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TORONTO _ Royal Bank of Canada set the tone for the latest round of big bank earnings with a dividend hike and profits and revenues in the latest quarter, helped by higher interest rates and mortgage growth.

Canada’s biggest bank by market capitalization delivered a record $3.1 billion in net income for its fiscal third quarter, up 11 per cent from a year ago.

The bank’s results, which beat analyst expectations, were driven by earnings growth in its wealth management, capital markets and personal and commercial banking divisions.

RBC delivered record earnings against a “strong economic backdrop,” said Royal Bank chief executive Dave McKay.

“We’ve been investing to grow organically on our key markets and our investments are paying off,” he said on a conference call with analysts on Wednesday. “All of our large businesses saw strong earnings growth in the third quarter and we had market share gains in our core franchises.”

As well, the bank said it will now pay a quarterly dividend of 98 cents per share, up from 94 cents per share.

The Toronto-based lender’s diluted earnings per share for the three-month period ended July 31 was $2.10, up 14 per cent from $1.85 per diluted share a year ago.

On an adjusted basis, RBC’s diluted cash earnings per share for its third quarter was $2.14, compared with the $2.11 earnings per share on average expected by analysts, according to Thomson Reuters Eikon.

Royal Bank was the first of Canada’s six biggest banks to report its third-quarter financial results this year. The Canadian Imperial Bank of Commerce reports its results for the period on Thursday, followed by the other banks next week.

“Royal kicked off earnings season with higher than forecast earnings and a dividend increase that was twice as much as expected,” said John Aiken, an analyst with Barclays in Toronto.

The bank demonstrated strong cost containment, and “impressive” results in both domestic retail and U.S. wealth management, including a strong contribution from Los Angeles-based City National, Aiken said in a note to clients. RBC acquired City National in 2015.

RBC’s personal and commercial banking arm earned $1.51 billion in the quarter, up $111 million or eight per cent from the previous year, “mainly reflecting improved deposit spreads resulting from higher Canadian interest rates.”

The division also saw average volume growth of five per cent, “primarily driven by solid growth in our leading Canadian residential mortgages, commercial lending and deposit products,” the bank said.

The bank’s residential lending portfolio was $279 billion at the end of the quarter, up from $268.7 billion a year ago, despite lingering concerns over the impact of tighter lending rules for uninsured mortgages introduced on Jan. 1.

Under the revised rules, homebuyers with a more than 20 per cent down payment must prove they can service their mortgage if interest rates rise, an additional hurdle which the country’s real estate association says has been weighing on the housing market.

Still, RBC saw mortgage growth of nearly six per cent and increased renewals of nearly 92 per cent in the latest quarter, said Rod Bolger, the bank’s chief financial officer.

“We’ve seen a healthy normalization in Canadian housing and our mortgage portfolio continues to grow,” he said on the conference call.

Under the revised mortgage underwriting rules introduced this year, homeowners looking to renew their uninsured mortgage are not subject to the new stress test if they stick with their existing provider, hobbling their ability to seek out a more competitive rate.

As well, the bank’s net interest margins _ or the profit made on loans _ at its domestic arm rose by 13 basis points on the back of four increases to the Bank of Canada’s trend-setting interest rate this year.

Net interest margins are the difference between the money banks earn on the loans they make and the interest they pay out to savers.

And while higher interest rates potentially put pressure on Canadian households’ ability to manage debt loads, consumers are “adjusting proactively,” said Neil McLaughlin, RBC’s group head of personal and commercial banking.

“We were expecting to see customers be a little bit caught off guard and our frontline sales advisers really aren’t sharing that,” he said on the conference call. “The customers are thinking about either extending … if they need to manage the payments on mortgages, they’re thinking about frankly just buying less expensive homes and actually moving down.”

Meanwhile, the bank’s wealth management division saw a 19 per cent bump in net income to $578 million, while its capital markets division saw a 14 per cent lift to net income of $698 million.

The bank’s insurance and investor and treasury services divisions, however, saw net income decrease by two per cent and 13 per cent, respectively, to $158 million and $155 million. The bank cited factors including increased costs to support growth for the drop in net income.

The Supreme Court of Canada has refused to hear an appeal from the Toronto Real Estate Board that would have prevented the numbers from being posted on password-protected webpages.

Greater Toronto Area realtors can now publish home sales data on their websites after the top court ruled against the real estate board, a case that could have sweeping implications for consumer access to real estate data across the country.

TREB’s appeal stems from a seven-year court battle that began in 2011 when the Competition Bureau challenged its policy preventing the publication of such information, arguing it impedes competition and digital innovation.

Canada’s largest real estate board, which represents more than 50,000 Ontario agents, argued at the Competition Tribunal and later the Federal Court of Appeal that posting the data would violate consumer privacy and copyright.

Both judicial bodies sided with the bureau, prompting TREB to take the fight to the Supreme Court of Canada.

