Lack of homes for the 'missing middle' to impact GTA

Building the right homes to meet the demands of the population is essential to avoid a sizeable deficit in housing supply in the Greater Toronto and Hamilton region.

A new report from the Residential and Civil Construction Alliance of Ontario warns that the region is at risk of missing provincial population targets, which could potentially result in 7,200 fewer new homes being built each year until 2041.

The report says that homes to encourage seniors to downsize and to provide the right space for families are essential to avoid skewing the region’s population older with a resulting impact on the economy.

The report - GTHA's Unbalanced Housing Stock: Benchmarking Ontario's New LPAT System - says that up to 165,600 homes are at risk of not being built over the next 23 years, equal to an annual loss of $1.95 billion in GDP from residential construction activity if various constraints continue to inhibit the goals set by the provincial growth plan, Places to Grow.

Medium density homes – the so called ‘missing middle’ are key to addressing this issue says Paul Smetanin – president of socio-economic research and data firm the Canadian Centre for Economic Analysis (CANCEA)who conducted the research.

"Hamilton has made the most progress on the 'Missing Middle,'" Smetanin says. "Toronto, Mississauga, Markham, Newmarket less so, while Brampton is biased towards lower density starts."

The big issues
The report highlights the key issues for the region’s most populous municipalities including:

• Only 15% of GTHA households live in medium-density housing, which leads to an inadequate supply of appropriate housing types for a range of household sizes and budgets.
• Toronto's number of annual starts is 5-15% higher than required to hit P2G targets. However, the mix of housing is constrained by land, meaning the city's supply will be highly skewed towards taller towers.
• York Region is the only one in the GTHA with current annual starts on pace to meet its future target population.
• Among municipalities with populations over 80,000 people, Oshawa, Brampton and Newmarket have the lowest share of higher-density starts.
• Municipalities can better optimize infrastructure investments by ensuring that community growth planning is based on a long-term and strategic analysis of our future housing requirements.

Source: https://www.canadianrealestatemagazine.ca/market-update/lack-of-homes-for-the-missing-middle-to-impact-gta-251794.aspx

Builders are planning to increase housing supply

The value of residential building permits issued by Canadian municipalities in October was up 4.2% to $5.2 billion.

The increase, reported by Statistics Canada, shows that the number of units for which permits were issued was up by a similar share (4.1%) to 20,017.

Both single-family and multifamily units posted increases month-over-month although overall it was apartment condos that drove the increase.

For single-family dwellings, there was the first increase in five months in value terms; up 4.6% to $2.3 billion. In unit volume terms, the increase was 2.2% to 5,052.

For the multifamily sector, there was a rise of 3.8% to $2.9 billion; and a rise of 4.7% to 14,965 new units. Ontario ($222m) and BC ($115m) posted the largest gains while Quebec saw a sizeable decline (-$238m).

The value of non-residential building permits fell 7.0% in October to $2.9 billion. Eight provinces posted declines, most notably British Columbia.

The overall value of permits issued for residential and non-residential properties was $8.1 billion in October, down 0.2% from September. The decrease was mainly attributable to lower construction intentions for industrial and institutional buildings.

Source: https://www.canadianrealestatemagazine.ca/market-update/builders-are-planning-to-increase-housing-supply-251718.aspx

Why VR and AR may become standard terms for real estate agents

The importance of effective listings is highlighted by a new report which shows that 1 in 5 homebuyers bought their home without physically walking through the property before deciding it was ‘the one’.

While that may be a risky strategy and most buyers still want to go inside their potential purchase, online listings do play an increasingly prominent role with almost three quarters saying that they toured or viewed images online before deciding which homes to physically visit.

The survey also reveals that 60% of respondents said they prefer to see homes furnished and professionally staged, or both furnished and empty, before making a purchase or signing a lease.

When moving into a new space, 65.4% of respondents said their top pain points included the stress of buying new furniture at once, shopping for furniture or designing their homes and finding furnishings to match their existing pieces.

The study was carried out by roOomy, a virtual staging and 3D modeling company which has just launched custom augmented reality (AR) and virtual reality (VR) tools for the real estate industry. The technologies allow for enhanced live views or an immersive digital experience.

“We’re enabling our Real Estate partners to transform the home buying and renting processes with the development of custom apps that allows users, both agents, and home seekers, to take control of how they visualize a new space. In this digital era, consumers expect to use advanced technology regularly, including when considering one of the biggest purchases of their lives – a home,” said Pieter Aarts, CEO of roOomy.

Sothebys International adopts AR
Sotheby’s International Realty has launched an AR app called Curate, which it says has empowered agents and consumers to virtually stage properties and view them with AR technology.

Nick Church, Pacific Sotheby’s International Realty sales associate says it adds an extra tool to win business.

“The seller felt confident in my ability to use the latest technology to sell the home,” he said.

Source: https://www.canadianrealestatemagazine.ca/market-update/why-vr-and-ar-may-become-standard-terms-for-real-estate-agents-251539.aspx

Investors have little to fear of a housing meltdown

Would-be investors who remain wary of the Canadian real estate market’s price growth should take a measure of comfort in the results of a new study conducted by Chartered Professional Accountants of Canada (CPA Canada).

The research found that the market’s fundamentals have robustness as their main feature, precluding any U.S.-style meltdown in the near future.

