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Toronto Real Estate Bubble? Try Affordability Crisis: RE/MAX Executive – RE/MAX News

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Greater Toronto real estate experienced record activity in 2020 and based on the data and market conditions in these first few months of 2021, we’ll likely see the trend continue. While some are saying Toronto is in a “housing bubble,” a RE/MAX executive is calling it a “housing affordability crisis” attributed to a perfect storm of factors including low inventory, high demand, and recently increased purchasing power thanks to rock-bottom interest rates and Canadians’ higher rate of household savings over the last year. All this has resulted in the current market conditions: “hot,” and that’s putting it mildly. With more people being vaccinated and immigration expected to pick up over the next three years, there’s no relief in sight without adding more housing supply to the Canadian housing market.

“Housing bubble? I prefer the term ‘affordability crisis,’” says Christopher Alexander, Chief Strategy Officer and Executive Vice President, RE/MAX of Ontario-Atlantic Canada. “The demand level is at an all-time high and inventory is very low. I don’t see how we’re going to be able to keep up with the demand with population levels expected to rise to new heights.”

Greater Toronto Real Estate Data (February 2021)

Greater Toronto real estate saw double-digit price and sales growth in February. Sales were up 52.5% year-over-year, with the Toronto Regional Real Estate Board (TRREB) logging 10,970 transactions. Average price rose 14.9% to $1,045,488. Overall, new listings were up 42.6% compared to February 2020, but sales are still outpacing any new supply coming on market.

Toronto has long been the hottest Canadian housing market, so while the continued growth in the 416 is certainly notable, it’s not entirely surprising. Then there’s the suburbs. Markets outside of Toronto really heated up in the wake of the pandemic, as homebuyers’ newfound flexibility due to remote work arrangements allowed them to look outside of the city core for homes offering more indoor and outdoor space with a lower price tag. Thus, real estate markets such as Halton, Peel and Durham experienced marked increases in sales and prices between 2020 and 2021, and the trend continues.

Here’s a quick look at the trends across these regions, according to TRREB’s February 2021 data (compared to their February 2020 stats):

The “Perfect Storm”

While some were forecasting a decline in housing prices last year due to Covid-19 and its impacts on employment, the economy and people’s ability to buy homes, industry insiders knew a downturn was highly unlikely. It never did materialize, and as we now know, Canadian real estate weathered that initial pandemic storm. What we’re facing now is unprecedented price growth and an affordability crisis prompted by the following factors.

  • Supply & Demand
    Tight markets and rising prices are expected to continue, with severely limited housing inventory and growing competition. With borders expected to open later this year, and the federal government’s plan to increase immigration to 1.2 million people over the next three years, housing supply will become an even more pronounced issue unless more supply materializes.
  • Interest Rates
    Rock-bottom borrowing rates have prompted many people to get into the market. In March of 2020, the Bank of Canada lowered its benchmark interest rate to a record-low 0.25% in an effort to boost the economy. Big banks followed suit by lowering their mortgage rates. That meant people who were still in the market to buy a home could now buy even more home for the same price, thanks to the lower cost of borrowing.
  • Covid-19
    Canadians saved record sums of money during the course of the pandemic, which they can stretch even further given these low interest rates. With few other diversions to spend their money during lockdowns, real estate became a place to sink those savings both as an investment and for lifestyle reasons.

“We’ve experienced some unexpected market shifts in the wake of Covid-19,” says Alexander. “Many Canadians suffered serious financial setbacks due to widespread job loss and lockdowns, largely across the service sector. Meanwhile, those who were able to transition to remote work environments saved an unprecedented amount of money last year. Urban condos lost some of their lustre last fall, while larger suburban and rural homes gained traction. These savings, coupled with record-low interest rates, have prompted many Canadians to invest in real estate – or at least try. The problem is that new listings are falling short of demand, and these tight market conditions across Canada are causing serious buyer fatigue. Demand is driving up prices, and as I’ve always maintained, a national housing strategy is sorely needed to boost supply and ease the housing crunch.”

What’s Next for Toronto Real Estate?

