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Opinion: Toronto Real Estate is Experiencing a Correction, Not a Crash – Toronto Storeys

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This article was submitted by Baron Alloway, Executive Director and Sales Representative at ReaLawState Realty Brokerage Ltd. Have your opinion on how COVID-19 is impacting the Toronto real estate industry? Email info@torontostoreys.com with the subject line Real Estate in COVID. 

It’s always important to separate fact from fiction.


The real estate market is no exception to this rule. As news continues to circulate and rumours of a second “Great Depression” start to land alongside chilling allusions to the 2008 Housing Crisis, facts matter now more than ever.

We’d like to use some data from the Toronto Regional Real Estate Board (TRREB) to illustrate that, despite the seemingly endless cries from pundits, COVID-19 is not 2008.

Take a look at the data below, compiled from TRREB, that shows the average sale price centred around the 2008 Housing Crisis.

Baron Alloway

Take a look at the dip during December 2008. The dive taken by housing prices in the Fall of 2008 was completely reversed within three months. In terms of the overall trendline, this depression seemed to be merely a blip on the radar. Three years later, prices were up over 50% (or one and a half times) from January 2008, despite the looming recession.

Though the month-over-month comparison of the same data seems to tell a different tale.

Toronto real estate
Baron Alloway

In the month of the “crash”, housing prices fell by about 20%. In order to rebound, they had to make gains that doubled their losses (or 40%). In other words, this is a perfect illustration of how a percentage loss will require a much greater gain to recover to pre-loss levels. This is hardly a new phenomenon and is the basis of outlining the dangers of leveraged ETFs in stock exchanges.

However, what happened next is what most people seem to forget. In order to curb the recovery, housing prices would have to fall by about half of their total gains (15%). In our first illustration, the period was illustrated by the “flattening line” immediately following the dip. However, looking at a month-over-month comparison, it almost seems that there was a second crash.

Lastly, here’s a graph illustrating sales volumes during those periods:

Baron Alloway

Detached home sales surged during the period of recovery. Within the first half of 2009, with battle scars still fresh in the minds of investors, the category saw a four-year high. The reasons behind this rise are largely debated, with explanations ranging from the illusion of detached homes being easier to borrow against, to the lack of exposure, to the risk of a condominium association in debt.

What is the significance of these charts? Let’s take a look at year-to-date statistics for home sales, particularly focusing on the COVID-19 pandemic.

Toronto real estate
Baron Alloway
Baron Alloway

Immediately, the contrast is apparent. Home prices have seen such a meteoric rise in the past 18 months that the dip brought about by COVID-19 can be seen as more of a correction than a crash. Transactional volume would indicate that the pandemic has not halted the market, but merely brought it back to its winter volumes. Simply put: This isn’t 2008.

So what is the importance of reviewing market data with historical context? It’s all about timing.

Many buyers and sellers have had their original plans of buying and selling in the traditional “spring market” snuffed out in the fumes of COVID-19. The buildup of product scheduled to move will create a condition that can only be described as fascinating.

READ: 34% of Torontonians Still Say They Want to Buy a Home in the Next 12 Months

If you’re looking to sell, the best guidance to follow is simply: wait (if you can). The market will correct itself as social distancing measures ease. People will be both desperate and eager, causing prices to skyrocket in the third quarter of this year. Specifically, detached home sales should soar. As ‘quarantiners’ emerge from their condominiums and realize a backyard might not be a bad idea, and worried investors flock to liability-free options, detached home sales should see a seller’s market like no other.

However, within a few periods following, cooler heads will likely prevail. The same month-over-month drop after 2008 will again hit the Toronto real estate market. Pullbacks will send month-over-month numbers plummeting, and voices of doom and gloom will again reign clear.

But once we see this happen, it’s time to get active again. The period of incessant volatility will come to a close, and conditions will be reminiscent of pre-COVID times. Every bad thing has the potential to turn into a good thing in the end… it’s a matter of patience and waiting for the right moment.

Just don’t try to get rich quick with the largest investment of your life, and everything should work out fine as everything begins to reopen.

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Slate Asset Management Unveils Canadian Real Estate Special Situations Strategy; Doug Podd Joins as Managing Director – Canada NewsWire

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“Slate has identified an immediate opportunity to provide transitional capital to the Canadian real estate market through a blend of credit and structured equity. Our investment platform, institutional relationships and operational expertise uniquely position the firm to address this gap,” said Blair Welch, Founding Partner.

In conjunction with the strategy’s unveiling, Slate has appointed Doug Podd as Managing Director in the Toronto office, effective immediately.  Doug joins Slate with more than 25 years of experience in commercial real estate lending and previously served as Canadian Lead for Brookfield Financial’s debt advisory business, where he directly placed in excess of $4.5 billion of real estate and infrastructure debt.

“We are delighted to welcome Doug to the firm. His debt advisory and commercial lending background in the Canadian real estate market will be a significant value add to this strategy,” continued Welch.

Slate is offering quick execution and closing certainty on:

  • Bridge and Transitional Lending Solutions: As the financing environment tightens, Slate will assist borrowers on new acquisitions and refinancings, offering a mix of whole and junior loans;
     
  • Acquisition and Restructuring of Loans: Slate will work with lenders facing impaired performing and non-performing loans and securities to re-package existing positions; and
     
  • Flexible Liquidity Solutions for Assets, Funds and Sponsors: Slate will use preferred equity to help stabilize balance sheets where existing debt or equity is constrained.

