Projections for 2020 went out the window by about the third week in February. What was supposed to be a year of restrained real estate sales and sluggish economic growth wound up generating both a full-on housing boom and a whiplash-inducing recession. The uncertainty of the past seven months makes projecting next year’s real estate activity a daunting challenge, but as 2021 draws near, any insight into what’s coming around the bend is sure to receive more than a passing glance from Canadian investors, realtors, and mortgage brokers.
PwC Canada and the Urban Land Institute recently teamed up to share their take on where Canadian real estate is headed in 2021. The groups’ Emerging Trends in Real Estate report, released on October 15, paints a picture of a housing market in which buyers, sellers, and developers have been forced to adjust to a plethora of destabilizing changes, from new short-term economic realities to market fundamentals that may be altered forever.
“The coming year will be all about embracing opportunities to be resilient in the face of uncertainty, while shifting strategies in anticipation of market headwinds,” says Frank Magliocco, PwC Canada’s national real estate leader. “For the first time in a few years, we’re hearing divergent views from industry players about issues like the future of office spaces and the urbanization and suburbanization trends.”
Based on a collection of interviews and surveys with almost 3,000 commercial investors, real estate advisors, banks, and builders, the report, at 117 pages, is a rather gargantuan summation of the perceived trends shaping Canadian real estate. Here are a few of the most relevant highlights.
Residential real estate
There was little consensus around what might happen in the residential sector. Some respondents felt that urbanization could stall if remote work begins drawing people from densely populated and expensive cities to more affordable centres nearby. One Toronto developer reported having already adapted its strategy as a way of getting ahead of the urban exodus, resulting in looking “further afield” for development opportunities.
The urban exodus theory, however, is roundly contradicted by the fact that demand for low-rise homes in suburban locations has remained high throughout the pandemic. The report lists “18-hour cities” – vibrant metros that are international in flavour but not quite on the scale of Toronto – as being particularly attractive for homebuyers. Quebec City, Halifax, Waterloo, and London are provided as examples. Still, PwC expects housing activity to slow across Canada “at least for the next year.”
Concerns over condo prices were mostly confined to the GTA, but the softening currently affecting the city’s condo market is expected to be short-lived. Many interviewees were of the opinion that condo living itself might be in need of a rethink, as being cooped up in a 500-square-foot box has become a version of hell for people who spent much of the spring inside their units.
“A number of features are being incorporated to make condos more attractive to buyers, such as videoconferencing rooms, dedicated areas for parcel and grocery deliveries, improved amenities and tools to create more connected communities,” reads the report.
When asked to rank their local markets on a scale of one to five across six different metrics, the top four were Toronto (with an average score of 4.23), Vancouver (4.22), Montreal (3.8), and Ottawa (3.56). The three lowest-ranked markets were Saskatoon (2.46), Halifax (2.58), and Calgary (2.61).
Commercial real estate
Somewhat unsurprisingly, warehousing and fulfillment was the commercial sub-sector tapped by most respondents as having the brightest prospects. The ubiquitousness of e-commerce was cited as a major factor, but those interviewed said that supply chain disruptions experienced by some companies during the pandemic have prompted them to keep more inventory on hand, leading to an increased need for storage space. Survey respondents gave the prospects of fulfillment spaces a ranking of 4.67 while those of warehouses received a 4.0.
Multifamily residential properties, particularly those for moderate income earners, are also expected to perform well in 2021. The report says demand may shift, “with renters and homebuyers looking to live in townhouses and mid-rise buildings rather than larger towers that have been the trend in urban centres in recent years”, but the higher rents associated with townhouses could keep many renters in this particular income range in place. Interviewees gave this asset class’s future a 3.79.
Medical office, which received a 3.75 from respondents, is another category expected to offer investors stability in 2021. The COVID-19 pandemic has resulted in a rise in the adoption of virtual health services but, as the report states, “there will be an ongoing need for physical space for care that can’t be delivered digitally as well as for diagnostic equipment.” One interviewee theorized that some healthcare facilities could take up unused space in high-traffic community locations like malls and smaller plazas.
Considering the rapid evolution of real estate technologies over the past decade, it’s not as if the industry in Canada was in need of an innovation trigger, but COVID-19 gave the sector a hearty shove into the future. One respondent said property-related technology “has accelerated by a decade” during the pandemic.
The same business continuity solutions – videoconferencing, cloud technologies – that have kept real estate humming are expected to generate continued demand in 2021, as are those that support safe re-openings of office and retail properties.
