The Canadian real estate market is confusing enough without having to look at it from a global standpoint. However, sometimes you have to look at the bigger picture to help put things in perspective. According to the Knight Frank Global House Price Index, Canada is sitting at the bottom of a global housing slowdown.
In 49th place of 56 housing markets, the report which tracks annual house prices by country shows that Canadian home prices in the second quarter of 2019 inched up by just 0.5 percent compared to 2018. However, despite this news, there is hope that the Canadian real estate market is looking up.
Home Pricing Holding Steady
Although the Knight Frank report shows we took quite the tumble, compared to a few years ago, we weren’t as bad as markets that reported declines such as Morocco, Italy, Finland and Australia. As well, according to the Canadian Real Estate Association National home sales held steady for November with activity up by 12.9% year-over-year, although there was a slight decline compared to October by 1.8%. The good news is the actual national average sale price rose 5.8% year over year.
Accelerated Sales in Vancouver and Toronto
Looking at those driving markets that have proven to be key to Canadian real estate, Toronto and Vancouver, they also saw accelerated sales activity according to the Huffington Post. This indicates recovery according to Robert Hogue, a senior economist for RBC. “Canada’s housing market correction is over, and the recovery is on.” So, things are truly looking up.
The Financial Post reported Canada’s realtors have been enjoying great performance going back to September, another sign the market is strengthening. B.C. was at the head of the charge, and weakness is only apparent in our oil-producing regions.
Steady Interest Rates
This info aligns with other factors that point to recovery from the slump we experienced in the beginning of 2019. According to the Financial Post, this includes the Bank of Canada’s decision to hold interest rates as is despite what is happening around the world. “Home sales activity and prices are improving after having weakened significantly in a number of housing markets,” says Gregory Klump, chief economist at the Ottawa-based realtor group in a statement to the Financial Post. “How long the current rebound continues depends on economic growth, which is being subdued by trade and business investment uncertainties.”
Bubble Risk in Canada
On a less positive note, according to the UBS Global Real Estate Bubble Index, risk of the real estate bubble in Toronto is the second highest in the world. The index looks at areas with the highest overvaluation of housing prices. Toronto was second to Munich and sitting in the company of Amsterdam and Hong Kong, which tied for third.
Vancouver actually saw improvements. The index reports areas that are experiencing consistent mispricing in real estate markets. One of the things they consider is what they call a “decoupling” of prices from local incomes and rents as well as issues in the economy such as higher instances of lending or what’s going on with construction activity.
Toronto Housing Crisis
It’s no secret Toronto suffers from unaffordable-housingitis. According to the Toronto Housing Markets Analysis, renters who are trying to save to buy in the GTA have to wait from 11 to 27 years just to for a 10 percent down payment on the average priced home. As well, unfortunately, Toronto’s rental market is not keeping pace with need. The majority of the purpose-built rental housing in Toronto was built during the “postwar rental apartment boom” of the 1960s and 1970s. Of the available units, over 90 percent were built pre-1980.
Drop in Prospects
According to Mortgage Brokers News, not surprisingly, contributors to the Index report say when there is low affordability, it causes issues for people who can’t afford to live in an area. Head of Swiss & Global Real Estate Claudio Saputelli and Head of Swiss Real Estate Investments Matthias Holzhey stated in the Index report: “If employees cannot afford an apartment with reasonable access to the local job market, the attractiveness and growth prospects of the city in question drop.”
The Mortgage Brokers article says that in markets that experience overvaluation, the expected drops can lead to managing curb price appreciation by taking regulatory measures. This is to help correct overheated prices. According to the Index, when looking at 2016 top rankers, they all experienced price drops at an average of 10 percent.
Real Home Prices Rise
As well, the Canadian cities in the Index between 2000 and 2018 saw real home prices rise by more than 5 percent each year in Vancouver and Toronto. “The introduction of taxes on foreign buyers, vacancy fees and stricter rent controls seem to have taken effect,” says the report. “While the average price level in Toronto has remained broadly unchanged from last year, prices in Vancouver are down by 7 percent. Lower mortgage rates are supportive but cannot outweigh lower economic growth.”
However, when it comes to Canada, in general, it really only is Vancouver and Toronto at risk of real estate bubbles.
Favourable Financing Conditions
In these expensive cities, the Index finds favourable financing conditions are not helping. This is one of the reasons home prices are staying high, even though in most cases affordability is one of the things that should, in theory, impact financial conditions. It’s a puzzler.
Although many are atremble thinking about the American housing market tragedy that occurred when the bubble burst, Canadians have some differences that might help. For example, we are seeing lending growth on par with GDP growth. This was not the case as the Great Financial Crisis in the U.S. crept up on everyone.
There, outstanding mortgage volumes increased up to 2.5 percent faster than GDP. We don’t seem to be seeing such an issue which is a hopeful sign for the Canadian real estate market and the state of our economy as well.