The Toronto housing market is experiencing a shortage of single-family detached listing inventory, while the condominium segment is flooded with supply. We expect balance to be restored, to a degree, when homeowners (potential sellers) feel more confident listing their homes for sale and feel safe in the current pandemic environment. Widespread vaccinations and eventual immunity will help.

Once this does happen and we reach that immunization target, how will this impact the economy? Preliminary reports have a positive outlook. Will the large Millennial cohort affect housing demand more so than what the Baby Boom cohort did back in the 60s and 70s? Do all three levels of government have a plan to address supply issues? Or might they continue to try to control buying activity with taxes and policies? Time will tell.

Some Final Words

Regardless of market conditions, always buy and borrow within your means. Do not use a “speculator philosophy” when buying a principal residence.

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Greening federal gov't building portfolio offers CRE 'opportunity' – Real Estate News EXchange

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IMAGE: A new eight-storey office building to be built at Ottawa's Zibi development will have the federal government as its dominant tenant. (Courtesy Dream)

An eight-storey office building being constructed at Ottawa/Gatineau’s highly sustainable Zibi development will have the federal government as its dominant tenant. (Courtesy Dream)

The ongoing pandemic, a quest to green its real estate footprint and a portfolio of buildings nearing the end of their useful lifespans will lead to a major transformation of the federal government’s real estate footprint during the next couple of decades.

That was the message from Stéphan Dery, the assistant deputy minister, real property services, for Public Services and Procurement Canada during his annual update on the government’s real estate plans at the virtual Ottawa Real Estate Forum this week.

While many of these changes had already started well before the pandemic, Dery said the effects of COVID-19 have accelerated some of the transformations, and the government’s owned-building portfolio isn’t getting any younger. Decisions on its future are becoming more pressing.

The feds do own a significant portion of the 75 million square feet of space they occupy. Of that portfolio, about 38 million square feet is in Ottawa, Gatineau and the National Capital Region (NCR), and 18 million square feet is leased from private owners.

Dery and PSPC work with 102 departments and agencies which employ about 240,000 people, just over half of them in the NCR.

Any shift in strategy will have wide-reaching implications for commercial real estate owners and operators, from those now leasing space to the feds, to companies wanting to sign government agencies as future tenants, and others hoping to buy aging assets for redevelopments.

“I think what you will see in the next few years is the Government of Canada disposing of large, old high-GHG-emission assets and replacing those assets by either new space that is leased, that is carbon neutral, or old space that is modernized and carbon neutral,” Dery told the CRE executives attending the online interview conducted by Nathan Smith, senior vice-president at the Cushman & Wakefield Ottawa office.

L’Esplanade Laurier could be sold

He offered the example of L’Esplanade Laurier, a complex including two 23-storey office towers connected by a podium, with three levels of underground parking in downtown Ottawa.

“I can see L’Esplanade Laurier in the next four, five or six years being on the market for the private sector either to redevelop it into apartments/condominiums, or redevelop it for office space, a hotel, whatever the private sector and the city will need at the time,” Dery said.

“These large assets that are at the end of their useful lives, we are going to be looking to dispose of them.”

The message was clear for firms looking to do business with the government, which has committed to reducing its greenhouse gas emissions by a minimum of 40 per cent by 2030. Real estate will be a major contributor.

“A lot of our inventory is old . . . it’s significant GHG emissions. So we are really looking for the next inventory, where we are going, to make these buildings, either leased or old, carbon neutral. It’s quite important to us,” Dery said.

“In 2030, 75 per cent of our lease(s) will have to be carbon neutral.”

As for how much space the government will occupy, Dery said current projections are to continue down the path to cut 30 per cent of its footprint.

Feds remain committed to smaller footprint

“Our portfolio plan says that over the next 25 years, we are thinking about reducing our footprint by 30 per cent or more depending on the outcome of COVID. It might be accelerated, but it’s not something that is going to be done overnight.”

Smith noted, however, if the government does shed aging real estate in favour of leasing newer, more environmentally friendly space, that could actually offer an opportunity for the CRE sector.