“Beyond prices and debt levels, Canada shares far fewer similarities with the U.S. than you might think. This becomes very apparent when you look at just one measure: credit quality,” CPA Canada chief economist Francis Fong stated.

Fong emphasized that seeing the U.S. crisis as a reference point for the possibility of a Canadian collapse would be futile due to the pre-eminence of different factors in the two markets.

The sheer volume of subprime mortgages issued to borrowers with low credit quality, who cannot afford to repay debt, is frequently cited as one of the leading causes of the U.S. breakdown.

In comparison, Canada’s share of high-credit-quality clients increased from 66% in 2002 to 88% in 2017, according to CMHC. During the same time frame, the proportion of low-credit-quality borrowers fell from 17% to just 3%.

“The situation in Canada is likely not a bubble in imminent danger of deflation; in fact, housing prices may reflect the true value of living space in Canada and in some markets increased household debt may be the new price for real estate,” Fong explained.

“Our cities frequently are listed among the best places to live and work in the world and, compared to their peer cities abroad, they are not among the most expensive. We may simply be dealing with the law of supply and demand so affordability could continue to be a challenge for the foreseeable future,” he added.

Source: https://www.canadianrealestatemagazine.ca/news/investors-have-little-to-fear-of-a-housing-meltdown-251448.aspx

Cut the mortgage red tape Mattamy Homes urges

Rising interest rates mean that the tighter mortgage lending rules introduced earlier this year are no longer needed.

That’s according to Toronto-based Mattamy Homes which says the measures brought in to cool overheated housing markets have done their job but are now having a negative impact.

Mattamy, along with the Canadian Home Builders Association, is urging the government to relax lending rules to enable younger buyers to move forward with their homebuying ambitions.

“We’re going to continue to lobby for a pullback now on B-20,” Brad Carr, chief executive officer of Mattamy Homes Canada told Bloomberg. “That had a very targeted outcome. It’s been achieved so it’s kind of overkill now.”

David Foster of the CHBA added that markets that were already soft, such as Calgary, are getting “hammered” by the B-20 mortgage regulations that introduced stress tests for CMHC-backed loans.

Despite the pleas from builders, an OFSI spokesperson told Bloomberg that sound mortgage underwriting including consumer stress tests are important given “current risks and vulnerabilities”.

Source: https://www.canadianrealestatemagazine.ca/market-update/cut-the-mortgage-red-tape-mattamy-homes-urges-251356.aspx

Housing collapse unlikely say Canada’s accountants

High levels of household debt and the sky-high home prices in some Canadian markets have led some commentators to make comparisons with the US housing crash which sparked the global financial crisis of a decade ago.

But Chartered Professional Accountants Canada says that a Canadian housing crash is unlikely because conditions are not the same as in the US in 2008.

"Beyond prices and debt levels, Canada shares far fewer similarities with the US than you might think. This becomes very apparent when you look at just one measure; credit quality," explains Francis Fong, CPA Canada's Chief Economist and author of the study: The Real Story Behind Housing and Household Debt in Canada: Is There Really a Risk?

Fong highlights that the US housing market in 2008 suffered from lax regulation and the prevalence of subprime mortgages that many homeowners could simply not afford.

Although Canada’s housing market is not immune to risks, the quality of credit – CMHC says 88% of borrowers had high credit quality in 2017 compared to just 3% low quality – makes a US-style crash unlikely.

Rise in unregulated lenders
Fong’s report does point to a “sharp rise” in the use of unregulated mortgage lenders in Canada; this has been exacerbated by the tighter lending rules introduced at the start of 2018.

However, even with this increase Fong says that the impact of any failures by these lenders would be less far-reaching that those in the US during the last bust.

"The situation in Canada is likely not a bubble in imminent danger of deflation; in fact, housing prices may reflect the true value of living space in Canada and in some markets increased household debt may be the new price for real estate," says Fong. "Our cities frequently are listed among the best places to live and work in the world and, compared to their peer cities abroad, they are not among the most expensive. We may simply be dealing with the law of supply and demand, so affordability could continue to be a challenge for the foreseeable future."

Source: https://www.canadianrealestatemagazine.ca/market-update/housing-collapse-unlikely-say-canadas-accountants-251132.aspx

The main reason Canadian homeowners refinance

The main reason that 15% of Canadian homeowners refinanced their homes was to consolidate debt.

That’s according to the CMHC Mortgage Consumer Survey which shows that debt consolidation outranked home improvements and that one-third of refinancers say that their debt, including their mortgage, is higher than expected.

That said, 69% say they are comfortable with their current level of mortgage debt and 63% said that, if they run into financial problems, they have other assets they can tap to meet their needs.

The survey also showed that 68% were satisfied with their broker and 79% were satisfied with their lender but would have liked to receive more information from their mortgage professionals about mortgage or purchase fees, types of mortgages, closing costs and interest rates.

Refinancer facts
The CMC survey revealed the following insights about refinancers:

• 24% are Generation Xers (35 – 44 years old) and 35% are baby boomers (55+ years old)
• 54% are married
• 61% are employed full time, 7% are self-employed and 17% are retired
• Refinancers, along with repeat buyers, represent the highest proportion of self-employed mortgage consumers
• 72% own a single-detached home
• 23% have a household income of $60,000 – $90,000

Source: https://www.canadianrealestatemagazine.ca/market-update/the-main-reason-canadian-homeowners-refinance-250813.aspx

FCT says new appraisals solution will streamline lending

Ontario-based FCT has launched a new real estate appraisal solution which it says will streamline the lending process and make it more efficient.