Greening federal gov't building portfolio offers CRE 'opportunity' – Real Estate News EXchange
The ongoing pandemic, a quest to green its real estate footprint and a portfolio of buildings nearing the end of their useful lifespans will lead to a major transformation of the federal government’s real estate footprint during the next couple of decades.
That was the message from Stéphan Dery, the assistant deputy minister, real property services, for Public Services and Procurement Canada during his annual update on the government’s real estate plans at the virtual Ottawa Real Estate Forum this week.
While many of these changes had already started well before the pandemic, Dery said the effects of COVID-19 have accelerated some of the transformations, and the government’s owned-building portfolio isn’t getting any younger. Decisions on its future are becoming more pressing.
The feds do own a significant portion of the 75 million square feet of space they occupy. Of that portfolio, about 38 million square feet is in Ottawa, Gatineau and the National Capital Region (NCR), and 18 million square feet is leased from private owners.
Dery and PSPC work with 102 departments and agencies which employ about 240,000 people, just over half of them in the NCR.
Any shift in strategy will have wide-reaching implications for commercial real estate owners and operators, from those now leasing space to the feds, to companies wanting to sign government agencies as future tenants, and others hoping to buy aging assets for redevelopments.
“I think what you will see in the next few years is the Government of Canada disposing of large, old high-GHG-emission assets and replacing those assets by either new space that is leased, that is carbon neutral, or old space that is modernized and carbon neutral,” Dery told the CRE executives attending the online interview conducted by Nathan Smith, senior vice-president at the Cushman & Wakefield Ottawa office.
L’Esplanade Laurier could be sold
He offered the example of L’Esplanade Laurier, a complex including two 23-storey office towers connected by a podium, with three levels of underground parking in downtown Ottawa.
“I can see L’Esplanade Laurier in the next four, five or six years being on the market for the private sector either to redevelop it into apartments/condominiums, or redevelop it for office space, a hotel, whatever the private sector and the city will need at the time,” Dery said.
“These large assets that are at the end of their useful lives, we are going to be looking to dispose of them.”
The message was clear for firms looking to do business with the government, which has committed to reducing its greenhouse gas emissions by a minimum of 40 per cent by 2030. Real estate will be a major contributor.
“A lot of our inventory is old . . . it’s significant GHG emissions. So we are really looking for the next inventory, where we are going, to make these buildings, either leased or old, carbon neutral. It’s quite important to us,” Dery said.
“In 2030, 75 per cent of our lease(s) will have to be carbon neutral.”
As for how much space the government will occupy, Dery said current projections are to continue down the path to cut 30 per cent of its footprint.
Feds remain committed to smaller footprint
“Our portfolio plan says that over the next 25 years, we are thinking about reducing our footprint by 30 per cent or more depending on the outcome of COVID. It might be accelerated, but it’s not something that is going to be done overnight.”
Smith noted, however, if the government does shed aging real estate in favour of leasing newer, more environmentally friendly space, that could actually offer an opportunity for the CRE sector.
“When we talk about a 30 per cent reduction in your space over a 25-year horizon, people in the room would start to get nervous. Is public works going to significantly downsize their lease portfolio?” Smith asked.
“I would say it’s probably an opportunity for growth in your lease portfolio as you exit some of these Crown-owned assets.”
Dery left all options open, but reinforced his earlier comments about greening the portfolio. He wanted the message to be “quite clear” – this is where the opportunity will be.
“I know that really today, none of our lease would meet that (GHG) criteria in Gatineau, Ottawa and (the NCR). So we have an opportunity here.
“If you are a landlord, an owner, an investor, and you want to keep leasing space to the Government of Canada, just think about that. Seventy-five per cent of new leases or renewals in 2030 will have to be carbon neutral.”
The process has already started, with the disposal of several aging federal buildings in the NCR. In 2019, it was announced the feds will lease 158,000 square feet at a new eight-storey office building being constructed at the carbon-neutral Zibi development straddling Ottawa and Gatineau.
The government is also looking to develop a 1.6-million-square-foot office campus on land it owns at 599 Tremblay Rd. in East Ottawa, working with a developer on a land-lease basis.
Return to office and potential vacancy
Dery touched on a number of other points during the wide-ranging, half-hour presentation.
On current lease renewals, he said the government is looking at shorter time frames for properties it renews, but so far it has not made significant space reductions.
“We know that space may be used differently, but we’ll need space. So over the last 18 months, the COVID period, we have approximately renewed 100 leases, totalling 3.2 million square feet in the National Capital Region,” Dery said.
“If it’s going to reduce, it’s going to reduce over time. It’s not something that you turn on a dime.”
On return-to-office, he said government data shows pre-pandemic most public service offices had in-person occupancy of about 60 per cent capacity on a daily basis due to a combination of many factors – hybrid work schedules, staggered working times or shift work, travel, time off, illness, etc.