“When we talk about a 30 per cent reduction in your space over a 25-year horizon, people in the room would start to get nervous. Is public works going to significantly downsize their lease portfolio?” Smith asked.

“I would say it’s probably an opportunity for growth in your lease portfolio as you exit some of these Crown-owned assets.”

Dery left all options open, but reinforced his earlier comments about greening the portfolio. He wanted the message to be “quite clear” – this is where the opportunity will be.

“I know that really today, none of our lease would meet that (GHG) criteria in Gatineau, Ottawa and (the NCR). So we have an opportunity here.

“If you are a landlord, an owner, an investor, and you want to keep leasing space to the Government of Canada, just think about that. Seventy-five per cent of new leases or renewals in 2030 will have to be carbon neutral.”

The process has already started, with the disposal of several aging federal buildings in the NCR. In 2019, it was announced the feds will lease 158,000 square feet at a new eight-storey office building being constructed at the carbon-neutral Zibi development straddling Ottawa and Gatineau.

The government is also looking to develop a 1.6-million-square-foot office campus on land it owns at 599 Tremblay Rd. in East Ottawa, working with a developer on a land-lease basis.

Return to office and potential vacancy

Dery touched on a number of other points during the wide-ranging, half-hour presentation.

On current lease renewals, he said the government is looking at shorter time frames for properties it renews, but so far it has not made significant space reductions.

“We know that space may be used differently, but we’ll need space. So over the last 18 months, the COVID period, we have approximately renewed 100 leases, totalling 3.2 million square feet in the National Capital Region,” Dery said.

“If it’s going to reduce, it’s going to reduce over time. It’s not something that you turn on a dime.”

On return-to-office, he said government data shows pre-pandemic most public service offices had in-person occupancy of about 60 per cent capacity on a daily basis due to a combination of many factors – hybrid work schedules, staggered working times or shift work, travel, time off, illness, etc.

Current in-person staffing remains well below that level and he said he foresees permanent on-person staffing levels dropping by another 10 per cent or so.

“I could definitely see an increase in that with the work from home, or hybrid model equal to 10 per cent . . . easily 10 per cent.”

Smith put that into perspective, noting vacancy in Ottawa had declined to the six per cent range pre-COVID and is sitting around 10 per cent now with some reabsorption occurring.

“On a market basis, is that three or four per cent? Somewhere in that range, and that is really delivering two or three new buildings into the market at once and letting the market absorb that space,” Smith offered.

“I would suspect the market will be resilient and be able to absorb that vacancy that obviously is coming to us post-COVID.”

Government co-working model

Dery also envisioned the possibility of a government network of workspaces allowing remote workers to access facilities closer to where they live.

Modelled on the co-working office format, he said it could involve a number of departments sharing workspaces.

“You may have a building in a remote location but it doesn’t serve only one department . . . it serves all of the federal public service and it’s that kind of co-working space,” he explained. “We see a take-up on that and interest from multiple departments.

“I think it is going to work well with the hybrid (work schedules): you need to go to the office, there is an office not too far from your house and you reduce the GHG emissions.”

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Anthem building two Calgary shopping centres – Real Estate News EXchange

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Isaac Beall, Senior Director of Development at Anthem Properties Group Ltd.

Isaac Beall, senior director of development at Anthem Properties Group Ltd. (Courtesy Anthem Properties Group Ltd.)

Vancouver-based real estate company Anthem continues to be bullish on the Calgary market and needs-based retail, launching two new shopping centre projects in the region to service growing residential communities.

The firm also announced the acquisition of the 300,612-square-foot Junction Shopping Centre in Mission, B.C. The grocery-anchored, tier-1 property was acquired in partnership with Crestpoint Real Estate Investments.

“Calgary is a core market for Anthem. It is a great city, with great people. It is affordable, has a well-educated population and is a better deal for families, all in, than Toronto or Vancouver,” said Isaac Beall, Anthem’s senior director of development, during an interview with RENX.