Flex Appraisal provides access to centralized data on properties, enabling appraisers to fully analyze and complete transactions within hours; bringing together valuation technology and qualified appraisers for a more accurate and speedy result.

"The conventional real estate appraisal landscape presents many challenges, including cost, decentralized data, long turnaround times and legal liability," said Michael LeBlanc, CEO of FCT. "Our solution seeks to remedy all of these concerns and provide an improved experience for Canadian lenders. With Flex Appraisals delivered in less than 4 hours, lenders can build and retain more business."

Upon initial evaluation, the solution utilizes the relevant data points available on a property to provide an expert market value estimate. The data is then presented to an appraiser in a standardized report format for analysis and Property Valuation Indemnity Insurance eligibility.

"The introduction of Flex Appraisal demonstrates FCT's commitment to creating innovative real estate solutions that modernize the Canadian real estate landscape. Appraisals that once took days or weeks to complete can now be delivered within seconds or hours. This lessens the need for potential homeowners to shop around for quicker appraisals, allowing real estate professionals to close faster, and provide greater peace of mind and an improved customer experience." added LeBlanc.

Source: https://www.canadianrealestatemagazine.ca/market-update/fct-says-new-appraisals-solution-will-streamline-lending-250647.aspx

Real Estate Mentoring Knowing how to effectively analyze an investment opportunity

Following strategies and systems that have been proven to succeed is a safe way of creating a robust real estate portfolio. Whether an investor is pursuing buy, fix and flip deals or they’re looking to become long-term landlords, there is a set of processes to learn and follow.

“If you don’t follow a proven system, you are going in blind,” says Nam Ratna of Go Get It Real Estate. “A lot of people purchase a property without even determining properly what the after repair value is by studying comparables and properly budgeting for repairs. It’s a grave mistake and something that costs investors a lot of money.”

As well as teaching investors strategies for analyzing properties, a leading mentorship program will also prepare people for all of the issues that come into play that are often forgotten, such as permits, behind the wall issues, contractor issues, and project management blunder stories.

“A lot of it boils down to the price they bought it for, which is why your purchase price is where you make all of your money,” Ratna says. “If you understand the need to purchase 60 – 70 % below the market value to make a profit, you can generally make a solid return on an investment property. Back in the day, you could cut corners, put up a bad place up for sale and people would buy it. You cannot do that anymore if you want to be in business for a long period of time.”

Learning modern marketing skills is another area that leading mentorships programs help investors. With most of the bargains only available before a property hits MLS, investors needs to be able to get in front of people before opportunities hit the market.

“Consistency with marketing is crucial. 80% of transactions happen between the fifth and twelfth contact but very low percentage of people even make the second phone call or send out the second letter,” Ratna says. “You need to be able to track and analyze what you are doing and then continually adjust.”

Source: https://www.canadianrealestatemagazine.ca/infocus/real-estate-mentoring/knowing-how-to-effectively-analyze-an-investment-opportunity-250174.aspx

Are your rental apartment buildings safe?

A new advertising campaign is urging renters in Toronto to ensure their landlords comply with RentSafeTO.

The program requires rental apartment owners to comply with building operation and maintenance standards. It was launched in 2007 and applies to all rental apartment buildings with three or more stories and 10 or more units.

Landlords that don’t comply can face orders and court charges which can result in substantial fines.

The new campaign, launched by the City of Toronto, is urging residents to speak to the RentSafeTO team on 311 if they have any issues. It reflects the top 3 complaints that the RentSafeTO officers hear about: pests, broken elevators and leaky ceilings.

"Ultimately we are striving to help ensure that tenants have a safe, secure and decent place to live, as well as protect and preserve the rental housing stock in the city. Our goal with this ad campaign is to remind residents to call the RentSafeTO team if they need support to have problems addressed," said Mark Sraga, Director of Investigation Services in Municipal Licensing and Standards. "Our message is simple: The RentSafeTO team is the next step after your landlord, and we are here to help."

Renters that live in buildings not covered by the program are urged to speak to their landlords but the City will still investigate if issues are reported.

Source: https://www.canadianrealestatemagazine.ca/market-update/are-your-rental-apartment-buildings-safe-250403.aspx

Canadians should get slighter bigger pay checks next year

Paychecks for non-unionized Canadian workers should grow slightly more in 2019 than they did this year.

A new report from the Conference Board of Canada forecasts an average 2.6% year-over-year increase in wages next year, up from 2.4% in 2018.

Those working in the food, beverage, and tobacco products industry should lead the wage increases with a 3% gain, with oil, gas, and technology industry workers not far behind at 2.9%.

However, those in the health sector will see a well-below-average rise in their paycheck at just 1.6% year-over-year.

“Over the past few years, we have seen wage increases among the lowest they have been in the past two decades. We are now seeing an improvement and compensation planners are looking to offer increases in 2019 that remain ahead of inflation,” said Allison Cowan, Director, Total Rewards, HR and Labour Relations Research, The Conference Board of Canada.

Provincial gains
Of the provinces, Saskatchewan will lead with an average wage rise of 2.9%, followed by Quebec (2.7%), BC, Alberta, and the Atlantic Provinces (2.6%), Ontario (2.5%), and Manitoba (2.3%).