Current in-person staffing remains well below that level and he said he foresees permanent on-person staffing levels dropping by another 10 per cent or so.
“I could definitely see an increase in that with the work from home, or hybrid model equal to 10 per cent . . . easily 10 per cent.”
Smith put that into perspective, noting vacancy in Ottawa had declined to the six per cent range pre-COVID and is sitting around 10 per cent now with some reabsorption occurring.
“On a market basis, is that three or four per cent? Somewhere in that range, and that is really delivering two or three new buildings into the market at once and letting the market absorb that space,” Smith offered.
“I would suspect the market will be resilient and be able to absorb that vacancy that obviously is coming to us post-COVID.”
Government co-working model
Dery also envisioned the possibility of a government network of workspaces allowing remote workers to access facilities closer to where they live.
Modelled on the co-working office format, he said it could involve a number of departments sharing workspaces.
“You may have a building in a remote location but it doesn’t serve only one department . . . it serves all of the federal public service and it’s that kind of co-working space,” he explained. “We see a take-up on that and interest from multiple departments.
“I think it is going to work well with the hybrid (work schedules): you need to go to the office, there is an office not too far from your house and you reduce the GHG emissions.”
Anthem building two Calgary shopping centres – Real Estate News EXchange
Vancouver-based real estate company Anthem continues to be bullish on the Calgary market and needs-based retail, launching two new shopping centre projects in the region to service growing residential communities.
The firm also announced the acquisition of the 300,612-square-foot Junction Shopping Centre in Mission, B.C. The grocery-anchored, tier-1 property was acquired in partnership with Crestpoint Real Estate Investments.
“Calgary is a core market for Anthem. It is a great city, with great people. It is affordable, has a well-educated population and is a better deal for families, all in, than Toronto or Vancouver,” said Isaac Beall, Anthem’s senior director of development, during an interview with RENX.
“It will grow and Anthem will continue to build homes, develop new communities and lease up commercial and industrial spaces to those people requiring it.”
Anthem’s D’Arcy Crossing and Highstreet at Cornerstone
The two new shopping centres – D’Arcy Crossing and Highstreet at Cornerstone – are being developed by Anthem Properties for the communities of D’Arcy in Okotoks, just south of Calgary, and Cornerstone in Northeast Calgary.
Those residential neighbourhoods are being developed by Anthem United.
The D’Arcy Crossing shopping centre, with Safeway as an anchor tenant, will also include Shoppers Drug Mart, a liquor store, restaurants, coffee shops and other businesses to service the daily needs of Okotoks-and-area residents. It will be the largest commercial centre in North Okotoks at 151,000 square feet and is scheduled to open in the spring of 2023.
The shopping centre will have more than 40 businesses when completed.
Beall said the northern part of the town has more than 60 per cent of Okotoks’ total population. D’Arcy is a 280-acre community that launched in 2018 bordering the D’Arcy Ranch Golf Club.
Once completed, it will have more than 2,200 homes. About 300 homes have already been built in the community with full buildout expected by 2026.
Anthem is also building the neighbouring community of Wedderburn in Okotoks, which will include about 1,300 homes on completion, which is also expected by 2026. So far 50 new homes have been built.
Cornerstone is a 1,100-acre community launched in 2015. It will comprise about 9,500 homes on full buildout by 2030, with 1,500 already built.
The new shopping centre, which will be 139,000 square feet, will feature a new Chalo! FreshCo and a Shoppers Drug Mart. It is under construction off Country Hills Boulevard and 60th Street N.E.
It also is scheduled to open in spring 2023.
Quickly growing Calgary neighbourhoods
The Cornerstone shopping centre will be a regional draw for other residential communities in the area which includes Redstone, Cityscape and Skyview Ranch – newer neighbourhoods built in the northeast part of the city in recent years.
“Eight years ago, there was nothing. Redstone was just starting and there are now 35,000 people that live there,” said Beall. “It’s staggering. There are so many homes up there it’s absolutely shocking.”
Calgary has been an integral part of Anthem’s business in recent years. The company has developed or has slated for development 4,100 acres in Calgary, Chestermere and Okotoks.
It also has about 513,000 square feet of existing retail and commercial space.
Anthem’s North American presence
Anthem, founded in 1991, has more than 270 residential, commercial and retail projects across Western North America.
Its portfolio includes 15,000 homes completed, in design or under construction, from master-planned, mixed-use and multiresidential, to townhome and single-family communities.
It also owns, co-owns, manages or has previously owned more than eight million square feet of retail, industrial, residential rental and office space.
The company is bullish on Calgary due to affordable real estate, lower taxes, great social and physical infrastructure and the fact people will be moving to the province.