About Slate Asset Management

Slate Asset Management is a leading real estate-focused alternative investment platform with over $6.5 billion in assets under management. Slate is a value-oriented manager and a significant sponsor of all of its private and publicly traded investment vehicles, which are tailored to the unique goals and objectives of its investors. The firm’s careful and selective investment approach creates long-term value with an emphasis on capital preservation and outsized returns. Slate is supported by exceptional people, flexible capital and a demonstrated ability to originate and execute on a wide range of compelling investment opportunities. Visit slateam.com to learn more.

For Further Information
Investor Relations
+1 416 644 4264
[email protected]

SOURCE Slate Asset Management L.P.

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Report says Ottawa real estate holds on while other cities slump – Ottawa Sun

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The capital is relatively insulated by jobs in the federal government and the technology sector, Real Estate Investment Network says.

Real-estate markets all over the country are slumping, except Ottawa’s, a report from the Real Estate Investment Network says.

Major real-estate markets are in the beginning to the middle of a slump, says the organization that advises investors.

The report divides real estate markets into three phases — slump, recovery and boom — and then segments each phase into beginning, middle and end.

According to the REIN analysis, Toronto and Vancouver are at the beginning of a slump, while Edmonton and Calgary are in the beginning to the middle of a slump because of COVID-19 restrictions.

However, Ottawa is at the beginning to the middle of a boom, said the report, which assesses 16 indicators, including employment, net migration, vacancy rates, affordability and number of days to sell, as well as market influencers.

“The coronavirus has been the greatest market influencer of all time,” said Jennifer Hunt, REIN’s vice-president research.

Ottawa is an “outlier” because it is relatively insulated by jobs in the federal government and the technology sector, Hunt said.

“There are so many strong fundamentals in the Ottawa market. The fundamentals are there.”

The report suggests the effects of COVID-19 on the indicators will move most real-estate markets further into the slump phase in the coming months.

As for the Ottawa market, it’s hard to say how long it will be insulated, Hunt said.

“We don’t have that crystal ball.”

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PC Urban, KingSett acquire Richmond industrial property – Real Estate News EXchange

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The Viking Way Business Centre has been acquired by PC Urban and KingSett Capital. The firms plan to redevelop the 9.7-acre property. (Courtesy PC Urban/Kingsett)

PC Urban Properties and KingSett Capital have partnered to purchase the multi-building light industrial Viking Way Business Centre in Richmond, B.C.

In an announcement Monday, the companies said current buildings on the 9.7-acre property, which include 160,000 square feet of leasable space, are 100 per cent occupied. PC Urban and KingSett plan to announce redevelopment and repositioning plans for the property this fall.

“This is our largest acquisition to date and it’s a well-positioned, well-known industrial property in a desired sub-market of Richmond where there is currently less than one per cent vacancy,” said Brent Sawchyn, CEO of PC Urban Properties, in the release. “For us, this acquisition is a natural progression of our growth and we are excited to be working with KingSett on reimagining and repositioning this property.”

Financial details have not been disclosed.

The property is located in Crestwood, the largest and most active sub-market in Richmond for industrial properties. The new owners say Viking Way Business Centre boasts a highly functional design, extensive frontage, an attractive look and design, and offers proximity to highways and transit.

Viking Way Business Centre

The single-storey, small-bay buildings are home to numerous light industrial businesses in biotech, electronics, aerospace, building products distribution, media, technology, textile and service businesses.

Demand for Viking Way Business Centre remains strong due to the park’s maintenance and appearance, along with its mix of unit sizes and dock/grade loading options.

“This partnership was attractive to us for a number of reasons,” said Andrew Kirkham, the Western Canada vice-president for KingSett Capital.

“Working with PC Urban Properties allows us to leverage local area knowledge and they have a strong track record for redeveloping industrial assets across Western Canada.”

Market rents have grown rapidly in North Richmond during the past three years, with strong demand for light industrial space, extremely limited options for tenants and a competitive atmosphere that includes multiple offers for most available spaces.

The average net rental rate in North Richmond increased more than 40 per cent from 2017 to 2019.

South Richmond has lagged behind due to the delayed George Massey Tunnel replacement and associated highway congestion. With no relief in sight for businesses located in South Richmond, PC Urban and KingSett believe demand will further increase for space in North Richmond.

PC Urban, KingSett partnership

IMAGE: Aerial view of the Viking Way Business Centre in Richmond, B.C. (Google Maps)

Aerial view of the Viking Way Business Centre in Richmond, B.C. (Google Maps)

In creating their partnership, PC Urban and KingSett are part of an emerging trend in the Metro Vancouver region, where local developers partner with institutional investors.

As noted in the CBRE 2020 Canada Market Outlook report, strong commercial real estate fundamentals attracted more investment capital to Vancouver in Q1 of 2020. CBRE is projecting that institutional investors, including Blackstone, Crestpoint and KingSett, will increasingly partner with local firms to gain a foothold in the market.

“Investors are still drawn to Vancouver in a big way and we’re seeing a growing number of institutional investors partnering with local operators in Vancouver,” said CBRE Vancouver managing director Jason Kiselbach, in the release.

“They’re looking at our fundamental lease rates and growth and buying as much as they can in office, industrial and multifamily, driving further construction of new projects.”

RELATED ARTICLES

* PC Urban moves into multiresidential development

* PC Urban to build office, commercial strata in Kelowna

* PC Urban launches new IntraUrban build, mulls spinoff firm

* Starlight, KingSett bid $4.8B for Northview Apt. REIT

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