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3 Toronto condo market trends to watch in 2020

 

Much ink has already been spilled over the rebound in housing that’s underway in some of Canada’s largest markets. After a volatile 2018 and an exceptionally brutal winter, home sales began to recover, particularly in the Toronto and Vancouver regions.

The country’s all-seeing housing eye, the Canada Mortgage and Housing Corporation (CMHC), recently published its optimistic 2020-2021 market outlook. The organization famously predicted that 2019 would be one of the worst years for Canadian home sales in the last 10 years, so the shift in tone for the next two years has been striking. Heck, it even revised its 2019 forecast to account for a better-than-expected housing performance during the year.

In the 2020-2021 outlook, the CMHC writes that Ontario will lead the country in the continued home sales and prices recovery, pulling up the national averages and offsetting ongoing weak performance in some of the country’s other major centres.

The Toronto condo market has played a significant role in the housing recovery observed in markets across the country through the spring and summer months. In the third quarter, the condo market saw an 11.1 percent rise in sales and a 5.8 percent increase in prices. While these upward trends are generally anticipated to be sustained through the next year, Toronto’s condo market will be particularly sensitive to a number of other factors that are playing out now.

Below we explore three condo market trends that are worth digging into beyond the simple ‘prices and sales go up or down’ market indicators.

1. Toronto’s job market will continue to show its strength in 2019
It doesn’t take a PhD to understand that as long as Toronto remains Canada’s business centre, the city will continue to attract large numbers of new residents assuming the economy stays on a reasonably solid growth trajectory.

“As economic conditions continue to be favourable for job growth in the Greater Toronto Area, people have continued to come to the city for work,” said Toronto Real Estate Board President Michael Collins in a media release published earlier this month.

While talk of a global recession has been bubbling up for months now, the fears don’t seem to be having much of an impact on the country’s job market.

“The big Canadian jobs machine just keeps chugging along, giving no sense that the economy is on the cusp of an imminent downturn,” wrote BMO Chief Economist Douglas Porter in early October, following the release of “sturdy” Canadian employment data from September that saw Ontario add 41,000 jobs.

Expect demand for condos to remain high so long as Toronto is a beneficiary of that “big Canadian jobs machine” attracting new residents to the city.

“Home ownership is important to many Canadians, and, as a relatively affordable housing option, condos in the GTA offer prospective buyers the chance to achieve their dreams of owning property,” said TREB’s Collins.

2. The city’s rental housing deficit isn’t going anywhere
All this good job growth news is both a blessing and a curse for Toronto’s beleaguered renter population who have endured a relentless onslaught of price increases over the years. Job growth has been paired with an increase in average hourly wages, so you’d imagine more jobs with higher pay would benefit renters in the city.

Of course, none of this is happening in isolation, so the burgeoning labour market has also added more residents to the city all competing for the same limited number of rental units in the chronically undersupplied market.

So while the positive job market picture could change on a dime in the face of a deteriorating global economy, only incremental change will likely lift the Toronto rental market out of supply deficit territory.

In a September RBC report, economist Robert Hogue estimated that the number of rental households will increase at an average of 22,200 annually in Toronto between 2018 and 2022. That sounds great from a ‘the city is booming’ perspective, but is a lot less exhilarating when you find out that the city is building nowhere near enough rental housing to accommodate these numbers.

Investor-owned condos make up a significant proportion of the rental supply pool in the city, so you can bet landlords will see plenty of interest in their properties for years to come. And it really could be years — in his report, Hogue said that more than half of the new condo units for the needed rental pool expansion still must be made up. Only major shifts in government policy will move the needle on this issue and Hogue is unconvinced that any level of government is doing enough to expand the rental housing pipeline.

3. The Liberal federal government will expand its support for first-time homebuyers
The now-minority Liberal government first rolled out the First-Time Homebuyers’ Incentive earlier in 2019 to a skeptical audience of economists and housing industry observers. Many thought it was less than helpful to homebuyers in Toronto, where the average home price exceeded the maximum mortgage participating homebuyers were permitted to take on through the program.

