Time for your cheat sheet on this week’s most important stories.
Canadian Real Estate
Canadian Real Estate Prices Could Drop Up To 30%, Moody’s Advises Institutions
Deep pocketed investors and institutions were advised Canadian real estate prices will fall. Moody’s, one of the world’s largest risk organizations, published their economic forecast. In the baseline forecast, Canadian real estate prices fall 8% in real terms, and recover a year later. It also gets worse as the pandemic carries on.
If things don’t get back to normal until July – just one month later than baseline, they expect prices to drop 20%. Reconstructing their model using projections given to parliament, prices are expected to decline 24%. The firm further added they don’t believe low interest rates can stop this trend. However, the decline in interest rates will help the recovery phase.
Canada’s GDP Growth Is Flat, But Real Estate Outperforms
The Canadian economy is further leaning on real estate for growth, as the rest of it slows down. Real GDP in February was up 2.1%, a big decline – but a little skewed due to an unusually slow Q1 in 2019. The real estate, rental and leasing portion of GDP saw growth of 5.9% from last year though. The real estate, rental and leasing portion of GDP now represents the biggest portion of GDP since the peak in 2016, and is likely to blow past that in the next report.
Nearly 1 In 5 Canadian Businesses Laid Off More Than 80% Of Staff
Canadian businesses are seeing big drops in revenue, and that’s causing a ripple effect for unemployment. A survey conducted by Stat Can shows 32.3% of companies experienced a decline of 40% or more in revenue. This helped contribute to nearly 1 in 5 businesses laying off more than 80% of their staff. Some layoffs are thought to be temporary. However, that won’t be clear until we see the state of the economy on the other side of the pandemic.
Canadian HELOC Growth Was Drying Up Before The Pandemic
Canadians slowed using their homes as ATMs in February, before the pandemic was declared. The balance of loans secured by residential real estate hit $303.99 billion in February, up just 1.68% from last year. Personal loans represented $268.51 billion of the total, up just 0.67% from last year. That’s a decline in real terms, even with CPI at just 0.9% these days. What does this all mean? Typically households cool on borrowing when they’re starting to feel pinched. This is a trend we’ve been seeing since late last year, despite the return of enthusiastic real estate buyers.
Toronto Real Estate
Altus: Toronto New Home Sales Almost Double, Expected To Cool
The market is packed with warning signs, but that didn’t slow new home buyers in Toronto. There were 3,780 new homes sold in March, up 67% from last year. The past two Marches had levels of sales not seen outside of recession, but this is still a big increase. Altus Group, the firm that provided the data, did note they expect volumes to slow as the year progresses. This is partially due to the comparison period, and partially due to the pandemic lockdown.
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Report says Ottawa real estate holds on while other cities slump – Ottawa Sun
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.”
PC Urban, KingSett acquire Richmond industrial property – Real Estate News EXchange
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
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.”
Oakville Real Estate Holding Its Own Amidst COVID-19 – RE/MAX News
Oakville real estate is continuing to attract buyers, despite COVID-19. The housing market in Oakville started 2020 strong, as was the case in many housing markets across Canada. Balanced market conditions and an average price of five per cent were the expectation by year’s end, according to the RE/MAX 2020 Housing market Outlook Report. A few months into the year, the global pandemic sent many industries into a tailspin, however Oakville real estate values did not decline due to the public health crisis. If current conditions continue, Oakville housing prices are expected to hold steady.
This is in stark contrast to a recent prediction from Canada Mortgage and Housing Corp., warning that housing prices in Canada could drop between nine and 18 per cent over the next year. However, based on reports from RE/MAX brokers in many of Canada’s largest housing markets, consumer inquiries are on the upswing, inventory is low and the demand for homes is there. Here’s a closer look at Oakville real estate activity over the past few months, and some insight as to what may lie ahead.
According to market data from the Oakville, Milton and District Real Estate Board (OMDREB), February 2020 saw a dramatic spike in sales activity year over year, with a total of 639 home sales compared to just 485 transactions in February 2019. Properties hitting the market also saw a significant increase, with 925 new listings in February 2020 compared to 847 in 2019.
By all accounts, Milton and Oakville real estate was primed for a busy spring market. Homebuyers emerged earlier than usual with strong sales activity, with luxury infill and detached homes sales in Oakville leading the charge in the $1M+ to $2.5M sale price range, according to OMDREB.
Despite the social distancing mandates and business closures that took effect on March 13, March 2020 actually reported an increase in transactions across Oakville and Milton. OMDREB reported 670 home sales in the region, compared to March 2019 when 650 sales were recorded. The month experienced a slight decline in the number of properties for sale, with 1,118 new listings in March 2020 compared to 1,220 in March 2019.
April marked the first month that the impact of the global pandemic was truly felt in local housing markets across Canada, and Oakville real estate followed suit.
OMDREB reported a dramatic dip in transactions in April 2020, with 289 homes sold across the region, compared to 761 home sales in April 2019. The number of new homes hitting the market also took a hit, with 559 new listings in April 2020 compared to 1,347 in April 2019.
“With social distancing measures still in place for the foreseeable future, we can expect the coming months to see a decline in home sales and listings compared to last year as well. However, while sales activity has seen a significant drop, the numbers also show us that real estate has not experienced a total shut down. Ultimately, some areas along with certain home types have been more impacted than others,” said OMDREB President Richard Weima.
What’s in store for Oakville real estate?
The Oakville real estate market has been surprisingly active during the pandemic. With the exception of the first two weeks of the lockdown – the second half of March – there has been a steady pace of buyers and sellers active in the housing market, according to Oakville-based RE/MAX Aboutowne Realty Corp. In the past few weeks, the brokerage reports a steady increase in call volume, appointments booked, and units sold.
And contrary to some widespread predictions, Oakville real estate prices did not adjust down based on the pandemic. In fact, the average home price increased 9.76 per cent year-over-year, reaching $1,251,124 in April 2020, compared to April 2019, when the average price was $1,129,093.
Some multiple-offer scenarios continue, with some properties selling for over asking. Based on these factors, RE/MAX expects that Oakville real estate will continue to be in high demand.
Luxury real estate in Oakville
The luxury housing market in Oakville starts at around $3 million. This property segment did experience some slight softening over the last 60 days, which is tied to COVID-19. These buyers may be temporarily sitting on the sidelines as the economy gradually returns to activity.
A return to “the new normal”
Are Canadians ready to return to some semblance of normalcy? According to a weekly consumer survey by Leger published on May 20, 60 per cent of Canadians think their provincial government should maintain the pace at which it is relaxing social distancing/self-isolation measures. Furthermore, 53 per cent of Canadians are afraid of contracting COVID-19; however, this proportion continues to trend downward.
Here in Ontario, while social distancing measures continue to be in effect, some businesses have been allowed to re-open their doors in an effort to reignite the local economy. They will join many businesses including real estate offices, which were classified as an essential service and continued to operate under strict guidelines throughout the pandemic. The economic, employment and general comfort level will continue to impact home-buying and selling decisions. Click here to find out what Canadian real estate might look like in the coming weeks and months.
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