impact to B.C. real estate market expected from proposed taxes

New tax policies put pressure on Canadians to sell their secondary properties within the province

Albertans anticipated to look within their own province and to the United States for secondary properties

TORONTO, March 29, 2018 /CNW/ - According to a Royal LePage advisor survey, which consolidated the views of 535 real estate professionals in British Columbia and Alberta, the implementation of new housing taxes outlined in British Columbia's 2018 budget have the potential to significantly impact the province's residential real estate market. While previous provincial measures have targeted foreign homebuyers, the implications of the new tax policies will be much more widespread, primarily affecting domestic homeowners located in B.C., Alberta and other parts of Canada who have made the tourist-focused region their second home.

British Columbia's tax policies within its 2018 budget include the introduction of a speculation tax on qualifying secondary homes, an increase to the foreign buyer tax as well as an expanded list of affected regions and an increase to the property-related school taxes and land transfer taxes on homes worth over $3 million.  

When asked, 85.0 per cent of advisors operating in British Columbia said that the new tax policies have hurt consumer confidence in residential real estate across the province. A further 78.0 per cent of respondents believe that home sales will decrease within the first three months of the announcement of the new policies, while the majority (57.3 per cent) stated that prices will also decrease during the same period of time.

"The expected impact of the proposed housing taxes announced in British Columbia should not be taken lightly," said Phil Soper, President and CEO, Royal LePage. "Homeowners across the province will feel the effects as major policy changes like this are also amplified by a drop in consumer confidence. We saw this happen in 2016 when the previous government launched a tax on foreign investors. A small number of international purchasers withdrew from the market – along with a huge cohort of domestic homebuyers.

"Canadian homebuyers from coast-to-coast were already struggling with new federal restrictions on access to mortgage financing," continued Soper. "We expect the impact of the new government's housing tax policies to be even more pronounced as they will force Canadians, Americans and potential buyers from elsewhere in the world out of the market."

While 77.0 per cent of advisors stated that the provincial regulations will cause interest from international purchasers to decrease, this demographic was ranked last when respondents identified the group that was most impacted by the new policies. When asked, 44.8 per cent of advisors stated that the new housing policies most impacted residents of British Columbia, followed by 43.5 per cent who believed it was Canadians who own or are looking to buy property in British Columbia, but predominantly live in other provinces. Only 11.3 per cent of real estate professionals forecast that the policies would impact international purchasers the most.

"We expect that the new taxes will materially impact communities that rely on recreational property markets for the health of their local economy," said Soper. "There will be some Canadians in British Columbia and across the country that will choose to sell their properties in the province as the new taxes add to the cost of homeownership.

"There are further unintended consequences from these kinds of policy changes," Soper concluded. "If property values decline, property tax revenues decline. Local municipalities will have to deal with this added burden."

When asked, 81.5 per cent of advisors said the new tax policies within British Columbia's 2018 budget have already caused interest from Canadians living outside of the province to decrease, with 73.8 per cent believing that the move will lead the group to sell their property. This is predominantly led by the impending speculation tax, which 90.8 per cent of respondents believe will impact sales in the province from prospective homeowners located in other areas of Canada, like Alberta.

These sentiments were verified by advisors in Alberta, with 80.7 per cent believing that Alberta-based interest in B.C. recreational properties will decrease, and a further 75.6 per cent stating that Albertans who currently own recreational property in British Columbia would likely sell their secondary homes. Instead, it is believed that Albertans will now increasingly look within their own province (72.6 per cent) or south of the border (46.7 per cent) for secondary properties.

Survey Methodology

Royal LePage's advisor survey was conducted online between March 14, 2018 and March 20, 2018, polling a total of 400 Royal LePage real estate advisors from British Columbia and a further 135 from Alberta. Responses were anonymously recorded and analyzed independently.

On March 26th, 2018, British Columbia announced amendments to its speculation tax. These amendments do not change the opinion of Royal LePage and its network of real estate professionals. While the size of the new taxes has been reduced modestly in one of the categories, the entire scope of the new tax regime remains in place. The results of the Royal LePage advisor survey are reflective of current expert opinion on real estate in the region.

 

NEWS PROVIDED BY

Royal LePage

06:00 ET

New mortgage rules will drive investments in private lending

MICs and other private lenders currently account for 10% of all new residential mortgages in Ontario. This number will surely increase in the short-term as buyers look for alternative lenders not governed by OSFI. For savvy real estate entrepreneurs, investing in private mortgage vehicles in the coming years will provide stability and robust yield amidst this backdrop of rising rates and tightening regulations.

Real estate investors woke up to an entirely new lending landscape on January 1st. Now, they must meet stricter guidelines to qualify for lending as part of a new policy instituted by the Office of the Superintendent of Financial Institutions (OSFI).

The result is that all mortgage applicants must prove they can still afford payments at a higher interest rate -- the greater of either 2% above the qualifying rate or the five-year Bank of Canada benchmark rate (currently 4.99%).

As you are likely aware, this stress test was already in place for low-ratio mortgages, but now extends to all loans governed by OSFI regulations. Credit unions and private lending entities are not subject to OSFI regulations, but more on that later.

The Bank of Canada has said that these new regulations will affect about $15-billion in borrowing, primarily in the hot Toronto and Vancouver markets. This change holds important implications for first-time homebuyers in these markets, but what does it mean for investors like yourself?

But that’s not all

The above regulation changes are not the only game in town, we are also in a rising interest rate environment with further increases projected.

Indeed, CMHC predicts that the posted 5-year mortgage rate will fluctuate between 4.9%-5.7% throughout 2018, and rise to a range of 5.2%-6.2% in 2019. This is a big deal!

A search for yield amidst change

According to the Bank of Canada, the new rules will disqualify about 1 in 10 borrowers, and in places like Toronto and Vancouver, this ratio rises to 1 in 8. This will drive borrowers to other lending options such as private lending and mortgage investment corporations (MICs). This reality present a great opportunity for investors looking for yield in the coming years.

Bank of Canada Governor Stephen Poloz believes that “people might also look for a lender that is not bound by these new mortgage rules so they can avoid facing the stress test.” This is where private lending comes in.

Bryan Jaskolka, Vice President at Canadian Mortgages Inc., notes that this environment will drive potential buyers to creative financing options. “Instead of settling for cheaper homes, holding off on home-ownership, or being forced into unfavourable lending terms, many home-buyers will move to creative financing options like private lending and MICs.” Indeed, RBC Capital Markets concurs, stating recently that it believes that its borrowers who don’t meet the new rules will turn to private lenders and MICs.


by Contributor09 Feb 2018 | Canadian Real Estate Wealth