The Liberals made it a campaign promise to expand the program by increasing the qualifying household income level and maximum mortgage size. If they follow through, the move will likely increase competition within Toronto’s condo market since that’s where the city’s first-time homebuyers typically focus their efforts when taking that first step onto the property ladder.

Tarion adds new protection for condo buyers
 
Condo buyers in Ontario will get greater protection following the announcement of new requirements by the province’s home warranty provider.

Tarion will says the new measures will help educate and inform prospective homebuyers and will include the addition of new search tools on Tarion’s Ontario Builder Directory and a new detailed information sheet highlighting the potential risks of purchasing certain types of pre-construction condominiums.

“The purchase of a new home is often the most important one that many Ontarians will make,” said Tarion’s President and CEO Howard Bogach. “At Tarion, we’re doing our part to ensure that these purchases are guided by a thorough understanding of the risks, builder history, and status of a given project. The initiatives that we’re announcing today will contribute to a better informed purchasing process.”

The new mandatory disclosures will be effective from January 1, 2020, and will ensure that potential buyers are aware of several key risk factors including:

- pre-construction condominiums come with the risk that they may never be completed;
- early termination conditions that would allow a developer to cancel a project; 
- information about the status of the development (e.g., formal zoning approval, relevant approval authority and date of commencement of construction);
- information about any restrictions on the developer’s land title that may prevent the project from going forward; 
- a purchaser has an initial 10 days under the Condominium Act, 1998 to cancel a sales agreement; and
-the expected date when a purchaser can take occupancy.
 
The new information sheet will be required for all agreements of purchase and sale for units where the purchase agreement for the project or phase of the project is signed after January 1, 2020.

However, leasehold, common element and vacant land condominiums are excluded from the requirement.
The real estate agent who's set a world record, twice
 
When real estate agent Ben Caballero achieved verified home sales of 3,556 it earned him a place in the record books.

But last year, Caballero did what many thought impossible by beating his own record by 67%, selling an eyewatering 5,801 homes through the MLS in just one year.

The total number of homes sold by the HomesUSA.com broker/owner from Dallas, TX, in 2018 meant that he has been reconfirmed by Guinness World Records as the current holder of title ‘Most annual home sales transactions through MLS by an individual sell side real estate agent – current.’

As a former builder, Caballero specializes in selling new homes via his platform for more than 60 builders in Dallas-Fort Worth, Houston, Austin, and San Antonio.

"Being honored by Guinness World Records for a second time is twice as nice," said Ben Caballero. "Achieving the first Guinness World Records title was the honor of a lifetime. Breaking my own record is, well, indescribable.”

His total annual home sales exceed $1 billion for the first time in 2015, a feat he repeated until last year, when he became the first real estate agent to exceed $2 billion in total home sales.
Ask An Agent: What Will Real Estate Sales Look Like In 3-5 Years?

The Harvey Kalles sales representative has been an agent for 15 years. In 2017, Kutyan was contacted by the The Globe and Mail and asked how he was able to get multiple offers on a home in mid-town Toronto. This was after the introduction of the Ontario Fair Housing Plan, when he had been the Canadian media’s go-to real estate prognosticator. Now, he’s been quoted in the Globe and Mail and the Toronto Star multiple times.
Since Kutyan always makes it his business to know what’s going on in Toronto’s housing market and tell the public about it, he seemed like a natural fit for this week’s question.

What is the three-to-five-year outlook for real estate sales in Toronto and the GTA? What are the top 5 trends?


It really depends what type of real estate you’re looking at. Are we talking about detached homes, condominiums, townhomes or semi-detached and what area of the city are you looking at? My answer is going to vary depending on what I’m looking at.

