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Loaded with cash, real estate buyers wait for sellers to crack – BNNBloomberg.ca

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The world’s biggest real estate investors are sitting on piles of cash, preparing for once-in-a-lifetime opportunities created by the pandemic.

With economies around the world sputtering, commercial real estate prices are expected to come down. How much they’ll fall is the key question.

Sellers are currently willing to concede discounts of around five per cent, while bidders are hoping for about 20 per cent off pre-pandemic prices, said Charles Hewlett, managing director at Rclco Real Estate Advisors. That estimated gap, which is likely wider in specific cases, has put a freeze on deals.

“The mantra for anything that hasn’t gotten started is: delay, defer and, in many cases, renegotiate,” Hewlett said. “If I’m going to have vintage May 2020 on my books, I want to be able to demonstrate to my investors that I got an exceptionally good deal.”

Dry Powder

Private equity firms across the globe hold an estimated US$328 billion in dry powder for real estate deployment, according to the data firm Preqin Ltd. Prior to the crisis, asset prices had been pushed up as investors chased yield in riskier corners of the property market. Now, Blackstone Group Inc. and Brookfield Asset Management Inc., the largest real estate investing companies, are expected to hunt for bargains among the fallout from the pandemic.

For now, social distancing rules and a virtual travel halt have stalled transactions and led to speculation that prices will drop in coming months.

“The physical restrictions taking place are mostly preventing new deals from happening,” Tom Leahy, a London-based senior director at Real Capital Analytics Inc. said. “Far fewer active buyers, far fewer deals, an increase of deals falling out of contract — those are the preludes to seeing prices fall when the market does come back.”

The volume of deals in Europe plunged 65 per cent in April from a year earlier, according to Leahy. U.S. and Asian markets faced similar drops.

Asia, where the pandemic began, is likely to recover faster than Europe or America, as Taiwan, South Korea, Japan and parts of China reopen for business, according to Richard Barkham, chief economist for CBRE Group Inc. Transactions in the Americas will fall an estimated 35 per cent this year, compared with a roughly 25 per cent decline in the Asia-Pacific region, he said.

Takes Time

Still, New York-based Blackstone, which had US$538 billion in assets under management at the end of March, is “starting to see some rescue situations,” President Jonathan Gray said during an earnings call last month. He added that “distress takes time to play out.”

Brookfield, meanwhile, has US$60 billion “ready to be deployed globally as opportunities arise,” Chief Executive Officer Bruce Flatt said last week.

“In reflecting on what really matters to our business, it is liquidity, liquidity and liquidity, in that order,” he wrote in a letter to shareholders.

The firms with money to spend first have to figure out what do do with some of their more vulnerable recent investments. Blackstone said last month that its real estate portfolio, which represents about 30 per cent of its assets under management, is concentrated in “sectors that have shown greater resilience to Covid-related headwinds.”

Still, not all its bets look like winners. In late February, Blackstone announced a deal to buy a $6 billion portfolio of university dormitories in the U.K. popular with international students.

Head Scratching

“Are they scratching their heads about having put money into the student business?” Chris Grigg, CEO of British Land Co., one of the U.K.’s largest commercial landlords, said. “You’d guess they probably are a bit.”

Brookfield made waves with a US$15 billion bet on malls in 2018. But with retail stores shuttered and more consumers shopping online, the company recently announced a US$5 billion retail revitalization program.

Until shopping, commuting and travel become routine again, it will be hard for investors to agree on what malls, hotels, offices and other properties are worth.

“Proof is really going to be when the markets start to reopen when buyers and sellers find a middle ground with what’s going to happen with pricing,” Real Capital’s Leahy said. “It’s going to be asymmetrical. Different sectors and different geographies are going to be factors. There’s not going to be a uniform recovery.”

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Greater Toronto home sales jump in October after Bank of Canada rate cuts: board

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TORONTO – The Toronto Regional Real Estate Board says home sales in October surged as buyers continued moving off the sidelines amid lower interest rates.

The board said 6,658 homes changed hands last month in the Greater Toronto Area, up 44.4 per cent compared with 4,611 in the same month last year. Sales were up 14 per cent from September on a seasonally adjusted basis.

The average selling price was up 1.1 per cent compared with a year earlier at $1,135,215. The composite benchmark price, meant to represent the typical home, was down 3.3 per cent year-over-year.

