Morguard Canadian Economic Outlook & Market Fundamentals
Third Quarter Update 2020
MISSISSAUGA, ON, Nov. 18, 2020 /CNW/ – During the third quarter of 2020, the multi-suite residential and industrial sectors of Canada’s commercial real estate remained resilient despite the economic slowdown resulting from the pandemic. Meanwhile, the office and retail segments witnessed increased vacancy levels in most Canadian cities as restrictions in response to a second wave of COVID-19 kept Canadians working and shopping from home, according to the latest Canadian Economic Outlook and Market Fundamentals Report issued by Morguard Corporation (“Morguard”) (TSX: MRC).
“The steady performance of multi-suite residential and industrial assets during the pandemic continued to attract investors during the third quarter of 2020,” said Keith Reading, Director, Research at Morguard. “Canada’s job market continued to recoup after the losses seen in the spring, however, office and retail assets are anticipated to underperform in the approaching atypical holiday season. Entering 2021, consumer and investor confidence are anticipated to return, aligned with further developments regarding a COVID-19 vaccine or more effective treatments.”
Commercial Real Estate
Demand for multi-suite residential assets outperformed the office and retail sectors in the third quarter of 2020, continuing with the trend seen since early 2020. The segment’s stable performance is in part attributed to the uncertainty brought on by the pandemic regarding job losses, as many Canadians who had planned to purchase a home in 2020, have decided to continue renting until the economic landscape becomes clearer. For investors, multi-suite residential assets remained a safe, long-term investment. Looking ahead, investment demand for multi-suite residential assets will continue to outpace the supply of available properties in major centres such as Toronto, Montreal and Vancouver.
Demand for industrial investment properties also exceeded supply during the third quarter of 2020. More than $1.0 billion in industrial property sales was tallied in the country’s major markets combined. Investment sales have exceeded $1.0 billion mark in every quarter dating back to the first quarter of 2014.
In the office segment, downtown vacancy rose sharply in most Canadian cities in the third quarter of 2020 with a spike in sublease availability and a subsequent increase in supply. Tenants were pushed to reduce their footprints in the core of the country’s most expensive markets due to heightened economic and financial uncertainty. Investors applied caution when purchasing office assets and focused on stable investments with financially stable tenants on longer-term leases as a more forward-looking approach.
Looking ahead, institutional investors are expected to target prime properties in Toronto, Montreal and Vancouver most aggressively, which will ensure property values hold firm. The Canadian commercial investment property capital flow is anticipated to remain muted over the near term, barring some form of resolution of the COVID-19 pandemic and a subsequent improvement in the economic outlook.
Economic Factors
The proportion of Canadians collecting the Canada Emergency Response Benefit, Canada Emergency Student Benefit or Employment Insurance fell to 13.5 per cent in September, down from 16.1 per cent in August, depicting a moderate improvement in Canada’s economy, combined with a bounce back in the job market.
During the third quarter, the Bank of Canada continued to adapt to the economy’s evolving conditions and responded to support Canadian businesses and borrowers. In the same period, global equity markets strengthened as a result of an improved global economic outlook, however, an increase in the number of COVID-19 cases across the country may impact the global equity market forecast for the near term.
The Consumer Price Index (CPI) increased modestly during the third quarter, due largely to subdued domestic services demand. Inflation levels are anticipated to remain muted over the next few months, as a result of excess economic capacity and an overall weakened labour market.
Retail sales grew at a moderate pace in the third quarter after a strong rebound from the losses as a result of the COVID-19 pandemic closures. Retail sales increased by 2.6 per cent year-over-year as of July. Except for gasoline and clothing, sales were up for all spending sub-categories.
The third quarter update of the 2020 Economic Outlook and Market Fundamentals Research Report, released today by Morguard, provides a detailed analysis of the 2020 real estate investment trends to watch in Canada. The full report is available at morguard.com/research.
About Morguard Corporation
Morguard Corporation is a major North American real estate and property management company. It has extensive retail, office, industrial, hotel and residential holdings owned directly and through its investment in Morguard Real Estate Investment Trust and Morguard North American Residential REIT. Morguard also provides real estate management services to institutional and other investors. Morguard’s owned and managed portfolio of assets is valued at $19.4 billion. Please visit http://www.morguard.com or follow us on LinkedIn.
Forward Looking Statement Disclaimer
Statements contained herein that are not based on historical or current fact, including without limitation statements containing the words “anticipates,” “believes,” “may,” “continue,” “estimate,” “expects” and “will” and words of similar expression, constitute “forward-looking statements.” Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, events or developments to be materially different from any future results, events or developments expressed or implied by such forward-looking statements. Such factors include, among others, the following: general economic and business conditions, both nationally and regionally; changes in business strategy; financing risk; existing governmental regulations and changes in, or the failure to comply with, governmental regulations; liability and other claims asserted; and other factors. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. The Publisher does not assume the obligation to update or revise any forward-looking statements.