Ultimately, I think the long-term outlook for any real estate sales in the city is going to be upward. We’re in a growing metropolis that looks more and more attractive on the world stage considering what’s going on with our neighbours to the south and what’s happening with the UK and Brexit. On the world stage, Canada and Toronto specifically are very attractive. Ontario brings in 110,000 permanent residents per year and most of them move into the GTA, so in the next seven or eight years we’ll have another million people living in Toronto.

Now, not all these people are buying one million, two million or three million dollar homes, but it puts upward pressure on demand so if supply is limited then it’s a simple math equation where prices will go up.

In the short-term, we’re going to see some fluctuation and that depends on the type of property and the location. There’s a real shortage in mid-town Toronto for properties between $800,000 and $1.2 million where I’ll get multiple offers. I’ll get four to five thousand hits on the listing in five to seven days. I’ll have two hundred plus people through in a week and I’ll end up with ten or twelve offers with property selling for significantly over my asking price.

But then in certain areas of the city, like Bayview, York Mills and Willowdale, there’s a lot of inventory on the market. If I look in Bayview and York Mills at prices between three to six million dollars for detached two-storey homes on 50 to 70-foot lots, there are 86 homes on the market right now. If I look at the number of homes that have sold over the course of six months and divide by the number of months it comes out to 2.83 sales per month, which means there is almost 31 months worth of inventory still on the market in those areas.

Most of the price growth in Toronto has been in condominiums because the majority of the buyers are not in the million plus range, so if you look at the $500,000 to $800,000, that’s where most of the buyers are. What can you buy at that price point? It’s going to be condos. There have been price increases on those for sure. As for trends, here are my main ones:

Shortage of large condos


The other flip side I’m seeing with the condo market is the high-end or the larger units have real lack of inventory in central Toronto.

What’s happening is there’s a big cohort of baby boomers who are looking to downsize, but there’s no one to sell them to. There are only a handful of buildings in Toronto that have fairly large units and they’re few and far between. I’m seeing multiple offers and big prices I haven’t seen before on these units because of the demand.

The problem is the homes they’re selling have gone down in price, while the condos they want to buy have gone up.

Boomers staying in homes longer creates housing shortage for millennial buyers


The gap is widening between what they’re leaving and what they’re looking to buy, so what’s happening is a lot of these people are holding on to their homes longer than they should.

Their house may be under used for their needs, but unless they have to move due to health they’re not going anywhere, which creates a housing shortage in certain areas for millennial buyers.

More long-term renters


As a result, young buyers will have to change their outlook on what home ownership is going to be for them. There’s the age old rent versus own conversation. This generation is used to living in freehold homes within the city, but that may change.

People might look at renting more now and if you look at Canada in general, we have one of the highest percentage home ownership rates in the western world, but it’s something ingrained in our mentality to be home owners. But this might change. People may shift to being permanent renters and focus on putting the rest of their money elsewhere.

Buyers owning homes outside Toronto means increased dependency on public transit


If people are going to own something, they’re going to have to change what their view of that is going to be.

We’re all used to growing up in freehold homes in suburban Toronto or within Toronto, but since income has not kept up with the way pricing has gone, if people want to live in the city, it’s not going to be in a freehold house it’s going to be in a condo or some kind of multi-residential home like a duplex or townhome.

If they want to live in a house, they will have to live in the suburbs and when I say suburbs, I’m not talking about Scarborough and Etobicoke. I’m talking about Oshawa, Ajax, Burlington, Hamilton and Barrie. They’re going to use GO Transit and other forms of public transit to commute into the city and work at even greater numbers than they already do.

Laneway housing


The city has allowed for laneway housing now and I think that’s going to be something we’re going to see more and more of moving forward. There are hundreds of kilometres of unused laneways in Toronto, so why not use them?

There are companies here in Toronto that are specifically geared towards building and getting approval for laneway housing. What you’re going to see is either someone is going to put in a laneway home to augment their income or subsidize their mortgage or because they need more space.

Perhaps they need a studio space, an apartment for a parent they need to take care of or a space for an adult child to live at home. This is going to be a big trend and I have clients now who are specifically only looking for houses on lanes. These are investor clients who are looking to do something.

