Part two of a two-part series examining the landscape facing real estate lenders going into 2024. The first part can be found here.
If lenders could draft a fantasy real estate portfolio, industrial properties and purpose-built rentals would be among their top picks.
Older Class B office properties, though, aren’t getting snapped up nearly as high in a fantasy draft.
“Something like the Bentall Centre [in downtown Vancouver] would be considered of high value, high desirability and if it was coming up for renewal, lenders would look at that on a positive base,” said Carmin Di Fiore, an executive vice-president at CBRE Canada.
“Where you’re seeing the real issues … is in the B, B-minus and the C buildings. Older assets that don’t have the type of amenities and the quality that you get in a Bentall setup are where lenders are going to sit there and say, ‘I’m not sure I want to be able to renew this’ or they’re saying, ‘We need significant reduction in the loan to get it to where we’re comfortable with.’”
Shifting sentiments around office space and the “fog of work from home” mean this asset class is less popular compared with purpose-built rental or industrial properties, according to Di Fiore, who works in CBRE’s debt and structured finance team.
The hope is that local and federal incentives to build purpose-built rentals and multifamily housing will spur more development, according to a Nov. 27 report from CBRE Canada.
The majority of lenders surveyed in the firm’s new report said they intend to increase their budgets and expand exposures for purpose-built rental properties, while half the respondents said they will do so for industrial properties.
Fewer than half (42) per cent of lenders expect rent growth for industrial properties to return to historic levels within the next year, while 55 per cent of respondents reported low or no appetite to finance speculative construction in 2024.
Environmental, social and governance (ESG) strategies will also have an impact on lender activity in 2024.
Half of respondents said that they expect ESG to either significantly or moderately impact both debt availability and mortgage pricing. In addition, 23 per cent of lenders said they declined to bid on a real estate loan this past year due to the underlying asset’s ESG profile.
Sixty-eight per cent of lenders said they expect a property’s carbon footprint to impact the ability to secure a mortgage with competitive terms within the next one to five years, with 11 per cent of lenders reporting it is already happening and having an influence today.
“Banks and regulators are also picking up on this and basically are saying, ‘We’re going to adjust capital requirements and what you’re allowed to lend on based on your ESG performance,’” Di Fiore said.
“Now, having said that, we are slower off the mark compared to Europe but we’re going to get there. Lenders think that in the next 36 months-plus it’ll be far more significant in terms of how they evaluate loans or how they look at things.”
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.
