The report combines market data with intel from Engel & Völkers’ local Canadian market experts to produce a residential property analysis for the markets in Halifax, Montréal, Ottawa, Toronto, and Vancouver. It shares notable trends, in-demand neighbourhoods, economic factors, and changing buyer and seller preferences in three different price segments; under $1 million, $1-$3.99 million, and over $4 million.
Factors like changing homeowner priorities, low interest rates, easy access to borrowing, and extra savings amongst professionals who stayed employed during 2020 combined to accelerate what Engel & Völkers calls ‘the COVID shuffle’. The report acknowledges the slight cooling of Canada’s red-hot housing market as of mid-April as competition levelled out. Overall, it forecasts that prices in premium markets are anticipated to stabilize in the short term while still increase in the long term as borders reopen in the wake of COVID-19 recovery.
In the luxury market, the start of 2021 brought an increase in demand for high-end condominiums. Driving the luxury condo sales market were (somewhat surprisingly) first-time homebuyers looking to enter the real estate market and retirees hoping to cash in their suburban homes, says Engel & Völkers. As many clients who moved to rural areas during the pandemic kept their city properties, luxury condo prices are expected to continue to rise with reopening rollouts across the country.
Interestingly, there is also an increase in multigenerational living. In fact, it’s the fastest-growing housing type in the country. Defined as homes with three or more generations living together, multigenerational homes allow families to redistribute and pool their resources to attain higher-quality luxury homes, says Engel & Völkers. The company forecasts that this fast growing phenomenon will become more frequent in Canada’s urban and surrounding areas.
Engel & Völkers also reports global pent-up demand for properties in Canada’s major metropolitan cities. As international borders have remained closed since start of the pandemic, international demand upon their reopening is expected to drive the luxury market in Vancouver and Montreal in particular. Given Canada’s limited housing supply, this influx of buyers is anticipated to significantly strain the market.
“After an unprecedented run, premium real estate markets are normalizing across Canada’s most in-demand cities, and that’s a good thing. At a global level, Canada’s real estate market is largely undervalued,” said Anthony Hitt, President and CEO, Engel & Völkers Americas. “But with low housing inventory and the buyer frenzy we saw in the first half of the year, Engel & Völkers believes the unprecedented demand for luxury properties will sustain. Local demand for luxury housing increased exponentially during the pandemic and international buyers are excited to return after a year of border closures. 2022 will be a year to watch.”
Engel & Völkers finds that The Halifax Regional Municipality (HRM) is a strong seller’s market that continues to draw both interprovincial and international interest. Draws of the city include its cultural attractions, the stunning landscape, and relatively attractive prices compared to other parts of the country, says the company. Last year, the average price for a home in Nova Scotia was $304,590 compared to a national average of $607,250.
Throughout the first half of this 2021, Halifax’s real estate market began a historic run. From January to June, homes priced between $1 million and $3.99 million stayed on the market for an average of only five days, while homes priced below $1 million spent 43 days on market. Despite record low inventory numbers in February 2021, total sales in Halifax increased from the previous year.
Overall, single-family detached homes were by far the most popular housing type. In the luxury bracket, 21 homes were sold from $1 million to $3.99 million in both April and May 2021, respectively. The average price hovered at $1.4 million during both months. This is a marked difference from the previous year, highlights Engel & Völkers, which saw zero sales at this price point in April 2020 and only five in May 2020 (though that was also at the height of COVID’s first wave). Now, as Halifax is open to the rest of Canada, Engel & Völkers anticipates a floodgate of interest from clients who were not prepared to purchase site unseen. Historically low inventory levels could create an even more pressurized situation, says the company.
Montreal’s position on the urbanization curve is steadily climbing, says Engel & Völkers, as the city continues to attract buyers from French-speaking regions around the world. “Additionally, strong working and education opportunities paired with a charming European-like lifestyle have garnered interprovincial and international attention,” says Engel & Völkers.
Both home prices and production in Montreal continued to rise during the first half of 2021. Total sales priced $1 million or higher grew 115% in January, from 61 to 131 year-over-year. This compares to an only 17% increase in sales for all homes in the market, says Engel & Völkers, signalling a new era for premium real estate. Plexes did exceptionally well in the first four months of 2021, seeing a 74% increase in sales compared to the first four months of 2020. Similarly, condo sales for units priced $1 million or higher climbed from January to April 2021, totalling 138 units.