7 year high for demand for CRE among global institutions
 
Global institutions are increasing their allocations to commercial real estate assets as confidence in the sector remains high.

The appetite for CRE investment among the world’s largest investors has reached a 7-year high despite concerns about asset valuations and weakening economic growth.

The annual Real Estate Allocations Monitor from Hodes Weill & Associates and Cornell University’s Baker Program in Real Estate, shows that institutions’ view of CRE from a risk-return standpoint increased from 5.1 to 5.7, reflecting that returns have exceeded return targets.

“Globally, we’re in a yield-starved environment, and real estate has proven to be one of the few asset classes where investors can still find yield without exposure to excessive risk,” said Douglas Weill, Managing Partner at Hodes Weill & Associates. “This is the primary reason why we’re seeing a flight to safety in real estate. However, there remains a significant amount of dry powder on the sidelines as good investments become harder to find – which could explain why institutions remain meaningfully under-invested relative to target allocations.”

Target allocations increase
Target allocations to CRE gained 10 basis points to 10.5% this year and implies the potential for an additional US$80 to US$120 billion of capital to be allocated to real estate over the coming years.

While there is some evidence that growth in allocations appears to be moderating, the report still forecasts a further 10 basis point rise in 2020, driven by institutions in the Americas and Asia Pacific.

Real estate is an important and growing allocation in institutional portfolios,” said Dustin Baker, Director of the Baker Program in Real Estate at Cornell University. “Despite concerns about late-cycle risk, real estate fundamentals – including supply and demand trends – remain broadly favorable. This has been driving strong returns, which in turn is contributing to continued liquidity in the asset class.”
Toronto condo apartment sales up 11% in third quarter
 
The buoyant economic conditions in Toronto mean more people moving to the city for work and wanting the most affordable housing options.

This has helped the condo apartment sales market in the third quarter, which gained 11.1% year-over-year according to new figures from the Toronto Real Estate Board.

TREB members reported 6,407 condo apartment sales through the MLS in Q3 while listings eased by 1% to 9,538.

“As economic conditions continue to be favourable for job growth in the Greater Toronto Area, people have continued to come to the city for work. Home ownership is important to many Canadians, and, as a relatively affordable housing option, condos in the GTA offer prospective buyers the chance to achieve their dreams of owning property,” said TREB president Michael Collins.

The tightening market put upward pressure on prices with the average price of a condominium apartment rising 5.8% to $584,564; although in the city of Toronto, which accounts for 70% of sales, the rise was slightly lower at 5.6% ($628,074).

Keeping up with demand
TREB says there are still concerns about supply as the market gathers pace; CMHC data for August shows completions of condo apartments was down year-to-date compared to last year, which may have curbed investor purchases.

“Condominium apartments are obviously a popular choice amongst first-time homebuyers. Moreover, it is also important to remember that condominium apartments owned by investors represent a huge component of the GTA rental stock and certainly account for most additions to the rental stock, on net, over the past decade. With this in mind, a well-supplied condo segment will be important moving forward to ensure that we can keep up with population growth driven by a strong and diverse regional economy,” said Jason Mercer, TREB’s Chief Market Analyst.
GTA Sales Activity Rebounds From Five Straight Quarters of Decline
Q2 2019 registered a total of 563 investment property sales transactions over $1 million, representing a total investment value of $5.8 billion

TORONTO – Altus Group, a leading provider of software, data solutions and independent advisory services to the commercial real estate industry, today announced the second quarter of 2019 results for commercial real estate investment in the Greater Toronto Area (GTA). Total investments for the first half of 2019 reached $10 billion, down 13% compared to the $11.4 billion registered in the first half of 2018. After five straight quarterly declines, total investments were up 43% compared to first quarter 2019, with strong momentum heading into the second half of 2019.