SOURCE Morguard Corporation
For further information: K. Rai Sahi, Chief Executive Officer, T 905-281-3800; Keith Reading, Director of Research, T 905-281-3800; or email [email protected]
[unable to retrieve full-text content]
Banks Believe They Are Well-Prepared for Commercial Real Estate Fallout The Wall Street Journal
Source link
Robert McLister: Tax shelters don’t make housing more affordable, but those with the cash would be foolish not to use them
Published Apr 19, 2024 • Last updated 55 minutes ago • 4 minute read
With housing unaffordability near its worst-ever level, our trusty leaders are on a quest to right their housing wrongs and get more young people into homes.
Part of Ottawa’s big strategy to “help” is promoting tax-sheltered savings accounts and pumping up their contribution limits. That, of course, stimulates real estate demand amidst Canada’s population and housing supply crises. But save that thought.
Advertisement 2
Article content
Article content
First-time buyers now have three government piggy banks to stockpile cash for a down payment:
1. The 32-year-old RRSP Home Buyers’ Plan — which lets you deduct contributions from your income to defer taxes and then borrow from the account interest-free for your down payment (as long as you wait 90-plus days to withdraw any contributions);
2. The 15-year-old Tax-free Savings Account (TFSA) — which lets you save after-tax dollars, grow your money tax-free and withdraw it without the taxman taking a bite;
3. The one-year-old First Home Savings Account (FHSA) — which is a combination of an RRSP and TFSA. It lets you deduct contributions from income, compound it tax-free and never pay tax on withdrawals used to buy a home. You can even save the deduction for a year when you need it more — when you’re earning more money.
Assuming you have the funds and contribution room, these tax shelters can combine to help you amass a supersized down payment.
“Looking at the FHSA alone, with the max annual contribution room of $8,000 for 2023 and 2024, a potential first-time home buyer could have as much as $16,000 deposited in the account today for a down payment,” says Eric Larocque, chief mortgage operations officer at Questrade’s Community Trust Company.
Top Stories
Article content
Advertisement 3
Article content
“If you also add in the cumulative contribution room of $95,000 for the TFSA, it amounts to $111,000 in potential funds available — and that’s before incorporating investment gains from either account.”
And it doesn’t stop there. RRSP, TFSA and FHSA savings limits keep increasing. If first-timers have enough contribution room, down payment savers in 2024 can sock away even more in these tax-sheltered troves.
“Factoring in the recent changes to the Home Buyers’ Plan, which now permits RRSP withdrawals of up to $60,000 — up from $35,000 — we land at a potential total of $171,000 in deposited funds that can be tapped for a first-time home buyer’s down payment,” Larocque adds.
That’s quite a wad — easily enough to cover the 20 per cent ($139,706) down payment required to avoid mandatory (and pricey) default insurance on the average home. Canada’s average abode is now worth $698,530 by the way, according to the Canadian Real Estate Association.
Here’s the rub: Canada’s living costs are sky-high, and real disposable income has trended downward. So, how’s an average first-time buyer household, raking in less than six figures, supposed to amass such a stash?
Advertisement 4
Article content
Based on national averages, saving 10 per cent of one’s pre-tax income per year (who does that?) would take a young FTB couple over 15 years to sock away $140,000. History shows what would happen to home values if you waited 15 years — they’d jet off without you.
If you have no other resources and your bet is that historical appreciation rates continue — despite slower population growth, more building and potentially higher long-term rates — you’re better off saving less and buying sooner with a five per cent down insured mortgage.
So, does Big Brother really expect your typical first-time buyer to max out all these savings plans? Nope. But hey, throwing a buffet of options at you sure paints a pretty picture of government effort, doesn’t it?
Ottawa’s dirty little secret is that these nifty programs crank up demand, turning renters into buyers. So don’t bet on them making the home-owning dream any cheaper, for first-timers or anyone else.
Take advantage of them anyway.
The government sets limits on these tax shelters with well-off home buyers in mind. One lucky bunch who can make use of all three down payment savings plans is the first-timer with prosperous parents.
Advertisement 5
Article content
Such buyers can make a withdrawal from their parental ATM (a living inheritance, some call it), deposit that cash in all three savings vehicles above and reap: hefty income tax savings or deferrals (thanks to the FHSA and RRSP deductions); tax-free/tax-deferred growth on the investments; and tax-free withdrawals if the money is used to buy a qualifying home (albeit, you’ll have to pay the RRSP HBP back over 15 years, starting five years after your withdrawal).