While Montreal is still one of Canada’s most affordable cities on the real estate front, Engel & Völkers forecasts it entering a strong growth period, with investors creating funds specifically for purchasing luxury detached homes in coveted neighbourhoods like Westmount and Outremont. This, coupled with growing opportunities and new construction projects, has positioned Montréal to be the new investor favourite of Canada’s real estate markets, according to Engel & Völkers.
In the nation’s capital, the first half of the year brought a strong seller’s market that drove home prices to increase exponentially. Engel & Völkers point to fear of missing out among buyers that has resulted in a 513% increase in the number of homes sold in the $1 million to $3.99 million category from January to May 2021 compared to the same period in 2020. The uptick in notable sales in Ottawa was replicated in surrounding rural areas as well, says Engel & Völkers.
Since January 2021, average days on market for all homes decreased steadily in Ottawa. In April, the average days on market for all residential properties dropped to 18, down 40% from April 2020, in the thick of the first wave of the pandemic.
In May, Ottawa houses sat on the market for an average of 13 days. For condos, however, days on market increased. In April and May 2021, units sat for 122 and 110 days, respectively, an increase from 90 days in May 2020, says Engel & Völkers. The market began to level off by May. Although prices continued to increase, sales returned to pre-pandemic levels and there was a notable drop in seriously interested buyers.
Engel & Völkers anticipates a return to a more balanced market in the fall. “As more government and tech jobs become available and borders reopen, Ottawa will likely see increased domestic and international migration,” says the company. “On a global scale, the city’s real estate is largely undervalued compared to other capital cities, leaving room for growth as Ottawa rises from a government town to a dynamic hub of tech and business.”
Like other major Canadian cities, Toronto saw a record-breaking population loss from July 2019 to July 2020, with 50,375 residents leaving the city for rural areas. However, as restrictions ease and vaccines roll out, the city is seeing a renewed interest in urban living, says Engel & Völkers.
January 2021 started off strong, with average home prices rising to $967,885, growing by 15.5% year-over-year in the Greater Toronto Area (GTA). Overall, home sales were up by more than 50% compared to January 2020, for a total of 6,928. All homes sold in the $1 million to $3.99 million bracket nearly doubled from January 2020, with single-family detached homes driving this increase. Homes in this category sat on the market for 24 days in January 2021, down 33% from January 2020. “The luxury condo market, deemed almost extinct in 2020, has remarkably held its value into 2021, as the number of condo units sold valued between $1 million to $3.99 million has also doubled and prices have held,” says Engel & Völkers.
The company predicts the market will continue to normalize. New inventory coming on the market will remain low, which will likely increase pressure for buyers looking to enter, it says. While the city and GTA have not run out of buyers and sellers, Engel & Völkers predicts a slow summer and holding pattern scenario as lockdown restrictions ease.
Engel & Völkers reports a robust condo market in Vancouver since the start of 2021. “Sales remain stable and are continuing to increase, indicating that buyers are still interested in condo living or taking an initial step into real estate,” says the company. Condos at all levels within premium and ultra-luxury markets continue to sell to discerning buyers with an increased focus on quality over quantity. Rather than a focus on the amount of money they’re spending on a home, wealthy buyers are more concerned with the quality of the home, as its reflected in things like amenities, square footage, and parking, says Engel & Völkers.
“Like Toronto, Vancouver is emerging from the third wave of the pandemic in a promising position,” says Engel & Völkers. The company says significant growth in the pricy city is fuelled by buyers’ growing interest in real estate as an investment and desire to own primary residences. As in Toronto, recreational homes and property outside of Vancouver continue to experience high sales as city residents crave an escape from the concrete and more space.
Vancouver is still in a seller’s market, but Engel & Völkers predicts that the west coast city will start to see a normalization period and return to a more balanced market in the fall, thanks largely in part to Canada’s new mortgage stress test. Finally, as we emerge from the pandemic, the city will experience an influx of national and international migration. According to Engel & Völkers, the luxury market will continue to grow steadily and see increasingly more ultra-luxury home sales.