 
GTA Property Transactions – All Sectors by Quarter 
Second quarter transactions managed to record the fourth highest quarterly investment totals ever after five consecutive quarterly declines. Confidence in the GTA market remains high as investors continue to view the GTA as a stable and attractive market, which provides a strong potential for higher returns. Re-development sites remain a driving force as it accounted for nearly 38% of all investments.

The office and residential land sector lead all asset classes this quarter, each representing about 20% of the $5.8 billion total. The largest transaction seen this quarter was the $640 million sale of Atrium on Bay, a one million square foot office property located in the heart of downtown Toronto. Pent up demand and low office vacancy rates, 3.1% in Downtown Toronto and 6.8% in the GTA for the second quarter, have resulted in growing demand for office space in submarkets just outside of the core.

Q2 2019 GTA Property Transactions – Total $ Volume by Sector 
 
 
The land sectors collectively accounted for $2.2 billion, which represents a 20% increase compared to the previous quarter, but a 25% decrease compared to the same period last year. The ICI land sector was up 69% compared to the previous quarter and registering $701 million in transactions, but down 47% compared to the same quarter last year. A notable ICI land acquisition this quarter was a 129 acre site located in Ajax which was purchased by Crestpoint Real Estate Investments Ltd. for a total consideration of $72,975,500. As reported by Altus Group’s Q2 2019 Investment Trends Survey, respondents had a positive outlook with regards to industrial land in the GTA market.

Future high density re-development sites comprised nearly 60% of the $1.1 billion recorded in the residential land sector this quarter, with the largest sale being 39 Newcastle Street located in Etobicoke. This 2 acre parcel, which was acquired by Vandyk Group of Companies for $90 million, is ideally situated within a short walk to the Mimico GO station. As housing demand persists due to the rapid population growth in the GTA, residential re-development projects will continue to be in the forefront. Investors continue to look at options to re-position and maximize their returns through the intensification of excess lands existing on current assets. This example is evident in recent development applications submitted on two prominent shopping malls in the City of Toronto, Sherway Gardens and Dufferin Mall. The application for Sherway Gardens in Etobicoke would see an infill development of the existing parking lot with eight new mixed-use buildings containing residential, retail, office and hotel uses, adding approximately 3.2 million square feet of space. The application for Dufferin Mall seeks to re-develop the northern portion of the site for purpose built rental towers containing 1,135 residential units and retail space which would provide an additional 1.1 million square feet of space to the asset.

The apartment sector saw a 266% jump from the first quarter and also a 52% increase compared to the same period last year. The largest transaction recorded this quarter was the $220 million sale of Rossland Park in Oshawa. The 911 unit complex which sits on 40 acres was acquired by Q Residential who may look to add density to the site in the near future.

The retail sector was the most traded asset this quarter and saw a 25% increase in investments compared to the same quarter last year. Investors continue to re-position and evolve their retail assets amid competition with e-retailers by offering more customer on site amenities and experiences. The largest transaction this quarter was the 50% interest sale of Stock Yards Village, a 500,000 square foot multi-building shopping complex which sits on nearly 20 acres. This retail complex, which was formerly anchored by Target, was acquired by RioCan REIT who now owns a 100% interest stake in the property.

According to the Altus Group Investment Trends Survey, investors remain particularly confident in the industrial sector as vacancy in the GTA remains tight, with second quarter vacancies sitting at 0.8%. The industrial sector recorded $944 million of investments this quarter, which is up 22% compared to the previous quarter and up 20% in comparison with the same period last year. With the emergence of e-commerce resulting in the expectation of same-day deliveries, warehouse space within proximity of the GTA has lead to a growing demand for larger format warehouse facilities containing higher than average ceiling heights.

Two notable transactions this quarter include:

· 2562 Stanfield Road, a two building 361,800 square foot property with ceiling heights up to 36 feet. The property, which is located in the City of Mississauga, was acquired by Pure Industrial Real Estate Trust for a total consideration of $38 million.