Continued growth is expected to be seen in technologies that encourage customer engagement and sales, such as virtual tours, voice-activated devices that can guide buyers through a home, and pre-sale tools that help buyers whittle down their lists of prospective properties to visit.
But it was construction tech that respondents said would be the most impactful disruptor in 2021.
“Many interviewees believe that modular construction solutions that address labour shortages have reached the point where they make more sense from a cost perspective and are seeing greater adoption as a result,” the report says, adding that construction companies are showing heightened interest in “digital twin technologies” that use sensor data to improve design and construction processes.
Real estate expert Benjamin Tal on the winter market, the vaccine, and the massive recovery to come – Post City
How has the real estate market outperformed your expectations as of late?
Yes, we have seen the mother of all V-shaped recoveries. The fact that the market recovered was not a big surprise. The speed at which it recovered was a surprise. I think that the number one fact though, of course, when people try to figure this out, will point to pent up demand and extremely low interest rates, which is true. However, there is much more to it. I think that if you look at qualification rates, at 4.79%, for variable and fixed-term rates, they are in fact higher from a qualification perspective when they were in 2008. And back then, this activity went down. In fact, this has been the most housing-market-friendly recession ever. Okay, so it’s not just about the industry. It’s about the composition of the damage in the labour market.
Explain how the labour market activity has impacted the market.
The vast majority, almost 100%, of all jobs lost during this recession were low wage occupations. Many of them are renters and are not players in the resale market. Second, is that it means that a very large segment of households was untouched by this crisis, financially speaking, their job is there, their income is there. In fact, many of them are sitting on extremely high levels of excess cash. And the interest rates are in the basement. That’s the opportunity that they were looking for. So the asymmetrical distribution of development in the labour market is the secret behind the success of the housing market today.
The downtown condo market is that big outlier here. What do you see happening there right now?
I think most of the most of the improvement was, of course, in the low-rise segment of the market. It makes sense because the nature of the crisis means that a lot of people want to move to detached houses. We are seeing a situation in which there is a positive correlation between the inflation rate in housing and the price of housing. The fact that detached prices are rising is a real nightmare, if you wish, for mover-uppers, because the price of the house that you want is rising faster than their own house. The gap is widening. So this is a reflection of people wanting to live in bigger houses and therefore they also move to outside the 416.
And do you see this trend continuing for the long-term?
I believe that that will continue to be the case for the next six months or so especially during the winter. The housing market in general, during the winter, will weaken alongside the economy as a whole as we have a second wave combined with the flu season confidence will go down. So that’s clearly something that we expect, and that will impact the housing market. I think that the 416 condo space will feel most of the pain because of the fact that we have a lot of supply coming in and demand is slowing. Having said that, I think that as we reach the other side of this crisis, the later the second half of 2021 we’re going to see a situation in which people start realizing the rental space in downtown Toronto is a bargain and you will see demand returning In between I see some adjustment in supply and some developers that basically front load and that activity will not be there during the winter. So the net result of some reduced supply in the second half of 2021 and marginal improvements in demand, we see some improvement in this market as well. But in between, we have to go through the winter.
And do you see the exodus to the suburbs trend continuing?
That trend started way before the crisis, as we all know, this is not new. Every crisis is a trend accelerator. And this crisis is no different in the sense that it accelerated this trend. Will we continue this trend? Absolutely not. When we are on the other side of this crisis, people will rethink this approach, it will continue, but not at the current rate. So again, when you’re in a situation, you have a tendency to exaggerate the long-term implications of that situation and we are in a situation. So people look at the people fleeing from downtown as a sign of a long-term trend. That’s not the case. I think that people will go back to downtown and the trend will continue but at a much slower pace than we’re seeing now.
What is your advice in terms of navigating this volatile market? Is it better to wait it out?
Well, I think that if you are in the market for a quick investment, then you can wait. For the long term, I think that the winter will provide some good entry positions given the relatively soft nature of the market. I think that the spring will be relatively strong.
And when the vaccine rolls out the timing, what will that do in terms of the market and the economy in general?
That’s one of the reasons why I believe that the economy will be very strong in the second half of the year, especially in the summer and into October, November when the vaccine will be widely available. That’s one of the reasons why I’m so optimistic about the second half of the year, when the economy I believe will rise by four, five, six percent including some nice improvement in the housing market.
Is now actually the best time in terms of buying a condo downtown?
I think that the market is soft and will probably get softer. The next few months will be actually if you have a long term horizon, the next few months will be a good opportunity absolutely.