Toronto real estate broker John Pasalis laughed at Greg when asked about campaign housing pledges and whether any of them make sense for addressing affordability. Check out that refreshingly candid reaction, and why Pasalis (like many other guests we’ve spoken with) fears the Liberals’ strategy will backfire and actually drive up prices. Mattamy Homes Founder Peter Gilgan was even more blunt, telling us “we need to declare that we’re at war with affordability.” We’ll have plenty more insight in the days ahead about what to expect in Justin Trudeau’s third mandate, including this afternoon when CAPREIT CEO Mark Kenney joins Greg to discuss the Liberals’ targeting of real estate investment trusts. We’ll note here that the Prime Minister’s Office released a readout yesterday evening from Trudeau’s call with U.S. President Joe Biden; the two “committed to getting together in person soon.”
Markets will find out this afternoon if the U.S. Federal Reserve is prepared to fine-tune its language about taper timing. Last we heard from Chair Jerome Powell in his Jackson Hole speech, he confirmed that the central bank thinks it will be in a position to scale back asset purchases before the end of this year, but signaled “considerable” progress was still needed to attain maximum employment. Since then, we saw August non-farm payrolls that fell way short of expectations. The policy statement and updated forecasts land at 2 p.m.; followed by Powell’s news conference a half hour later.
The debt-laden Chinese property developer that’s captured the financial world’s attention amid concern (seemingly misplaced, at least for now) that it could be heading toward a Lehman moment has managed to assuage some immediate fear, while simultaneously stirring confusion. China Evergrande Group said in a regulatory filing that it “resolved” an interest payment coming due tomorrow, without providing many details. Meanwhile, less than 24 hours ago, Bloomberg Intelligence Analyst Damian Sassower told us the big question surrounding Evergrande was what the People’s Bank of China was prepared to do about it. Overnight, it pumped additional liquidity into the financial system in a reverse repo operation. That all added up to a steady session in Asia, where the Shanghai Composite closed flat after a two-day holiday.
OTHER NOTABLE STORIES
FedEx had a rough fiscal first quarter as profit fell year-over-year amid supply chain woes and a US$450-million jump in costs due to what the company calls a “constrained labour market.” The parcel shipper cut its full-year profit forecast as a result. Shares have been down more than five per cent in pre-market trading.
Celestica announced last night that it’s paying US$306 million to acquire Singapore-based electronics manufacturer PCI Limited. Celestica, which also raised its profit forecast, said the deal will add more than 20 “blue-chip” customers to its business. CEO Rob Mionis is on The Open at 10:10 a.m.
Telus International announced a secondary offering of 12 million shares after yesterday’s closing bell. None of the proceeds are flowing to the company. TIXT shares have surged almost 22 per cent since their first day of trading in February.
Walt Disney Co. shares have steadied in pre-market trading after an abrupt five per cent plunge yesterday afternoon on the heels of a management warning about Disney+ subscriber additions this quarter.
Reminder that Ontario’s COVID vaccine passport program takes effect today, forcing venues including restaurants, bars, and movie theatres to screen patrons for full vaccination.
Notable data: Canadian manufacturing sales flash estimate, U.S. existing home sales
Notable earnings: BlackBerry, General Mills
8:30: Wheaton Precious Metals investor day
9:10: Suncor Energy East Coast Vice-President Josee Tremblay addresses Newfoundland and Labrador Oil and Gas Industries Association conference
10:00: Ontario Superior Court resumes hearing Cineworld-Cineplex case
11:00: U.S. President Joe Biden convenes virtual COVID summit on sidelines of United Nations General Assembly
14:00: U.S. Federal Reserve releases interest rate decision and updated forecasts (plus 14:30 news conference)
Canadian Council for Aboriginal Business hosts virtual conference on rebuilding the Indigenous economy. Speakers include Suncor Energy CEO Mark Little (12:45)
It is part of the REIT’s overall strategy of divesting Calgary office property, which began in late 2016, to concentrate on other real estate assets.
At its peak in mid to late 2016, just prior to its shift in its strategy, Artis (AX-UN-T) owned in excess of 2.5 million square feet of office property in Calgary across approximately 20 properties.