Recommended from Editorial
The more opportunities it gives people to save for a down payment, the more Ottawa worsens the imbalance between purchase demand and supply. And that, of course, boosts real estate values skyward — which is dandy for existing owners but contradictory to the government’s affordability messaging.
But hey, these tax treats are ripe for the picking. Home shoppers with the means — especially those with deep-pocketed parents — might as well take advantage of all three accounts.
Robert McLister is a mortgage strategist, interest rate analyst and editor of MortgageLogic.news. You can follow him on X at @RobMcLister.
Article content
Successful real estate investors have long followed the adage: When there is blood in the street, buy property.
Historically, this approach has yielded dividends, and it explains the mindset behind a new venture from Hines, a real estate giant with over $93 billion in assets under management. Hines recently announced a new platform called Hines Private Wealth Solutions that seeks to capitalize on the recent troubles in the real estate industry.
The management at Hines has been carefully watching the real estate industry for decades, and they believe that today’s market presents the perfect opportunity for investors to buy distressed assets and sell them at a profit in the future. When you consider that nearly $4 trillion in commercial real estate loans are set to mature between now and 2027, it’s easy to see the logic behind Hines Private Wealth Solutions.
The developers behind many of those projects took out loans assuming they would be able to refinance at pre-COVID interest rates. Considering that current interest rates are about double what they were before COVID-19, that assumption looks more like a losing bet every day. It also means there will be a lot of foreclosures that a well-positioned fund can snap up for pennies on the dollar.
Don’t Miss:
That’s where Hines Private Wealth Solutions seeks to step into the picture. It’s already contracted with investing heavyweight Paul Ferraro, former head of Carlyle Private Wealth Group, and raised $10 billion in funds for the new project. It will offer its clients a range of investment options, including:
In addition to these offerings, Hines will also give personal guidance to its investors on how to best manage their real estate assets. It is targeting investors who want to turn away from the traditional 60/40 investment model by channeling more money into real estate and away from other alternative investments. Hines is banking on the idea that high interest rates and high inflation will be around for a while.
Trending
When that happens, it becomes more important for investors to hold inflation-resistant assets. That’s a big part of why Hines is betting that real estate is near the bottom after years of declining profits resulting from high interest rates and major losses in the commercial sector. Hines’s conclusion that now is the time to buy real estate is based on long-term company research showing that real estate typically declines after a 15- to 17-year-long growth period.
Its research shows that the decline normally lasts around two years, which is about the same length of time the real estate market has been suffering from high prices and high interest rates. Theoretically, that makes this the perfect time to make aggressive moves in the real estate market, and the Hines Private Wealth Fund was conceived to allow investors to take advantage of current market conditions.
Despite the deep troubles facing today’s real estate industry, it’s not hard to see the logic in Hines’s approach.
“This is a great vintage, it’s a great moment. This real estate correction began really over two years ago, right when the Fed started raising interest rates,” Hines global Chief Investment Officer David Steinbach told Fortune magazine. “So, we’re two years into a cycle, which means we’re near the end.”
If Hines is correct, real estate investors will have a lot of good bargains with high upside to choose from in the next 12 to 24 months. The good news is that even if you’re not wealthy enough to buy into the Hines Private Wealth Solution, there may still be plenty of opportunity for you to adopt their investment philosophy and start scouting for an undervalued, distressed asset to scoop up. Keep your eyes open and be ready.
Read Next:
“ACTIVE INVESTORS’ SECRET WEAPON” Supercharge Your Stock Market Game with the #1 “news & everything else” trading tool: Benzinga Pro – Click here to start Your 14-Day Trial Now!
Get the latest stock analysis from Benzinga?
This article $93 Billion Real Estate Giant Is Betting The Market Is About To Hit Rock Bottom originally appeared on Benzinga.com
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
UK Mulls New Curbs on Outbound Investment Over Security Risks – BNN Bloomberg
Auston Matthews denied 70th goal as depleted Leafs lose last regular-season game – Toronto Sun
BC short-term rental rules take effect May 1 – CityNews Vancouver
Trump Media alerts Nasdaq to potential market manipulation from 'naked' short selling of DJT stock – CNBC
Collection of First Nations art stolen from Gordon Head home – Times Colonist
Benjamin Bergen: Why would anyone invest in Canada now? – National Post
Save $700 Off This 4K Projector at Amazon While You Still Can – CNET
'Kingdom Come: Deliverance II' Revealed In Epic New Trailer And It Looks Incredible – Forbes
Comments