It currently has eight active residential communities in the area which includes Cornerstone, Glacier Ridge in the northwest, Belmont in the southwest, Pine Creek in the southwest, Sirocco in the southwest, Wedderburn in Okotoks and Chelsea in Chestermere.
Some of Anthem’s other communities also have commercial components planned for future phases, but D’Arcy and Cornerstone will be the first to open. They are also the first commercial centres in its land developments to be developed and built by Anthem.
“The No. 1 amenity for all of these residents is grocery,” said Beall, “and part of our business model going forward is to provide that amenity.”
The format for successful retail
Beall said a grocery-anchored shopping centre is the hub and the heart of a community and increasingly so during the current pandemic.
“That type of retail format we have a lot of confidence in, because our paradigm has always been food, booze and drugs when it comes to these centres. People need grocery stores. They need drug stores to get their medications and a liquor store,” he said.
“It’s sort of the prototype piece of critical amenities that communities want, and around that you provide that finer-grain service.
“You add some doctors in. You add the quick-service food and the hair salons and dentists. It’s a sort of tried-and-true recipe and we like to keep that within the community.
“Also from a sustainability standpoint. We try to integrate them in in a thoughtful way as opposed to dropping them in a field in the middle of nowhere so it keeps people from having to travel far distances to have those needs met.”
Beall said there is a need to tread carefully because not every community can support a shopping centre. A critical mass is needed, but wherever possible Anthem will pursue the opportunities.
“At the end of the day, it’s always the grocery store that drives the bus. We’re at the mercy of grocery tenants. Fundamentally their target trade area that most grocers look for is a population within their catchment in excess of 30,000 people,” said Beall.
“That’s sort of the magic number where a store starts to make sense, where they can draw enough shoppers in.”
The Junction Shopping Centre acquisition
The Junction Shopping Centre in Mission includes about 40 tenants and is located at the intersection of the Lougheed Highway and the Abbotsford-Mission Highway about 70 kilometres east of Vancouver.
Anchored by Save-on-Foods and London Drugs, the regional shopping centre has a diverse roster of ancillary tenants including Winners, Cineplex, Goodlife and Starbucks.
The tenant mix is tailored to local demographics providing a mix of daily needs retail which also includes liquor, financial services, health and personal care, entertainment and discount retailers.
It is 98 per cent leased.
Canadian home prices have jumped 21.4 per cent since last year, survey finds – CTV News
A new survey from the real estate firm Royal LePage shows that housing prices in Canada have jumped an astounding 21.4 per cent since this time last year.
The Royal LePage House Price Survey, released on Friday, shows that the aggregate price of a home in Canada has risen to $749,800 in the third quarter of 2021, compared to $617,800 in the third quarter of 2020.
The aggregate price refers to a “weighted average of the median values” of both condominiums and single-family homes for a given area.
During the third quarter, housing sales also slowed down, largely due to waning supply and demand, coupled with lessening pandemic restrictions, Royal LePage notes.
“With easing pandemic restrictions, there was finally something to talk about other than real estate, and people began travelling and socializing again,” Phil Soper, president and CEO of Royal LePage, said in news release.
“In addition, a year of relentless competition for too few properties drove some would-be purchasers to the sidelines as buyer fatigue set in. Yet their fundamental need or desire for a new home remains and we are seeing pent-up demand grow. We expect another unusually busy winter season building to a brisk 2022 spring market.”
When broken down by housing type, the median price of a single-family detached home rose 25.2 per cent, while the median price of a condo rose 13 per cent.
When it comes to regional housing prices, each of the major Canadian cities and their surrounding areas saw a jump in home prices, with the biggest jumps coming in Greater Vancouver (20.8) and Ottawa (20.7).
“Vancouver and the surrounding greater region remains firmly in a seller’s market,” said Randy Ryalls, general manager, Royal LePage Sterling Realty in Vancouver.
“Although activity showed signs of slowing modestly in the summer and early days of September, the market has picked up again, now that families are back in their usual routines.”
Of the 62 Canadian cities included in the survey, every single one showed rising aggregate home costs, but the slowest rise in prices came out of Thunder Bay, Ont. (2 per cent), West Vancouver (3.7 per cent) and Toronto (4.8 per cent).
When it comes to the fastest-growing areas in terms of aggregate home prices, Saint John, N.B. (36.4 per cent), Kingston, Ont. (36 per cent), Belleville/Trenton, Ont. and London, Ont. (32.4 per cent) top the list.
Royal LePage is also predicting a 16-per-cent increase in aggregate home costs for the fourth quarter of 2021 when compared to last year’s fourth quarter.
“Looking back to the late spring of 2020, the Royal LePage benchmark value of a home was $580,000,” Soper said. “The subsequent ‘Covid-catalyst’ which drove legions of Canadians to upgrade their living situations, has created a period of exceptional home price growth with real estate values on track to grow 33 per cent by year end.”
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