· 1602 Tricont Avenue, a 258,000 square foot property with ceiling heights up to 35 feet. The property, which is located in the Town of Whitby, was acquired by Dream Industrial REIT for a total consideration of $35.8 million.

Purchaser activity this quarter was predominantly comprised of private investors, while institutional buyers and public investors acquired the larger trophy assets. Once again, foreign investors were not as prominent this quarter. It is anticipated that the record activity that occurred in Q2 2019 will continue into the second half of 2019. Challenges remain in the market as willing buyers are being met with a lack of product. 
GTA New Home Sales – YTD (Jan to June) 2019
Year-to-date new home sales totals for January – June 2019 in the Greater Toronto Area are as follows.

YTD (Jan to June) 2019 Results

Low Rise: 4,796 sales; up +130% from 2018; down -40% from 10 year average

High Rise: 12,331 sales; up +24% from 2018; up +5% from 10 year average

Total New Homes: 17,127 sales; up +43% from 2018; down -14% from 10 year average
 
New rental supply needs to double in Toronto

This week, RBC Economics published a study on Canada’s rental market where they argued that the pace of new supply needs to at least double in markets like Toronto in order to meet future housing demand and balance the market. Similar things, I’m sure, could be said about many other housing markets around the world.

The report pegs the current rental housing deficit in Toronto at about 9,100 units:

And because they believe that the cost of ownership is pushing more people into rentals, the number of renter households is expected to grow at an average rate of 22,200 units per year in Toronto.If you take 22,200 units per year over the next two years, and add in the current deficit of 9,100 rental units, you get to a total count of 53,500 rental units. This is what RBC Economics believes must be delivered to the market in order to restore equilibrium, and decrease the upward pressure on rents.

Rental units are, of course, delivered to the market in two main ways. There’s purpose-built rentals and there are for-sale units that end up as rental housing. But even if you amalgamate both of these tenures, we are not building enough housing.

Against this backdrop, I find it curious that developers are so often vilified. Earlier this week, I saw Jennifer Keesmaat tweet out that — as we ready for this fall’s federal election — any sensible housing plan must move away from our current for profit housing delivery model.

Who, then, will build these 53,500 rental units? That part wasn’t clear to me.

Canada's condo markets intensify, outstripping the rest of NA
 
Condo markets in Toronto, Vancouver, and Montreal have accelerated significantly this fall, especially when compared to other major cities south of the border.

Last month alone, benchmark prices in Toronto went up by 5.2% annually to $805,500. This was only about $10,000 below the record highs achieved around two years ago, Bloomberg reported.

And even though Vancouver prices have exhibited a downward trend over the last few months, sales activity intensified by a massive 46% year-over-year, making September the third straight month of sales growth.

Even Calgary, which is still recovering from the catastrophic effects of the oil industry turmoil seen from 2015 onwards, enjoyed an 8.2% annual increase in sales in September.

To compare, the traditionally hot Manhattan market has experienced a steady decline in sales activity over the past two years. During the third quarter, resale prices for Manhattan condos and co-ops shrunk by 8% annually.

A significant driver of the Canadian trend is the country’s population growth. Statistics Canada data indicated that the national population expanded by 531,497 to roughly 37.6 million in July, ending up as the greatest year-over-year increase registered since the 1970s.

A RE/MAX survey conducted by Leger earlier this year found that Toronto, Vancouver, and Calgary have all been deemed among the top 10 best cities to live in worldwide, due to their population growth along with other positives.

Calgary has proven to be especially attractive destination, with RE/MAX stating that the city ranked high in nearly two-thirds of the liveability benchmarks polled. Such criteria include population growth, housing supply, and access to retail outlets.

Vancouver boasted of particularly strong public transit options, including the Skytrain and bus system. The city also ranked high in RE/MAX measures of walkability, especially in Yaletown.

Meanwhile, Toronto ranked medium in terms of access to green spaces/parks, and high in population growth, retail store availability, and healthcare access.

