Yesterday, the Toronto Regional Real Estate Board (TRREB) released its annual Market Year in Review & Outlook Report for 2021, projecting optimism for a booming Greater Toronto Area (GTA) real estate market in 2021. The report forecasts near-record sales numbers of 100,000 units, with average selling prices expected to break records and exceed the $1 million mark.
Toronto’s North York skyline, image by Jack Landau
2020 market activity was negatively affected by the onset of the global COVID-19 pandemic, though booming late-year demand turned the market around. “The pandemic certainly resulted in an unprecedented year for real estate in 2020, but it hasn’t put a damper on the overall demand,” reads a statement issued by Jason Mercer, TRREB Chief Market Analyst. “Looking ahead, a strengthening economy and renewed GTA population growth following widespread vaccinations will support the continued demand for both ownership and rental housing. But over the long run, the supply of listings will remain an issue, particularly in low-rise segments.”
Also released this week, January’s monthly figures show a strong start to the year. 6,928 sales recorded last month represents an over 50% increase measured year-over-year against January, 2020. Sales growth was recorded in all market segments, including condominiums in both the 416 and surrounding 905 regions. New listings also increased year-over-year, though at a less pronounced rate, which led to a tightening of market conditions versus the previous January.
The average selling price for January, 2021 spiked 15.5% year-over-year to $967,885, driven primarily by the low-rise market segments as condominium apartment prices dropped in Toronto during this period. Despite this, TRREB expects that the continued growth of condominium sales could soon lead to sales growth outpacing listing growth, and renewed condo price appreciation.
“When the pandemic hit, TRREB outlined a detailed policy brief on government economic initiatives to municipal, provincial, and federal governments. With regards to housing supply, our key recommendations are to expedite the creation of missing middle housing, that is, multi-unit low-rise housing between detached and mid-to high-rises. It is crucial that we expand these development opportunities in residential areas which are currently only zoned for detached and semi-detached housing. This is why we asked Urban Strategies to research and propose innovative and workable ideas around the provision of missing middle housing across our region,” reads a statement from John DiMichele, TRREB CEO.
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GCP Raises $2.3 Billion for Logistics Real Estate Investments – BNN
(Bloomberg) — Real estate focused investment firm GCP said it closed a $2.3 billion fund that will be used to buy and operate warehouses tied to logistics and e-commerce.
The fund has already acquired about 25 million square feet of real estate and will will look to buy about 25 million more, GCP Chief Executive Officer Alan Yang said in an interview. Los Angeles-based GCP is aiming to own about 100 properties in the fund.
Yang said it’s GCP’s first discretionary fund and is unlike previous vehicles tied to specific investments.
GCP spun out of Singapore-based investment manager GLP in 2019 following Blackstone Group Inc.’s $18.7 billion acquisition of GLP’s U.S.-based assets. Yang, who was GLP’s chief investment officer, founded GCP after it took on $1.1 billion of GLP assets that weren’t part of the Blackstone deal.
GLP is a limited partner in GCP, alongside other investors including Goldman Sachs Group Inc. and several pension funds, according to people familiar with the matter who asked not to be identified because the information was private. Representatives for GLP and Goldman Sachs couldn’t be reached for comment.
Yang, who founded the firm with former colleagues from Blackstone where he worked earlier in his career, said he’s betting on e-commerce to keep driving the need for warehouses to help in the last-mile delivery of goods.
“Logistics 1.0 was about delivering wholesale goods,” Yang said. “Logistics 2.0 is now about retail and direct to consumer — getting goods to people’s doorsteps for the lowest price and least amount of time.”
The GCP fund will focus on real estate logistics, investing and acquiring warehouses and other facilities in key markets across the U.S., chiefly Seattle, Los Angeles, Miami, Portland and the northeast corridor via eastern Pennsylvania.
GCP also owns and operates Modlo, a logistics platform founded in 2019 that operates its properties and serves as its consumer-facing brand. Modlo’s clients include Amazon.com Inc., which leases a Seattle property that was custom-built for the e-commerce giant, Yang said. Other big clients include Keurig, Dr. Pepper, DHL and FedEx, he said.
Modlo’s staff — part of GCP’s total team of about 35 employees — also helps identify new assets for investment.
The logistics real-estate world already has some big players, including real estate investment trust Prologis Inc. and Blackstone, which created a company called Link to manage its U.S. logistics real estate.
One of GCP’s largest deals was a $308 million portfolio of properties in Pennsylvania and Central California that it bought from USAA. It has invested about 60% of the fund and will start raising its next one when 75% of it is deployed, Yang said.
“How we designed GCP and the fund is that it can go anywhere on the risk spectrum,” Yang said. “We’re agnostic to specific deal size or market.”