The Compensation Planning Report 2019 also reveals that the professions in highest demand continue to be IT specialists, skilled trades, management, and engineering. Sales and marketing now round out the top five with the demand for accounting/finance specialists decreasing.

Source: https://www.canadianrealestatemagazine.ca/market-update/canadians-should-get-slighter-bigger-pay-checks-next-year-250084.aspx

Canadians are feeling more confident in the economy, real estate

Confidence in the economy has risen since the new trade agreement with the US and Mexico was agreed.

The weekly Bloomberg/Nanos Canadian Confidence Index hit 59.02 this week, rising from 55.20 four weeks ago and closing in on the 2018 high of 61.91 on January 5. There was an improvement in both sub-indexes. The one covering job security and personal finances was up less than 1 point but the one covering expectations for the economy and real estate prices was up by almost 5 points compared to 4 weeks ago.

“Consumer confidence is up in all regions of the country compared to four weeks ago,” said Nanos Research, Chief Data Scientist, Nik Nanos.

Confidence in the future strength of the Canadian economy stood at 12.47% before the USMCA deal while currently, it stands at 21.02.

Homeowners’ confidence gained this week compared to last week while renters confidence slipped.

Source: https://www.canadianrealestatemagazine.ca/market-update/canadians-are-feeling-more-confident-in-the-economy-real-estate-250040.aspx

HSBC Canada says three things have helped grow its market share

HSBC Bank Canada has posted its latest quarterly financial results with strong results across its business.

For the quarter ending September 30, 2018, the bank’s total operating income was $588m, up $60m or 11.4% compared with the same period of 2017. Profit before tax was $271m, up $53m or 24.3% year-over-year.

“Revenues and asset growth remain strong across all of our business lines, and profit before tax is up 24.3% over the same period last year as we bring more of HSBC to Canadian customers. Our strategy is yielding results and we remain focused on our customer relationships and building business one customer at a time," said Sandra Stuart, President and Chief Executive Officer of HSBC Bank Canada.

Mortgage growth
For the mortgage business, HSBC says that it continued to see strong growth in total relationship balances and to grow market share primarily in deposits and mortgages.

It puts this growth down to “strong branding, innovation and strategic investments to make our bank simpler, faster and better for our clients.” This included the opening of a Mortgage Centre during the quarter.

Overall retail banking was up $19m or 10.9% to $193 million.

"We continue to build our business and Q3 was no exception. Our team has continued to help our retail, corporate and institutional customers make the most of opportunities as they pursue their domestic and global growth ambitions,” added Stuart.

Source: https://www.canadianrealestatemagazine.ca/market-update/hsbc-canada-says-three-things-have-helped-grow-its-market-share-249917.aspx

52% Of Canadians Less Likely To Buy Homes Where Legal Pot Was Grown: Zoocasa Study

It may be legal to smoke, grow, and possess marijuana come Oct. 17, but that doesn't mean Canadians looking to purchase real estate are suddenly going to be chill about it.

According to a new report on cannabis and real estate from real estate site Zoocasa, 52 percent of Canadians say they'd be less likely to consider specific houses for sale if they knew a legal amount of cannabis was grown in it.

Upon legalization, each Canadian household will be allowed to cultivate four marijuana plants.

Baby boomers (54 to 72 years old) and Gen Xers (38-53 years old) were more likely than millennials (22 to 37 years old) to think a legal amount of pot grown in a home would reduce their desire to buy it. Nearly six in 10 of boomers and Gen Xers (59 percent and 58 percent, respectively) agreed, compared to just over a third of millennials (38 percent).

Over half of current homeowners (57 percent) believe growing a legal amount of cannabis would harm a property's resale value, while 26 percent disagree and 18 percent are unsure.

Zoocasa managing editor Penelope Graham said Bill C-45 has created a lot of uncertainty for homeowners because "there isn't much clarity yet on whether there will be negative implications for home values and marketability."

"Prior to legalization, there were mortgage and insurance consequences for those who smoked or grew cannabis in their homes, and there has yet to be any concrete clarification as to how this will change once the legislation is in place," Graham said in a statement emailed to HuffPost Canada.

"For this reason, the question of whether or not homeowners, buyers, and sellers need protection and education continues to be a hot button topic for real estate associations, agents and appraisers."

Most landlords (70 percent) say landlords should be able to charge higher rents if tenants want to smoke cannabis inside their homes and just over half of Canadians overall (52 percent) say the same, though only 13 percent of renters say they'd be willing to actually pay it.

An overwhelming majority of landlords polled in the survey said that they want or plan to ban smoking within their rental properties.

Mixed feelings about dispensaries

Indoor cannabis consumption and cultivation aside, almost half (48 percent) of respondents said the presence of a dispensary would reduce their desire to purchase a property, and almost as many (42 percent) feel having one in the neighbourhood would harm the value of nearby homes.

Less than a third of respondents (31 percent) said they're comfortable with a dispensary opening in their area, compared to 59 percent saying the same thing about liquor stores.

Zoocasa conducted an online survey from Sept. 27-Oct. 3 among 1,380 respondents who live in Canada. The results have an estimated margin of error of +/- 2.6 percentage points, 19 times out of 20.