Since the court won’t hear the case, lawyers say there is likely nothing TREB can to do to keep its legal battle going and the data from being posted.

Investing in real estate can be tricky in a rising rate environment, but interest-only mortgages with term are helping stabilize cash flow.

“It’s the most innovative product that has come through the mortgage market for the last seven years,” said Jacques du Preez, principal broker and owner of Mortgage Allies. “Because of the new rental laws, you can’t just increase the rent on tenants, but at the same time you want to make sure your costs are stable. What turns a lot of people off is having a line of credit on a rental property because as time goes on, payments go up, so cash flow gets pressurized.”

du Preez likened the fixed-term rates on interest-only mortgages to variable rates, but without the risk of rising primes. He secured a 4.3% interest-only mortgage for a real estate investor client who locked it in for five years.

“They have a low payment, and that is fixed for five years,” he said. “If at any time they want to lock that in, they can lock it into a P&I [Principal and interest]. Variables are not good for rentals because it can impact the cash flow over time as the prime increases, but here the cash flow is sure for the next five years.”

Borrowers can also break the mortgage whenever they like with very little penalties.

“The client is king here,” said du Preez. “After two years, if the client decides to do something else, they can cancel the mortgage with very little penalties. They really are king.”

The interest-only flex mortgage has been on offer at Merix Financial for the past couple of months, and its reception has been resoundingly positive, according to the lender.

“The interest-only flex is all about providing clients lower monthly payments that allow them to free up cash flow for other purposes,” said Jill Paish, Merix’s executive vice president of broker experience. “We felt there was a real need for that type of mortgage for a variety of reasons. With the tightening rules and the way real estate prices are going, a lot of times clients can’t afford the monthly carrying costs, and the monthly costs are higher than they’d like to live in a desired marketplace.”

Merix has noticed many borrowers who have opted to take the interest-only mortgage are investing in real estate.

“We’re finding it’s being used by people who want to invest,” said Paish. “They’re taking a lower interest rate on their mortgage and using cash flow from that investment for a savings nest. We’re also finding that it’s popular with people who have various lifestyles, like cyclical income or a lot of overtime, and just want to make lower payments. When they have more money, they’ll pay a lump sum towards their mortgage.”

A new report from reveals that, in the one-bedroom category, Toronto rents have surpassed Vancouver’s, but the latter’s two-bedroom units are still Canada’s most expensive.

“Toronto has been a hot market,” said Matt Danison,  “The prices keep going up and up and up. Toronto and Vancouver are always battling for the top rents in the country; it’s always neck and neck. Toronto overtook Vancouver for the month July.”

The average one-bedroom in Toronto costs $1,862 to rent, while in Vancouver it’s a hair lower at $1,833. A two-bedroom unit in Vancouver rents for an average of $2,583 a month, and for $2,193 Toronto.

That Toronto and Vancouver jokey for the unceremonious title of most expensive rental city in Canada is a consequence of supply shortages in both cities. Danison has a solution that could offer some relief, albeit in a limited capacity.

“New rental buildings have to have a different approach in that, like Manhattan, the square footage has to be a lot smaller than it is. That way, you can include more rental units in a building by cutting the square footage. Instead of living in a 900 square foot apartment with super high rent, you can cut the rent by reducing the square footage to 650.”

Danison concedes tight quarters aren’t ideal, but then again, neither are escalating rents. Plus, buildings with smaller units tend to offer better amenities.

Moreover, because his idea is not unprecedented, he believes that Toronto and Vancouver should take a page out of Montreal’s playbook.

Tobias Smulders, a sales representative REMAX Escarpment Realty Inc., not only believes smaller units are ideal for single people, they will help cities like Toronto fulfill their intensification mandates.

“You could do more by increasing overall intensification,” he said. “All these buildings they’re constructing should not be limited in height as much as they are. An issue we have here in Hamilton is they don’t want to allow developers to build what they propose. If they apply for 40 storeys, they’ll get approved for something like 20 storeys.”

The Fair Housing Plan and B-20 have conspired to put downward pressure on valuations throughout Toronto, however, some neighbourhoods have been impervious.

The six steepest year-over-year drops between July 2017 and this year are Don Mills, Parkwoods-Donalda and Victoria Village, where prices depreciated 19%. Bridle Path-Sunnybrook-York Mills and St. Andrew-Windfields saw an 18% decline, as did L’Amoreaux, Steeeles, and Tam O’Shanter-Sullivan.

Newtonbrook East and Willdowdale East saw 17% drops, and Bayview Village, Bayview Woods-Steeles, Don Valley Village, Henry Farm, Hillcrest Village and Pleasant View depreciated 13%, as have Bathurst Manor and Clanton Park.

“January is when it started dropping and now it’s coming to the point where it’s stabilizing,” said Freda Lau, Fivewalls Realty’s director of operations. “We don’t see any reason for prices to go up really fast simply because with the users who come through, their budgets are getting tighter. It’s taking a while for the impact of some of these rules to come in place.”