Such factors tend to outweigh the impact of higher prices, according to RE/MAX of Ontario-Atlantic Canada executive VP Christopher Alexander.

“While price and value are always top of mind for buyers, there are some aspects about a home that you can’t change,” Alexander stated at the time. “These liveability factors are what make your home more than just the place you live.”
Colliers rises to the challenge with strata sell-out in 2 weeks

 

Colliers International is celebrating after selling out the commercial element of North Vancouver’s new premium Park West development.

The real estate firm had set itself a target of selling the strata units in the shortest time but with the highest possible price and achieved this in just 2 weeks.

The sales were led by Casey Pollard and Dan Jordan, who sold the 13 units in the mixed-use development which is due to be completed in Q3 2022.

Park West is part of the Lions Gate Village master planned community in North Vancouver and includes residential, retail and office development.

More than 27,000 square feet of Park West is commercial strata space including a boutique grocery store, freestanding restaurant pavilion, and retail and office space.

TD only Canadian bank among world's most sustainable companies
 
With investors and consumers giving greater scrutiny to the companies they do business with regarding their environmental, social, and economic performance, being a ‘sustainable business’ is a badge of honour.

TD Bank Group has been named among the world’s most sustainable businesses by Dow Jones Sustainability Indices (DJSI) among just 25 banks on the shortlist and the only Canadian bank.

"This accomplishment is a testament to TD's commitment to help build a more inclusive and sustainable tomorrow and reflects our purpose: to enrich the lives of our customers, colleagues and communities," said Andrea Barrack, Global Head, Sustainability and Corporate Citizenship, TD. "Our inclusion on the DJSI World Index is a reaffirmation of TD's goal to be an environmental leader as well as our long-standing commitment to diversity, human rights, and positive social impact."

TD was recognized for its strong performance in the areas of Corporate Governance, Risk Management, Customer Relationship Management, and Talent Attraction and Development.

The bank has acknowledged the support and efforts of its 85,000 employees worldwide.

Ready Commitment
Among its sustainability initiatives, TD recently published its first Environmental, Social, and Governance (ESG) report and its first report measuring its Corporate Citizenship strategy, The Ready Commitment.

"We launched The Ready Commitment to activate the power of our business, philanthropy and human capital to drive greater impact," said Barrack. "Our size and scale enable us to be a positive change agent across our footprint, and we are incredibly proud to be recognized for another consecutive year as an environmental leader among the world's most sustainable companies."
BC sets out plan to modernize housing approvals

The building approvals process in British Columbia is in need a makeover to make it more efficient.

The Minister of Municipal Affairs and Housing initiated a review of the process at the Union of British Columbia Municipalities (UBCM) convention in 2018 and now the findings of that review are published in a new report.

A common theme of the feedback received was the need to make the approval process more effective and efficient while still ensuring that buildings are safe and healthy.

Meetings have been held across the province to identify what is needed to improve the system for all stakeholders, with the findings sitting within 6 categories:

  • local government application processes;
  • local government approval processes;
  • development finance tools;
  • subdivision;
  • provincial referrals and regulatory requirements; and
  • overarching ideas, such as training and the provision of resources for all participants in the development approvals process.

The report, which is available on the bc.gov.ca website and includes suggestions of how to boost affordable housing and address the challenges of climate change.

It also acknowledges that the expectations of development have changes over the years and the development industry has grown and changed too with competition for lots meaning shorter option periods, creating greater risk.

As a next step, the province will work with local governments and UBCM to improve current development approval processes, including through supporting interested local governments to turn a number of these ideas into pilot projects.

Toronto’s housing market has the worst rental supply deficit in Canada
 
Toronto’s rental housing landscape is getting hit from all sides, as high prices keep homeownership out of reach for many while a chronically undersupplied rental pool fails to keep up with rising demand.

Even as purpose-built rental construction in Canada’s largest city rises significantly, RBC senior economist Robert Hogue says the market is not on track to meet rental demand in the coming years. In fact, it’s not even going to come close.