Source: https://www.huffingtonpost.ca/2018/10/15/canadians-cannabis-property-values_a_23561679/?utm_hp_ref=ca-real-estate&fbclid=IwAR1PPQV2dlppGnbFjV1hUd9MLzIrSu_vg-Qr5OHp4_szEoWMsakiKUGDWXg

Price, affordability remains top homebuyer issue says CMHC

Buying a home is still an important goal for most Canadians but high home prices and affordability remain the dominant issues for many potential buyers.

Almost twice as many first-time buyers reported price/affordability as being the most important factor when buying a home compared to other factors such as neighborhood, proximity to work, and condition of the home.

The findings from the newly-published Mortgage Consumer Survey from CMHC also reveal that 37% of buyers say they have concerns or uncertainty when buying a home.

Paying too much for their new home concerns around half of the respondents while around a third are worried about interest rates and mortgage qualification.

The majority (80%) homebuyers believing that homeownership remains a good long-term financial investment and 66% believe the value of their home will increase in the next 12 months.

Among first-time buyers, most said they wanted to buy their first home and felt financially ready to do so.

They said they had been planning their purchase for some time and were encouraged by low interest rates.

Despite 85% saying they spent as much as they could afford, 76% were confident in meeting future mortgage payments.

Source: https://www.canadianrealestatemagazine.ca/market-update/price-affordability-remains-top-homebuyer-issue-says-cmhc-249562.aspx

An alternative take on foreign home ownership

The influence of foreign homebuyers on housing markets is a much-debated one but a new report suggests a new take on the correlation between foreign ownership and high prices.

A study of US Census Bureau data by mortgage lending platform LendingTree suggests that a market’s high home prices may attract foreign homebuyers rather than them being the cause.

The study looked at where foreign homeowners are most prolific and found that, generally, cities with the largest share have higher home prices.

Prices in the top 10 cities for foreign-born owners average U$491,750 compared to $167,560 for the bottom 10.

Miami is a key exception, topping the list with foreign residents making up 26% of all homeowners although the median price in Miami is well below the average for the top 10 at $278,700.

Foreign buyers attracted to dynamic economies

LendingTree’s chief economist Tendayi Kapfidze says that the greater share of foreign owners in high-price markets may be down to opportunity.

"It's likely that immigrants gravitate towards these cities which have higher home prices, as they also have more dynamic economies and thus more employment opportunities,” he explains. "The proportion of highly-skilled immigrants is also higher in these cities which puts some upward pressure on home prices as a secondary effect.”

He added that homeowners in cities with high foreign-born populations benefit from faster home price appreciation, creating opportunities for them to access this wealth via refinancing or home equity extraction.

This extra spending can in turn boost the economy or provide capital to fund new businesses.

Source: https://www.canadianrealestatemagazine.ca/market-update/an-alternative-take-on-foreign-home-ownership-249325.aspx

Real estate industry urges Ford to deliver housing promises

Ontario’s premier needs to push ahead with the assistance promised to the province’s potential home buyers.

The Ontario Real Estate Association (OREA), Ontario Home Builders Association (OHBA) and the Federation of Rental-Housing Providers of Ontario (FRPO) met this week to discuss housing policy and are calling on the Ford government to implement solutions to increase housing supply and assist first-time buyers.

“Keeping the dream of home ownership alive in Ontario requires bold policies and action from the provincial government,” said Tim Hudak, Chief Executive Officer, OREA. “First and foremost, to get more new homes in the marketplace, the building approvals process must be streamlined and zoning updated to allow for more homes in the right places. The best and fastest way to give Ontario’s first-time home buyers a break is to eliminate the punishing land transfer tax for first-time buyers.”

Along with increased supply and less red tape, the organizations are calling for the government to eliminate the land transfer tax for first-time home buyers or dramatically increase the current rebate offered to first-time buyers.

They also want a return of the Ontario Municipal Board which they say has traditionally taken the NIMBY out of housing decisions. They say bringing back the OMB will mean evidence-based planning decisions, which will create more housing supply and choice.

Source: https://www.canadianrealestatemagazine.ca/market-update/real-estate-industry-urges-ford-to-deliver-housing-promises-249256.aspx

This is the number 1 concern for real estate pros

Several challenges continue to concern real estate professionals but there is still optimism for the sector in the year ahead.

A new report from PwC Canada and the Urban Land Institute shows that the industry’s concerns include tariffs and interest rates which could further weaken affordability.

For those developers, investors, lenders and other leading experts involved in the residential real estate sector, land supply is the top concern heading into 2019.

"Dealing with the affordability issue is a shared responsibility between government and developers. While government addressed demand by introducing measures like tighter mortgage rules and foreign taxes, they neglected the supply side," says Frank Magliocco, National Real Estate Leader, PwC Canada. "Reducing regulation and making more land available for development in a timely manner will help address the affordability issue."

With the proportion of household income needed to service the costs of a single-family home rising to 53.5% in the first quarter of 2018 (and as much as 119.3% in Vancouver), the impact of rising interest rates and tariffs on steel are also large concerns.

Commercial sector
For the commercial real estate sector, multi-family remains strong along with industrial, which should benefit from demand for growing facilities for Canada’s burgeoning cannabis sector.

The struggles for retail continue as the sector faces more competition from e-commerce. This sector is being forced to reinvent itself.

Coworking space is driving demand in the office sector and is projected to make up 30% of corporate real estate portfolios by 2030.

There is also growth expected in the senior's sector with the aging population driving demand for this housing type.

