(Bloomberg) — The fundamentals for commercial real estate have never been better at this stage of a downturn, according to Brookfield Asset Management Chief Executive Officer Bruce Flatt.
Demand for the best space is strong and vacancy is low, leading to outsize rents for top office properties in New York, London and Dubai, Flatt said in an interview with Bloomberg Television. Insatiable demand for information storage is also supporting the company’s investments in digital infrastructure such as data centers and towers, he said.
“There is a real tale of two cities,” Flatt said, dismissing recent loan defaults on Brookfield-owned properties in Los Angeles as insignificant. “High quality space is very sought after as companies want to bring people back and have engaging space.”
Rising interest rates are washing through real estate markets globally, ending the cheap money era that saw asset values inflated to record levels. Still, relatively modest levels of borrowing by landlords and constrained supply make the current rates-driven correction distinct from previous downturns, when excess credit or construction have led to a crash.
Brookfield raised about $100 billion last year and the company will likely raise similar sums this year, Flatt said. Investors continue to allocate capital to infrastructure assets that are “positively disposed to inflation,” even as once-hot sectors like venture capital-backed technology investments suffer.
The 57-year-old, who has led Toronto-based Brookfield since 2002, sees the impending recession as likely to be mild, with the rate hiking cycle nearing its peak. “We have seen the worst of it, it hasn’t all transferred through the economy yet, but the worst of the medicine has been doled out,” he said.
Still, the correction in public markets makes selling companies through initial public offerings unattractive at the moment. That means Brookfield-owned businesses like UK holiday park operator Center Parcs are more likely to be sold privately when the company is ready to exit, Flatt said.
The fallout from the Adani crisis in India means there is less investor interest and lower competition for deals, he added. And while some of Brookfield’s clients have decided to pull back from China as an investment destination, Brookfield is still deploying capital there on behalf of other investors that remain committed to the country.
“Returns going forward will be better,” Flatt said of the overall investing environment. “Risk is less, prices have fallen, it is a good market to invest in.”
TORONTO – One expert predicts Ottawa‘s changes to mortgage rules will help spur demand among potential homebuyers but says policies aimed at driving new supply are needed to address the “core issues” facing the market.
The federal government’s changes, set to come into force mid-December, include a higher price cap for insured mortgages to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
CIBC Capital Markets deputy chief economist Benjamin Tal calls it a “significant” move likely to accelerate the recovery of the housing market, a process already underway as interest rates have begun to fall.
However, he says in a note that policymakers should aim to “prevent that from becoming too much of a good thing” through policies geared toward the supply side.
Tal says the main issue is the lack of supply available to respond to Canada’s rapidly increasing population, particularly in major cities.
This report by The Canadian Press was first published Sept. 17,2024.
OTTAWA – The Canadian Real Estate Association says the number of homes sold in August fell compared with a year ago as the market remained largely stuck in a holding pattern despite borrowing costs beginning to come down.
The association says the number of homes sold in August fell 2.1 per cent compared with the same month last year.
On a seasonally adjusted month-over-month basis, national home sales edged up 1.3 per cent from July.
CREA senior economist Shaun Cathcart says that with forecasts of lower interest rates throughout the rest of this year and into 2025, “it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well behaved in most of the country.”
The national average sale price for August amounted to $649,100, a 0.1 per cent increase compared with a year earlier.
The number of newly listed properties was up 1.1 per cent month-over-month.
This report by The Canadian Press was first published Sept. 16, 2024.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