“It will grow and Anthem will continue to build homes, develop new communities and lease up commercial and industrial spaces to those people requiring it.”

Anthem’s D’Arcy Crossing and Highstreet at Cornerstone

The two new shopping centres – D’Arcy Crossing and Highstreet at Cornerstone – are being developed by Anthem Properties for the communities of D’Arcy in Okotoks, just south of Calgary, and Cornerstone in Northeast Calgary.

Those residential neighbourhoods are being developed by Anthem United.

The D’Arcy Crossing shopping centre, with Safeway as an anchor tenant, will also include Shoppers Drug Mart, a liquor store, restaurants, coffee shops and other businesses to service the daily needs of Okotoks-and-area residents. It will be the largest commercial centre in North Okotoks at 151,000 square feet and is scheduled to open in the spring of 2023.

The shopping centre will have more than 40 businesses when completed.

Beall said the northern part of the town has more than 60 per cent of Okotoks’ total population. D’Arcy is a 280-acre community that launched in 2018 bordering the D’Arcy Ranch Golf Club.

Once completed, it will have more than 2,200 homes. About 300 homes have already been built in the community with full buildout expected by 2026.

Anthem is also building the neighbouring community of Wedderburn in Okotoks, which will include about 1,300 homes on completion, which is also expected by 2026. So far 50 new homes have been built.

Highstreet at Cornerstrone will be 139,000 square feet, and is scheduled to open in Spring 2023. (Courtesy Anthem Properties Group Ltd.)

Highstreet at Cornerstone, which will be 139,000 square feet, is under construction off Country Hills Boulevard and 60th Street N.E. It is scheduled to open in spring 2023. (Courtesy Anthem Properties Group Ltd.)

Cornerstone is a 1,100-acre community launched in 2015. It will comprise about 9,500 homes on full buildout by 2030, with 1,500 already built.

The new shopping centre, which will be 139,000 square feet, will feature a new Chalo! FreshCo and a Shoppers Drug Mart. It is under construction off Country Hills Boulevard and 60th Street N.E.

It also is scheduled to open in spring 2023.

Quickly growing Calgary neighbourhoods

The Cornerstone shopping centre will be a regional draw for other residential communities in the area which includes Redstone, Cityscape and Skyview Ranch – newer neighbourhoods built in the northeast part of the city in recent years.

“Eight years ago, there was nothing. Redstone was just starting and there are now 35,000 people that live there,” said Beall. “It’s staggering. There are so many homes up there it’s absolutely shocking.”

Calgary has been an integral part of Anthem’s business in recent years. The company has developed or has slated for development 4,100 acres in Calgary, Chestermere and Okotoks.

It also has about 513,000 square feet of existing retail and commercial space.

Anthem’s North American presence

Anthem, founded in 1991, has more than 270 residential, commercial and retail projects across Western North America.

Its portfolio includes 15,000 homes completed, in design or under construction, from master-planned, mixed-use and multiresidential, to townhome and single-family communities.

It also owns, co-owns, manages or has previously owned more than eight million square feet of retail, industrial, residential rental and office space.

The company is bullish on Calgary due to affordable real estate, lower taxes, great social and physical infrastructure and the fact people will be moving to the province.

It currently has eight active residential communities in the area which includes Cornerstone, Glacier Ridge in the northwest, Belmont in the southwest, Pine Creek in the southwest, Sirocco in the southwest, Wedderburn in Okotoks and Chelsea in Chestermere.

Some of Anthem’s other communities also have commercial components planned for future phases, but D’Arcy and Cornerstone will be the first to open. They are also the first commercial centres in its land developments to be developed and built by Anthem.

“The No. 1 amenity for all of these residents is grocery,” said Beall, “and part of our business model going forward is to provide that amenity.”

The format for successful retail

Beall said a grocery-anchored shopping centre is the hub and the heart of a community and increasingly so during the current pandemic.

“That type of retail format we have a lot of confidence in, because our paradigm has always been food, booze and drugs when it comes to these centres. People need grocery stores. They need drug stores to get their medications and a liquor store,” he said.