Technology continues growth
Despite growth in the PropTech sector, including new lending platforms and digital real estate brokerages, just 10% of executives said they were concerned about the speed of technological change.

According to the report, PropTech is forecasted to add US$5.2 billion in new investment globally across 454 equity deals in 2018, after reaching a record US$3.4 billion in 2017 across 367 deals.

Drones are considered the top tech disruptor for the real estate sector, the poll found, followed by autonomous vehicles, cybersecurity and construction technology.

Source: https://www.canadianrealestatemagazine.ca/market-update/survey-this-is-the-number-1-concern-for-real-estate-pros-249121.aspx

Investors remain confident in Canadian CRE market

nvestment in commercial real estate remains strong across Canada as economic fundamentals continue to support the market.

That’s despite rising interest rates, tight supply, and the lateness of the investment cycle, according to a new report from Avison Young.

The Toronto-based real estate firm’s Fall 2018 North America and Europe Commercial Real Estate Investment Review highlights the attractive yields that are still available to investors – and that Canada’s CRE is regarded a safe haven.

"Canadian and international investors continue to view the country in a favourable light," notes Bill Argeropoulos, Principal and Practice Leader, Research (Canada) for Avison Young. "Toronto and Vancouver remain the primary destinations for investor capital, but investment was relatively evenly distributed among the asset classes nationwide in first-half 2018. In fact, Toronto is in good company among North America's major markets – the only Canadian market to crack the top 10."

Offices are hot right now
The Canadian office market is strong with tech and co-working firms demanding space.

"Among the top five transactions by dollar volume in each of the six major Canadian markets, office building sales outnumbered all other asset types as investors paid top dollar for these prized properties, including a 50% interest in Toronto's Bay Adelaide Centre, which was sold to a foreign investor for $850 million," says Argeropoulos.

But there is also interest in other CRE asset types with increased urban density driving demand for industrial and retail; while tight supply of homes is boosting investor interest in multifamily assets.

Robin White, Avison Young Principal and Chair of the firm's capital markets group, adds: "Despite the challenges being faced in many parts of the world, Canada's economy has maintained its resilience with low unemployment and moderate growth. This situation has translated into continuing demand for real estate as an asset class from domestic and international investors, both private and institutional. They have been attracted to the strong fundamentals of the asset class, and there is no sign of this interest dissipating in the near term." 

Source: https://www.canadianrealestatemagazine.ca/market-update/investors-remain-confident-in-canadian-cre-market-248900.aspx

Canadian housing affordability at 30-year-low says RBC

Canada’s housing affordability is at its worst level since 1990 and its going to get worse.

A newly report from RBC Economic Research shows that its aggregate housing affordability measure was 53.9 in the second quarter of 2018, based on the share of household income required for ownership costs including taxes and mortgage payments.

The figure is up from 43.2% just 3 years ago and although house prices are responsible for the initial rise, interest rates are the bigger influence of the past year.

Since Q2 2017, the index has increased 2.6 percentage points and there was a 1.1 percentage point rise quarter-over-quarter. The impact of the mortgage stress test has added to the burden for first-time buyers.

"The grim outlook for prospective home-buyers will likely continue in the near term," said Craig Wright, Senior Vice-President and Chief Economist at RBC. "We anticipate the Bank of Canada will proceed with further interest rate hikes well into 2019. This will keep mortgage rates under upward pressure and boost ownership costs even more across Canada."

Condo affordability worsened more than single-family detached homes, especially in Toronto.

Vancouver, Toronto off-the-scale
Affordability in Toronto and Vancouver remains at staggering levels with an average GTA buyer facing a burden of 75.9% of their income to cover costs, up 1.8pp in the quarter.

In Vancouver, the situation is even worse having risen 8.2pp over the year and 1.6pp in the quarter to 88.4%.

"The prospect of further rate hikes doesn't bode well for Toronto or Vancouver buyers, whether they're on the look-out for a condo or a single detached home," said Wright. "Affordability pressures are likely to become an even bigger issue for them, which we believe will limit how much home resale activity will rebound from its recent cyclical low."

Victoria is also showing strained affordability with RBC's aggregate measure up 2.4pp points to 65% in the second quarter.

Only St John’s saw a slight improvement with other markets generally manageable.

Outlook isn’t great
For first-time buyers the ability to afford a home is not going to get any easier any time soon.

RBC Economics expects intensifying affordability pressures to hold back homebuyer demand in the coming year.

Source: https://www.canadianrealestatemagazine.ca/market-update/canadian-housing-affordability-at-30yearlow-says-rbc-248723.aspx

What next for the Canadian housing market?

Following the small increase in national home sales revealed by CREA Monday, the association has updated its forecast for the housing market.

Although acknowledging the strong economic and demographic fundamentals which support the housing market in most of the country, the forecast highlights the policy headwinds that are creating barriers for homebuyers.

Firstly, the mortgage stress test introduced at the start of the year which continues to pressure would-be first-time buyers; at least those who did not bring forward their purchase to before the new rules took effect.

Secondly, rising interest rates. With those that have already happened and at least one more expected before the end of 2018 with more to follow in 2019, the bar is rising for borrowers hoping to qualify for a mortgage.

These factors lead CREA to call for a 9.8% decline in sales to 462,900 for 2018. This is in line with the previous forecast in June and reflects stronger-than-expected activity in Ontario offsetting weaker sales in BC, although both are expected to post double-digit year-over-year declines.