Vancouver real estate: Kitsilano property purchased for $138000 in 1986 sold in 2020 at $3.5 million – Straight.com
Here’s an example of how real estate creates wealth.
On November 9 this year, a Vancouver property in Kitsilano sold for $3.5 million.
The transaction was tracked by real-estate site fisherly.com.
Realtor and market observer David Hutchinson shared the sales history of this property at 3472 West 12th Avenue to illustrate what the market does.
Some people make money and, of course, some lose. Others break even, Hutchinson told the Georgia Straight.
The property was sold on December 22, 1986, for $138,000, based on information from the real-estate site Redfin.ca.
Years later, it again sold on April 20, 2012, for $1,510,000.
In 2013, a new house was built on the property.
The house features four bedrooms and six baths.
On June 2, 2014, the property sold again, this time for $2,475,000.
B.C. Assessment placed the 2020 value of 3472 West 12th Avenue as of July 1, 2019, at 2,810,000.
After more than six years, the Kitsilano property was back on the market.
Sutton Group-West Coast Realty listed the property on October 28, 2020, for $3,688,888.
The realty agency described the “stunning Kitsilano family home” as one of “highest quality with lavish, elegant finishes”.
Plus, it has “nanny or in-law accommodation with roughed in laundry & separate entrance”.
It sold after 12 days on November 9 at $3.5 million.
“This one is a big money maker,” said Hutchinson, who watches the market closely.
According to Hutchinson, the market is “fickle”, and results are “unpredictable”.
University Dropout Manny Brar Becomes Canada's Real Estate Wunderkind – GlobeNewswire
Toronto, CA, Nov. 24, 2020 (GLOBE NEWSWIRE) — Many people consider dropping out of university to be a failure, but not Manny Brar. He’s not embarrassed to say he’s a dropout. In fact, he leads with it and wants people to know that there are many paths to success — and not just for tech creators like Steve Jobs and Mark Zuckerberg.
Brar entered York University in Toronto, Ontario, Canada in 2014 to study finance. He was an above-average student and had all good intentions of graduating with his peers in the class of 2018. But by his junior year, he was miserable in his non-elective courses. “I couldn’t force myself to pay attention, and my marks would suffer,” said Brar. “I began rethinking my entire post-secondary journey — if I don’t like this, how will I survive a career? I have been interested in commerce and investing since I was young, but this wasn’t the stuff I was learning as a finance student.”
University isn’t for everyone.
Brar left York University and began selling real estate for RE/MAX at the age of 20. He was an assiduous saver, and after a year, he accrued enough capital to purchase his first property, a condo in Etobicoke, Ontario. Condos appealed to him in a big way, and he began to envision an elite business. In 2019, Brar and longtime friend and fellow realtor/investor, Jad Sandhu, founded their own real estate company, Platinum Condo Broker, which allows buyers and investors to get in on the ground floor of premier condos before they are even built.
“We founded the company to bring only the best development projects to our clients,” said Brar. “We want to show people how we have been able to build wealth through investing in real estate. A lot of people think home ownership is a goal that they will never attain, PlatinumCondoBroker.com is here to change that.”
Brar continues to be fascinated by the rise of Toronto, the home of many of his properties, although he is branching out to other Canadian provinces. “Eventually, I would love to expand into working internationally,” he said. “I love real estate and know there are great investment opportunities across the world. We just have to find them.”
At the age of 23, he has accumulated a portfolio of several properties and consistently achieves a high value of sales, making him one of the youngest realtors/investors in Canada to do so.
At the heart of Brar’s professional ethic is his desire to create opportunities for his clients. “My business is unique because I focus on helping investors find the best properties — whether they are first-time or experienced investors,” he said. “My job is to make sure my clients get the best property at the best price.”
The properties we purchase are the same ones we sell to our investors. “I think this is a reason why our clients trust us, because they know we won’t bring anything to the table that we wouldn’t invest in ourselves. We have a responsibility to our investors,” he said.
Despite his youthful age, Brar is always thinking of the future.
“My business philosophy is to always think for the long term. Whether that’s an investment, hiring someone to work with me, or taking on a new development. I don’t care to make a quick buck in the short term if my relationship or business will suffer in the grand scheme of things,” he said.
“The long term is where all the value is, I am a student of Warren Buffett and compound interest. I believe that if we take care of things properly in the short-term and look out for our client’s best interests, we will succeed tenfold in the future. Good business compounds into great business in the future.”
For more information, go to Manny Brar’s website, www.platinumcondobroker.com, or follow him on Instagram : Torontocondobrokers.
Media Contact: 416-505-8108
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