“It’s sort of the prototype piece of critical amenities that communities want, and around that you provide that finer-grain service.

“You add some doctors in. You add the quick-service food and the hair salons and dentists. It’s a sort of tried-and-true recipe and we like to keep that within the community.

“Also from a sustainability standpoint. We try to integrate them in in a thoughtful way as opposed to dropping them in a field in the middle of nowhere so it keeps people from having to travel far distances to have those needs met.”

Beall said there is a need to tread carefully because not every community can support a shopping centre. A critical mass is needed, but wherever possible Anthem will pursue the opportunities.

“At the end of the day, it’s always the grocery store that drives the bus. We’re at the mercy of grocery tenants. Fundamentally their target trade area that most grocers look for is a population within their catchment in excess of 30,000 people,” said Beall.

“That’s sort of the magic number where a store starts to make sense, where they can draw enough shoppers in.”

The Junction Shopping Centre acquisition

The Junction Shopping Centre in Mission includes about 40 tenants and is located at the intersection of the Lougheed Highway and the Abbotsford-Mission Highway about 70 kilometres east of Vancouver.

Anchored by Save-on-Foods and London Drugs, the regional shopping centre has a diverse roster of ancillary tenants including Winners, Cineplex, Goodlife and Starbucks.

The tenant mix is tailored to local demographics providing a mix of daily needs retail which also includes liquor, financial services, health and personal care, entertainment and discount retailers.

It is 98 per cent leased.

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Canadian home prices have jumped 21.4 per cent since last year, survey finds – CTV News

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TORONTO —
A new survey from the real estate firm Royal LePage shows that housing prices in Canada have jumped an astounding 21.4 per cent since this time last year.

The Royal LePage House Price Survey, released on Friday, shows that the aggregate price of a home in Canada has risen to $749,800 in the third quarter of 2021, compared to $617,800 in the third quarter of 2020.

The aggregate price refers to a “weighted average of the median values” of both condominiums and single-family homes for a given area.

During the third quarter, housing sales also slowed down, largely due to waning supply and demand, coupled with lessening pandemic restrictions, Royal LePage notes.

“With easing pandemic restrictions, there was finally something to talk about other than real estate, and people began travelling and socializing again,” Phil Soper, president and CEO of Royal LePage, said in news release.

“In addition, a year of relentless competition for too few properties drove some would-be purchasers to the sidelines as buyer fatigue set in. Yet their fundamental need or desire for a new home remains and we are seeing pent-up demand grow. We expect another unusually busy winter season building to a brisk 2022 spring market.”

When broken down by housing type, the median price of a single-family detached home rose 25.2 per cent, while the median price of a condo rose 13 per cent.

When it comes to regional housing prices, each of the major Canadian cities and their surrounding areas saw a jump in home prices, with the biggest jumps coming in Greater Vancouver (20.8) and Ottawa (20.7).

“Vancouver and the surrounding greater region remains firmly in a seller’s market,” said Randy Ryalls, general manager, Royal LePage Sterling Realty in Vancouver.

“Although activity showed signs of slowing modestly in the summer and early days of September, the market has picked up again, now that families are back in their usual routines.”

Of the 62 Canadian cities included in the survey, every single one showed rising aggregate home costs, but the slowest rise in prices came out of Thunder Bay, Ont. (2 per cent), West Vancouver (3.7 per cent) and Toronto (4.8 per cent).

When it comes to the fastest-growing areas in terms of aggregate home prices, Saint John, N.B. (36.4 per cent), Kingston, Ont. (36 per cent), Belleville/Trenton, Ont. and London, Ont. (32.4 per cent) top the list.

Royal LePage is also predicting a 16-per-cent increase in aggregate home costs for the fourth quarter of 2021 when compared to last year’s fourth quarter.

“Looking back to the late spring of 2020, the Royal LePage benchmark value of a home was $580,000,” Soper said. “The subsequent ‘Covid-catalyst’ which drove legions of Canadians to upgrade their living situations, has created a period of exceptional home price growth with real estate values on track to grow 33 per cent by year end.”

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