Angels anyone searching for a rental unit knows, there are too few available, and they’re getting more expensive,” Hogue writes in a report published this week titled “Big city rental blues: a look at Canada’s rental housing deficit.”

In the report, the economist notes that Toronto has the largest rental unit deficit in the country as well as the second lowest vacancy rate, beaten out only by Vancouver by just 0.1 percentage points. By Hogue’s estimation, Toronto had a deficit of 9,100 rental units according to data available as of the fourth quarter of 2018. With 9,100 units added to the market at that time, Toronto would have achieved a vacancy rate of 3 percent which is considered to be at equilibrium.

The problem is that demand for rental units is set to continue to grow and accelerate in Toronto thanks to strong migration into the city and its suburbs, coupled with stubbornly high home ownership costs that show no signs of declining. The RBC economist says that the total number of rental households will increase at an average of 22,200 annually in Toronto between 2018 and 2023, by far the highest in the country. A 1.8-percent-point drop in the city’s homeownership rate is also projected to occur by 2023.

For the city to meet this demand, Hogue writes that net new contributions to the supply in the form of purpose-built rentals and new condos added to the rental pool by investor-owners would need to double. While chances of reaching rental equilibrium look much better in Vancouver and Montreal, Toronto is set to fall far short of the mark.

“In the Toronto area, purpose-built rental apartment completions surged over the past 12 months to a quarter-century high of 4,300 units,” writes Hogue. “That’s good news, but constitutes less than 20% of the required increase in the rental stock.”

The picture isn’t much better on the new condo rental front. All told, more than half of the new units for the needed rental pool expansion still must be made up, according to Hogue.

So there’s a significant and widening gap between the rental units needed to keep up with growing demand and the planned new units currently in the pipeline. Where does Toronto go from here?

Hogue acknowledges that shortages will persist in the near term but “[r]ental apartment construction must rise (and soon) to bring lasting relief.”

He writes that government housing policy must go further in addressing the rental shortage, noting that the Ford government’s June 2019 plan is a step in the right direction, but could do more to tip the scale “in favour of building new rental supply.”

“This could mean sweetening existing rental-housing construction funding programs or offering new incentives (e.g. development charge rebates) to project developers,” Hogue writes.

He also points to the City of Vancouver’s wide-ranging 10-year housing strategy as a source for inspiration. Regulating short-term rentals would also be helpful in taking units off of Airbnb and returning them to the city’s rental pool.
Canadian home sales have ‘room to run’ in 2020

Home sales rose Canada-wide for the sixth straight month in August, leading one of the country’s largest real estate industry groups to increase its 2019 sales forecast on the back of the sustained strong results.

According to Canadian Real Estate Association (CREA) data and commentary released last week, the impacts of the new mortgage rules introduced in 2018 are running their course and the market adjustment is entering a new stage that will see more sidelined buyers return to the market.

The five percent annual sales growth recorded in August and positive overall economic outlook prompted TD economist Rishi Sondhi to note that the Canadian housing recovery still “has further room to run” into 2020.

“The beneficial combination of solid job markets, rising household incomes, healthy population growth, further distance from restrictive government policies and low mortgage rates have given a boost to demand,” Sondhi writes in a housing note published by TD Economics last week.

“And, with sales still somewhat low compared to population and employment levels, the recovery likely has further room to run. Our forecast anticipates positive sales growth through next year, contingent on the economy and job markets holding up,” he continues.

The outlook has certainly improved for the Canadian housing market since the tumult experienced in 2018 following the extraordinary ramp up in sales activity and prices through 2017 that eventually spurred intervention from the federal government as well as the two provincial governments home to the country’s hottest markets — Toronto and Vancouver.

That said, Sondhi cautioned that even as the strength exhibited over the last six months has caused housing markets to tighten across the country, growth expectations in Canada’s most expensive markets should be tempered by existing affordability challenges that will cap price gains.

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