Yang said that the fund is targeting mid-teens returns for the fund.
©2021 Bloomberg L.P.
In its latest crackdown, China intensifies focus on real estate – Aljazeera.com
After a years-long campaign to tame property prices, China is upping the ante to break a stubborn cycle of gains that’s made homes increasingly unaffordable.
In recent days, China jacked up mortgage rates in a major city, vowed to accelerate the development of government subsidized rental housing, and moved to increase scrutiny on everything from financing of developers and newly-listed home prices to title transfers. Echoing Xi Jinping’s famous words that “housing is for living in and not for speculation,” Vice Premier Han Zheng added that the sector shouldn’t be used as a short-term tool to stimulate the economy.
The intensified focus on real estate — an industry that was already under the scanner — mirrors broader crackdowns on businesses such as education that are seen as widening social inequities. As China’s economy slows and President Xi tries to increase the nation’s birth rate, the policies underscore the Communist Party’s growing resolve to respond to mounting dissatisfaction with hoarded wealth and narrowing avenues for advancement.
“China’s property sector has been one of the biggest sources of discontent and the government is hell bent on controlling prices so it doesn’t lead to social unrest,” said Beijing-based Liao Ming, a founding partner of Prospect Avenue Capital. “The measures echo the policy curbs in education in that they are aimed at easing public angst against inequity.”
While China has spent years trying to cool property prices, analysts say this round of crackdowns will be different. One clear signal came in Vice Premier Han’s comments on steering away from using real estate to provide short-term boosts for the economy.
“In the past, Beijing has consistently used the property sector to stabilize overall growth,” Nomura analysts led by Lu Ting wrote in a research note, adding that they expect Beijing to change its playbook. Policy makers won’t lift property restrictions this time partly due to concerns about a systemic financial crisis, the analysts wrote.
Another signal came from the unusually large number of government entities that vowed recently to strengthen measures on everything from project development and home sales, to rental and property management services. Eight policy bodies said in a joint statement that they would step up penalties for misconduct. In the line of fire will be developers that default on debt repayments, delay deliveries on pre-sold homes or elicit negative news or market concerns.
Local bureaucrats’ careers are on the line. Officials in cities that lack sufficient regulations and experience rapid price spikes will be held accountable, Zhang Qiguang, an official for the Ministry of Housing and Urban-Rural Development said on July 22.
On Monday, commentary from state-media Xinhua urged governments across the nation to keep home prices at a reasonable level and make it an urgent task.
“New residents and young people can’t afford to buy or rent good homes,” the editorial said. “Those problems are especially acute in cities with population inflow and metropolises.”
Investors have responded by selling property stocks, with the recent stream of news piling pressure on developers that were already being pressed to deleverage and meet China’s “three red lines” on debt metrics.
China Evergrande Group shares were little changed as of 14:13 p.m., after plunging more than 40% in just under two weeks. A Bloomberg Intelligence index of 33 major Chinese developers mostly traded in Hong Kong dropped for a fourth consecutive day on Wednesday.
China Chengxin International Credit Rating revised its outlook for the country’s real estate sector to negative from stable on Monday, citing concerns about policy tightening and weakened investor confidence.
“Owning property is one of the key ways in which income inequality has worsened in China so the clamp down will come and will be severe,” said Alicia Garcia Herrero, the Hong Kong-based chief economist for Asia Pacific at Natixis. The cost of mortgages will increase, particularly for those with multiple homes, as will things like property taxes, she estimated.
The policies are here to stay, Ren Yi, the social media commentator and Harvard University-educated princeling otherwise known as Chairman Rabbit, wrote in commentary online.
“The nation’s leaders are looking at this issue from a bigger point of view, property isn’t just a economic tool, it sits at the root of all social economic and political issues, and must be dealt with,” Ren said.
The Chinese government needs to maintain a delicate balance. The real estate sector accounts for 13% of the economy from just 5% in 1995, according to Marc Rubinstein, a former hedge fund manager who now writes about finance.
Policy missteps could have unintended consequences for the banking system. Chinese banks had over 50 trillion yuan ($7.7 trillion) of outstanding loans to the real estate sector, more than any other industry and accounting for about 28% of the nation’s total lending.
Of those loans, about 35.7 trillion yuan were mortgage loans to households and 12.4 trillion yuan were for property development, according to official data.
But all signs point to the government’s determination to ensure social stability, even if it spells near-term turmoil for capital markets. Just in June, Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission, warned against betting that property prices will never fall.
“Property is the single most important source of financial risks and wealth inequality in China,” said Larry Hu, head of China economics at Macquarie Securities Ltd. It “is worth watching.”
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