The national average price is projected to ease to $494,900 this year, down 2.8% from 2017, reflecting fewer sales transactions in B.C. and Ontario in 2018.  

Meanwhile, home prices in Eastern Ontario, Quebec, New Brunswick, Nova Scotia and Prince Edward Island are expected to continue rising following steadily firming market conditions in recent years.

Home prices are projected to edge down by about 1.5% in Alberta, Saskatchewan and Newfoundland and Labrador. In these provinces, particularly in the latter two, supply is historically elevated in relation to demand.

And for 2019?
CREA is forecasting national sales to rebound modestly (+2.1%) to 472,700 units but remain below annual levels recorded in 2014 through 2017.

The national average price is forecast to rebound by 2.7% to $508,400 in 2019, reflecting modest average price growth in several provinces and the return of the normal seasonal pattern for sales and average prices in Ontario where a 3.3% rise is forecast.

Quebec, New Brunswick, Nova Scotia and Prince Edward Island are expected to see rising prices next year, although restricted by interest rate hikes.

Prices are forecast to remain stable from 2018 to 2019 in Alberta, while further edging down in Saskatchewan and Newfoundland and Labrador.

Source: https://www.canadianrealestatemagazine.ca/market-update/what-next-for-the-canadian-housing-market-248144.aspx

Higher mortgage rates forecast for fourth quarter

Mortgage rates are trending higher and the prime rate will hit 3.85% in the last three months of 2018.

That’s the view of economists at British Columbia Real Estate Association who have just published their Q4 Mortgage Rate Forecast.

It calls for a 5-year qualifying rate of 5.54% and a 5-year average discounted rate of 3.65%.

Pointing to the slowdown in mortgage growth following the introduction of the stress test at the start of the year, BCREA Economics says that the combination of lower access to credit and rising interest rates has led to a significant tightening of the market.

Monetary policy is also tightening and BCREA says that, while the 5-year qualifying rate for mortgages held fairly steady in Q3, the BoC’s actions will likely lead to higher rates.

Although there are some solid reasons why the BoC could speed up its normalization of interest rates – including employment and inflation data – BCREA believes that if the economy is reaching the end of the current business cycle, the cautious increases will endure.

It forecasts the bank will increase its overnight rate to 1.75% in October, with a possible further increase in December, and more to come in 2019.

Source: https://www.canadianrealestatemagazine.ca/market-update/higher-mortgage-rates-forecast-for-fourth-quarter-248034.aspx

Canadians can't afford NOT to buy study suggests

Rising rents are making homeownership the affordable alternative according to a new report.

In a comparison of expected costs by those intending to rent and those who chose to own, Mortgage Professionals Canada’s chief economist Will Dunning concludes that ownership costs less than renting today and is, even more, cost-effective over time.

"The report demonstrates that the money Canadians are spending on monthly rent if used instead to finance a home, would be a very beneficial investment over time," explained Dunning. "The costs of owning and renting continue to rise across Canada. However, rents continue to rise over time whereas the largest cost of homeownership – the mortgage payment – typically maintains a fixed amount over a set period of time – usually for the first five years. The result is that the cost of renting will increase more rapidly than the cost of homeownership."

How much could buyers save?
By looking at the comparative costs, the report shows that, if mortgage rates remain at 3.25%, in 10 years the cost of ownership (on the net basis that takes out principal repayment) will be lower than the cost of renting for almost 98% of cases. The saving for owners vs renters would be $1,295.

If rates were to rise to 4.25% after 10 years, the cost of ownership is less than the cost of renting in 92% of case studies, with an average saving of $1,014 per month.

A rate of 5.25% would still make homebuying a lower cost option in 82% of case studies with a monthly saving of $726.

"Using conservative expectations for rental increases over time, there is a clear financial benefit of owning versus renting," commented Paul Taylor, President, and CEO of Mortgage Professionals Canada. "While recent changes to mortgage qualifying have made the barrier to entry higher, those who can qualify will be much better off in the long term. Given the economic advantages of homeownership, Mortgage Professionals Canada would recommend the government consider ways to enable more middle-class Canadians to achieve homeownership. Our collective long-term economic success may be compromised without that support."

Source: https://www.canadianrealestatemagazine.ca/market-update/canadians-cant-afford-not-to-buy-study-suggests-247917.aspx

Reaction to BoC rate hold, what next?

The decision of Bank of Canada governor Stephen Poloz to hold interest rates steady in September was no big surprise.

The markets and economists had been expecting that freeze due to inconclusive economic data and the ongoing NAFTA talks.

But what do two leading economists make of the decision and how do they see things progressing for interest rates?

“It was wise of the Bank of Canada to hold its powder dry at today's policy meeting given the continued uncertainty on the NAFTA front,” commented Dr Sherry Cooper, chief economist for Dominion Lending Centres. “An agreement on NAFTA would provide the central bank with more comfort in moving ahead with a hiking cycle that has already lifted the benchmark overnight rate four times since mid-2017.”

She notes that the BoC acknowledged that a spike in inflation (to 3%) was largely driven by air fare hikes and the CPI is expected to return to near 2% early in 2019.

However, TD Economics senior economist Brian DePratto says that a rate hike could still have been justified by the rise in inflation despite its temporary nature, but he agrees that NAFTA is the key issue that prompted the hold-steady.