“Artis pursued a significant portfolio shift away from Calgary office to prioritize capital allocation to higher-growth strategies, particularly emphasizing the U.S.A. industrial development program,” said Corey Colville, head of strategy, real estate, at Artis.
Colville said the present occupancy of the Calgary office portfolio is about 70 per cent.
“Strategic decision” to exit Calgary office sector
“We still have a very robust portfolio of retail and industrial properties in Calgary, but we’ve made this strategic decision to market our remaining Calgary office buildings,” said Colville.
Artis has five retail properties in Calgary of over 343,000 square feet and six industrial properties with over 362,000 square feet.
“Over the past trailing few years, Artis has marketed and successfully transacted on much of their Calgary office portfolio. These remaining six assets, we’re of the view that there’s a terrific opportunity for the market to capitalize on a substantial discount (to) replacement cost and create significant value,” said Colville.
“We’ve had interest from owner/user investors, from repositioning and converter investors as well as office investors.
“With these properties, we think with the amount of potential there’s just fundamentally an opportunity in the market for local investors to capitalize on.”
Colville said Artis has held some of the Calgary office assets for more than a decade. On balance, they’ve been longer-tenured assets for Artis.
“At the peak, (Calgary office) was a really significant component of Artis’ total valuation. At this point of time, the remaining assets in relation to our gross book value is actually quite immaterial and the contributory cash flows from them,” he said.
“We’re looking to focus our efforts in a more strategic way. We think that we’ll be very dominant long-term and competitive landlords and we don’t feel that this is going to be the case now that we’ve reduced our position so much in the Calgary office market.”
Downtown vacancy about 30 per cent
Corey Colville, head of strategy, real estate, at Artis REIT. (Courtesy Artis)
Calgary’s office market has struggled for the past seven years since the collapse of oil prices in late 2014. That led to massive layoffs, particularly in the city core where many energy companies had their corporate head offices. Obviously, fewer people has meant less need for office space throughout the city.
The downtown Calgary office vacancy rate has hovered around the 30 per cent mark for some time.
“You know, we’re not quite as pessimistic as some of the news headlines would indicate. Naturally, and quite obviously, there’s been a struggle in the market, but we are confident that Calgary is one of the most important cities in Canada and that Canada is a phenomenal country to invest in,” said Colville.
“In time, we believe that Calgary will make a strong resurgence and comeback and we believe that Calgary will benefit from the wave of immigration to come and the rejuvenation to the energy markets over time.”
The Artis REIT property portfolio
In Q2 2016, Artis had 260 properties of about 26.6 million square feet overall; 191 properties in Canada with about 17.1 million square feet and 69 properties in the U.S.A. with about 9.5 million square feet.
At that time, it owned 73 properties in Alberta with about 6.7 million square feet. By the end of Q2 2021, that number had decreased to 40 properties with about 2.7 million square feet.
At the end of Q2 2021, Artis had 133 Canadian properties with about 10.4 million square feet and 70 U.S. properties with about 11.6 million square feet for an overall total of 203 properties and 22 million square feet.
The REIT’s portfolio at the end of the second quarter was 42.7 per cent office, 38.2 per cent industrial and 19.1 per cent retail.
Its overall occupancy was 92.3 per cent in Canada; 97.7 per cent for industrial, 83.3 per cent in office and 90.8 per cent in retail. In the U.S., its overall occupancy was 91.8 per cent comprising 94.3 per cent for industrial and 87.4 per cent for office.
Colville said the third quarter will feature a further and material shift of the portfolio following the sale of 27 of 28 of its Greater Toronto Area industrial properties. The 28th property is also for sale.
Other recent portfolio activity
– Acquired a parcel of industrial development land in Minnesota’s Twin Cities Area, for US$1.5 million.
– Disposed of an office property in Calgary, three retail properties in Regina and a portion of a retail property in Fort McMurray, Alta., for an aggregate price of $62 million.
– On June 30, Artis entered into an agreement to sell the GTA Industrial Portfolio, comprising 28 industrial properties located in the Greater Toronto Area. On July 15, the REIT closed on 26 of the 28 properties for $696.7 million. One of the remaining properties is expected to close in Q3 2021 and generate gross proceeds of $26.7 million. The remaining property will be actively marketed for sale.
