TORONTO (Reuters) – Canadian pension funds are seeking to boost their real estate investments, betting the slumping property market will recover as the COVID-19 pandemic recedes and office workers and city dwellers return to downtown properties.
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Canadian pension funds held $278.7 billion in property assets in 2019, up 4% from 2018, according to the Pension Investment Association of Canada, making them the country’s largest real estate owners.
In a world of slower economic growth, very low interest rates, volatility in equity markets, real estate offers an attractive opportunity for pension funds, which take a long-term investment horizon, say market participants.
“We’re looking for buying opportunities,” said Hilary Spann, Head of Americas, Real Estate at CPP Investments, which manages $456.7 billion. CPP’s real estate portfolio generated 5.1% return for the year ended March 2020.
CPP announced a U.S. joint venture with Greystar Real Estate Portfolio to build multiple separate housing units this month, a deal that was initiated pre-pandemic.
In November, it signed an agreement with Hudson Pacific Properties to acquire an office tower in Seattle. Spann said a lot of buyers that would have been competitive in the Seattle deal were temporarily on the sidelines. “So we were able to step in and pick up that asset at yields that we thought were quite attractive.”
OFFICE VACANCIES CLIMB
As the pandemic forced many staff to work from home, the office vacancy rate in Canada hit a 16-year high of 13.4% in 2020, according to data from broker CBRE. Downtown offices were hit harder.
“I think pension funds are very well aware that…there are times when values dip a bit and vacancies go up but overallreal estate assets are a great part of any pension fund portfolio,” Paul Morassutti, CBRE Canada Vice Chairman said.
CPP’s Spann said while both rental markets and office may suffer in the short-term, it was expected that both markets would return when the pandemic comes to an end.
“Office may fall in the short term but in the long term, as everybody does start coming back to the office, I think it’s fair to say you may see a reversal,” she said, adding that the things that made places like New York and San Francisco vibrant will remain.
Kristopher Wojtecki, Managing Director, Real Estate at PSP Investments, told Reuters the fund had been increasing exposure in select sectors including single family rental and production studio real estate during the pandemic.
However, Canada’s second-largest pension fund, Caisse de depot et placement du Quebec, is taking a contrarian approach. A spokeswoman for Ivanhoé Cambridge, the real estate subsidiary of Caisse, said the fund is cutting exposure in traditional asset classes and prioritising opportunities in growth sectors which include logistics and residential office buildings among others.
Grant McGlaughlin, partner at law firm Fasken, said he did not see any drastic moves on pension funds getting rid of their real estate portfolios.
“I think that’s the right thesis that there is no point selling into a low,” he said.
Reporting by Maiya Keidan; Editing by Denny Thomas and David Gregorio
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.