“Barring a major shock, an October hike looks like a pretty safe bet, but after that the picture becomes murky. The Bank has been marking down its growth outlook to account for trade uncertainty – any resolution on the NAFTA front is thus likely to mean a stronger outlook, and by extension, a faster pace of hikes, all else equal,” DePratto said.

Dr Cooper is in agreement, although sounds a less certain tone on an October hike: “The bank reaffirmed that the economy is doing well enough to require higher interest rates in the future to achieve the inflation target. Another rate hike could come as soon as the next policy meeting on October 24th.”

Source: https://www.canadianrealestatemagazine.ca/market-update/reaction-to-boc-rate-hold-what-next-247597.aspx

What’s pot going to do to home insurance?

In less than six weeks, Canadians will be legally able to grow recreational cannabis in their homes, as well as buy, use, and possess it. But how will their insurance be affected?

In a new survey from Ratehub, an overwhelming majority of homeowners (79%) say they don’t know if their home insurance policy would cover damages relating to growing cannabis with another 20% believing that it would not.

Renters are also confused about what their insurance – and landlords – may allow.

While 28% of renters think they should have the right to smoke and grow cannabis within their rental units, most landlords don’t believe their tenants should be able to smoke (62%) or grow (58%) within their units.

Further, more than half of landlords are unsure whether their insurance policies would cover smoking or growing cannabis.

Ratehub co-founder Alyssa Furtado is calling on insurers to be upfront with Canadians and go “above and beyond” in informing them about how insurance may be affected by the legalization of cannabis.

“Given they are responsible for defining changes within the industry, they need to be more transparent about how cannabis legalization may affect Canadians’ insurance,” she says.

Source: https://www.canadianrealestatemagazine.ca/market-update/whats-pot-going-to-do-to-home-insurance-247594.aspx

Improved credit quality for CMHC loans portfolio

The latest quarterly financial results from CMHC show continued improvement in the quality of its mortgage loan portfolio.

During the first half of 2018, the overall arrears rate decreased from 0.29% to 0.27% and the average homebuyer had a credit score of 754.

A typical homebuyer bought a home costing almost $271,000 with most choosing a 25-year amortization mortgage with 80% preferring a fixed rate loan.

CMHC provided mortgage insurance for nearly 107,000 homes in the first half of 2018 with 57,781 for homebuyers and 48,885 for rental units.

Its securitization programs provided lenders with nearly $75 billion in guarantees.

Its business activities generated revenues of $2.7 billion and a net income of $681 million through the first half of 2018 and at June 30, 2018, its overall insurance-in-force was $463 billion with $13.5 billion in capital available, representing 177% of the minimum regulatory capital required. Total guarantees-in-force were $479 billion with $2.5 billion in capital held, representing 143% of the minimum required.

Helping with housing needs
CMHC also delivered nearly $1.5 billion to create and support much-needed housing units for low- and middle-income Canadians and continued to implement National Housing Strategy initiatives.

"We continued to implement initiatives under the National Housing Strategy while delivering results for Canadians and helping people from all across the country meet their housing needs," said Lisa Williams, Chief Financial Officer

source: https://www.canadianrealestatemagazine.ca/market-update/improved-credit-quality-for-cmhc-loans-portfolio-247274.aspx

Canadian housing market is bouncing back says TD Economics

Things are starting to improve in Canada’s housing markets according to a report from TD Economics.

Deputy chief economist Derek Burleton and economist Rishi Sondhi say that recent data has confirmed TD’s view that there would be some traction gained after initial sharp impact to tighter lending restrictions at the start of the year.

“Past experience has shown that markets begin to stabilize after about 4-6 months following the implementation of major changes to housing policy. True to form, sales activity and average prices have come off a floor in most major markets since May,” the economists’ report says.

The report notes recent stabilization in the GTA with increasing resales for both single-family (20% estimated) and condos (10% estimated) and prices climbing.

However, the TD Economics team say that Vancouver is not yet seeing the same rebound as the market’s low affordability. The economists say that the market has yet to find a bottom as provincial cooling measures are also in play alongside the tighter mortgage lending rules.

While the signs of stabilization and even a comeback are evident, the report warns of uneven conditions across Canada’s markets and the spectre of economic conditions, interest rate rises, and trade tensions impacting job markets.

Source: https://www.canadianrealestatemagazine.ca/market-update/canadian-housing-market-is-bouncing-back-says-td-economics-247032.aspx

Confidence in the economy, real estate is growing

Canadians are becoming more confident in the outlook for the economy, real estate prices, and their finances.

The weekly Bloomberg Nanos Canadian Confidence Index recorded a 56.58 reading last week, up from 55.87 a week earlier and 54.31 four weeks ago. The 2018 low was in mid-July (54.21).

The sub-indexes on personal finances and job security; and expectations for the economy and real estate prices; were both higher last week.

“Over the past four weeks views on the future strength of the Canadian economy have positively moved up almost four percentage points,” said Nanos Research, Chief Data Scientist, Nik Nanos. “Compared to the results four weeks ago all regions in Canada are up in consumer confidence.”

Younger Canadian adults have shown increases in confidence while those over 50 are less confident overall.

Confidence improved among both homeowners and renters.

Source: https://www.canadianrealestatemagazine.ca/market-update/confidence-in-the-economy-real-estate-is-growing-246837.aspx