– Subsequent to June 30, it also disposed of the King Edward industrial portfolio, comprised of two properties in Winnipeg, for $3.2 million.
New arrivals may further stress Canada’s already tight housing markets
Author of the article:
Just when you thought you could catch a break from pandemic-fuelled housing madness, experts are predicting the reopening of the U.S.-Canada border, and Canada’s commitment to boost immigration, could fuel even higher levels of demand. All those new arrivals, students and family members rejoining loved ones will need places to live. And Canada’s housing supply is tight.
“If you think it’s expensive now, just wait,” says Tom Storey, a real estate agent with Royal LePage in Toronto. “The numbers tell us that prices should go up because there’s a lot of people coming here and we’re not building enough new properties.”
Canadian government raising immigration targets
Exactly when new arrivals will impact housing markets is vague. Border entry is limited to those who can show they’re fully vaccinated.
But, once the pandemic’s threat has largely passed, the U.S. and Canadian governments have both expressed hopes that border traffic will return to normal.
Likewise, while Canada’s immigration goals call for 401,000 new permanent residents this year (reaching 1.2 million by 2023), dates aren’t specific and COVID-19 will continue to delay things in the short term.
Canada’s borders have been closed to most immigrants for much of the pandemic. But as the country’s population ages, economic immigration from workers and employers who ultimately become permanent residents has become more important.
“The key to both short-term economic recovery and long-term prosperity is immigration,” Marco Mendicino, Canada’s Minister of Immigration, Refugees and Citizenship, said at a news conference where he revealed the country’s goals through 2023.
The newcomers will put pressure on housing — either as homebuyers or renters.
In addition to new permanent residents, the number of international students in Canada is also rebounding. Those numbers were rising sharply before the pandemic, growing to 402,500 in 2019 — a 15 per cent increase from 2018, according government data.
Those with temporary work permits will also grow the population. Almost 70,000 more people were issued work permits in 2019 (a total of 404,000) and 63,020 people with temporary work permits were granted permanent residency.
Newcomers will need housing
Home prices were rising pre-COVID-19, due to a lack of housing supply combined with low mortgage rates and strong consumer demand.
Amid the new immigration policies, a growing student population and a proposed childcare system that’s expected to give families room to save more of their income, demand for housing will only grow, according to a recent report from Scotiabank.
Yet, home construction hasn’t kept up with demand for several years.
This year, as fewer newcomers have entered the country, the ratio of home completions to population has improved slightly. That’s likely to worsen as the government meets its immigration targets, the report says.
To avoid a continued rapid acceleration in home prices, experts argue immigration targets should align with housing policies that help meet the demand.
“Our federal government’s decision to raise immigration targets today without making the corresponding supply-side housing policy changes needed to increase supply is a decision to inflate home prices out of reach of most Canadians tomorrow — including many of our newest fellow citizens,” John Pasalis, the president of Toronto-based Realosophy Realty, says in a recent market report.
Immigration to impact the resale and rental markets
While Canada’s major cities have seen double-digit home price growth in recent years, the market overall appears to be calming.
July sales slipped 3.5 per cent on a month-over-month basis, according to the Canadian Real Estate Association, and sales are down a cumulative 28 per cent from a March 2021 peak.
Home sales in Canada fell a significant 14 per cent year over year in August, the Canadian Real Estate Association (CREA) said Sept. 15. Still, the association says, home sales in this country remain historically strong. And a lack of supply of homes for sale is pushing prices to record levels in Canada’s most populous cities.
The rental market, too, has been down from its high — in part due to restrictions on Airbnb units, which released bundles of short-term rentals into the traditional leasing market.
“When the borders open and [people] go back to university, you’re going to see an increase in the rental market,” Storey says. “Then it will flood into the sale market.”
But analysts say the property market is facing headwinds — namely inflation and the specter of rising interest rates.
And many of the Canadians who wanted to buy a home in order to get more space amid the pandemic, or even downsize, have already done so, says Adil Dinani of the Dinani Group for Royal LePage West in Vancouver. That may help cool off prices in the months to come.
Building more housing also will help.
“Supply is the common denominator in most of these major markets,” Dinani says. “There’s a shortage of quality inventory.”
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
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