“While we are still early in the Bank of Canada’s rate cutting cycle, it definitely does appear that an increasing number of buyers moved off the sidelines and back into the marketplace in October,” said TRREB president Jennifer Pearce in a news release.

“The positive affordability picture brought about by lower borrowing costs and relatively flat home prices prompted this improvement in market activity.”

The Bank of Canada has slashed its key interest rate four times since June, including a half-percentage point cut on Oct. 23. The rate now stands at 3.75 per cent, down from the high of five per cent that deterred many would-be buyers from the housing market.

New listings last month totalled 15,328, up 4.3 per cent from a year earlier.

In the City of Toronto, there were 2,509 sales last month, a 37.6 per cent jump from October 2023. Throughout the rest of the GTA, home sales rose 48.9 per cent to 4,149.

The sales uptick is encouraging, said Cameron Forbes, general manager and broker for Re/Max Realtron Realty Inc., who added the figures for October were stronger than he anticipated.

“I thought they’d be up for sure, but not necessarily that much,” said Forbes.

“Obviously, the 50 basis points was certainly a great move in the right direction. I just thought it would take more to get things going.”

He said it shows confidence in the market is returning faster than expected, especially among existing homeowners looking for a new property.

“The average consumer who’s employed and may have been able to get some increases in their wages over the last little bit to make up some ground with inflation, I think they’re confident, so they’re looking in the market.

“The conditions are nice because you’ve got a little more time, you’ve got more choice, you’ve got fewer other buyers to compete against.”

All property types saw more sales in October compared with a year ago throughout the GTA.

Townhouses led the surge with 56.8 per cent more sales, followed by detached homes at 46.6 per cent and semi-detached homes at 44 per cent. There were 33.4 per cent more condos that changed hands year-over-year.

“Market conditions did tighten in October, but there is still a lot of inventory and therefore choice for homebuyers,” said TRREB chief market analyst Jason Mercer.

“This choice will keep home price growth moderate over the next few months. However, as inventory is absorbed and home construction continues to lag population growth, selling price growth will accelerate, likely as we move through the spring of 2025.”

This report by The Canadian Press was first published Nov. 6, 2024.

The Canadian Press. All rights reserved.

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Homelessness: Tiny home village to open next week in Halifax suburb

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HALIFAX – A village of tiny homes is set to open next month in a Halifax suburb, the latest project by the provincial government to address homelessness.

Located in Lower Sackville, N.S., the tiny home community will house up to 34 people when the first 26 units open Nov. 4.

Another 35 people are scheduled to move in when construction on another 29 units should be complete in December, under a partnership between the province, the Halifax Regional Municipality, United Way Halifax, The Shaw Group and Dexter Construction.

The province invested $9.4 million to build the village and will contribute $935,000 annually for operating costs.

Residents have been chosen from a list of people experiencing homelessness maintained by the Affordable Housing Association of Nova Scotia.

They will pay rent that is tied to their income for a unit that is fully furnished with a private bathroom, shower and a kitchen equipped with a cooktop, small fridge and microwave.

The Atlantic Community Shelters Society will also provide support to residents, ranging from counselling and mental health supports to employment and educational services.

This report by The Canadian Press was first published Oct. 24, 2024.

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Here are some facts about British Columbia’s housing market

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Housing affordability is a key issue in the provincial election campaign in British Columbia, particularly in major centres.

Here are some statistics about housing in B.C. from the Canada Mortgage and Housing Corporation’s 2024 Rental Market Report, issued in January, and the B.C. Real Estate Association’s August 2024 report.

Average residential home price in B.C.: $938,500

Average price in greater Vancouver (2024 year to date): $1,304,438

Average price in greater Victoria (2024 year to date): $979,103

Average price in the Okanagan (2024 year to date): $748,015

Average two-bedroom purpose-built rental in Vancouver: $2,181

Average two-bedroom purpose-built rental in Victoria: $1,839

Average two-bedroom purpose-built rental in Canada: $1,359

Rental vacancy rate in Vancouver: 0.9 per cent

How much more do new renters in Vancouver pay compared with renters who have occupied their home for at least a year: 27 per cent

This report by The Canadian Press was first published Oct. 17, 2024.

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