Fivewalls compiled the data and also notes there were areas that appreciated despite the government’s intervention. High Park-Swansea, Roncesvalles and South Parkdale in Toronto’s West End saw 15% appreciations, while Cabbagetown-South, St. James Town, Church-Yonge Corridor, Moss Park, North St. James Town, Regent Park, and the Waterfrotn Communities had 12% hikes. Alderwood, Long Branch, Mimico and New Toronto bore witness to 10% appreciations.

The reason for appreciation in those neighbourhoods, says Lau, is they have a high number of condo sales. She also cautions that those price increases will eventually stabilize.

“We’re noticing that it’s especially the first-timers, whether in their early 30s and looking for first home or moving in with their significant other, they’re looking for condos and townhomes because detached homes are unaffordable for them, and an interesting stat we’ve seen is the number of inquiries for detached homes have decreased 10-15% this year compared to last year.”

Prices in the luxury market likely won’t rebound because demand has significantly tapered.

“I don’t see appreciation going back up in the luxury market because with the mortgage rules and Fair Housing Plan, the psychology of prices going up has pretty much stopped, and it’s very hard for luxury market to rebound in the $2mln-plus homes,” said Lau. “We’re seeing that it’s almost like getting a discount when you see a price depreciation of 18% in those neighbourhoods, whereas with condos and townhomes for first-timers, where those are the product that’s most available to them, those will keep going up a bit, but with the increase in interest rates that looks like it’s stabilizing because there’s only so much people can afford.”

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.

A combination of factors continue to impact affordability of homes in the US and sales are suffering.

With prices rising due to low inventory, cost of materials for new homes and renovations, and increasing mortgage rates, affordability is a key barrier to first-time buyers and those wishing to trade up.

Existing home sales in July slipped 0.7% to a seasonally adjusted annual rate of 5.34 million, from 5.38m in June. It was the fourth consecutive month of decline.

National Association of Realtors chief economist Lawrence Yun says price rises have weakened demand.

“Led by a notable decrease in closings in the Northeast, existing home sales trailed off again last month, sliding to their slowest pace since February 2016 at 5.21 million,” he said. “Too many would-be buyers are either being priced out, or are deciding to postpone their search until more homes in their price range come onto the market.”

The median existing-home price for all housing types in July was $269,600, up 4.5% from July 2017 ($258,100). July’s price increase marks the 77th straight month of year-over-year gains.

Inventory declined by 0.5% to 1.92 million existing homes, 4.3 months of supply.

Ontario’s medium-sized cities are heading for a slowdown according to the latest assessment from the Conference Board of Canada, with home financing among the key reasons.

It says that apart from Greater Sudbury and St. Catharines-Niagara there will be moderation in the economic growth of the province’s medium-sized cities.

The 16-city report shows that Oshawa (2.6%) and Guelph (2.3%) will be the fastest-growing cities covered by the forecast.

“In most Ontario metropolitan areas, economic growth is slowing in line with the national economy. Rising interest rates, newly implemented tariffs on Canadian exports, and stricter mortgage rules are limiting growth across a number of sectors,” said Alan Arcand, Associate Director, Centre for Municipal Studies, The Conference Board of Canada. “In fact, most Ontario cities covered in this report can expect to see their economies expand by less than 2% this year.”

Notably, Windsor will see growth in GDP slashed to 1.9% in 2018 having been 3.0% in 2017.

However, there is better news for London, with real GDP set to grow 1.9% this year; and Kitchener-Cambridge-Waterloo’s economy is poised to expand by 1.6% in 2018.

The big banks are reporting their quarterly earnings and the season has started well with record net income for Royal Bank of Canada.

RBC reported record net income of $3,109 million for the third quarter ended July 31, 2018, up $313 million or 11% from the prior year with double-digit diluted EPS(1) growth of 14%. Quarter-over-quarter growth was 2%.

Personal and business banking, wealth management, and capital markets all did well while insurance and investor & treasury services saw lower results.

Among the personal banking business, RBC highlights solid growth in Canadian residential mortgages.

“We delivered record earnings of $3.1 billion this quarter with strong results in our largest businesses. In addition, I am pleased to announce a 4% increase to our quarterly dividend,” said Dave McKay, RBC President and Chief Executive Officer. “Our results demonstrate our continued focus on deepening existing client relationships by providing more value, and our commitment to delivering on the objectives we introduced at our Investor Day. We maintained our focus on risk management and expense control; at the same time, we continue to invest in long-term sustainable growth, including in the United States.”

Sales of newly built homes continued to fall in July as condo sales slumped and single-family sales remained subdued despite a jump.

A report from the Building Industry and Land Development Association (BILD) shows that combined sales were down 44% year-over-year and were 55% below the 10-year average.

Data from the Altus Group reveals sales of new condominium apartments in low, medium and high-rise buildings, stacked townhouses and loft units were down 52% from July 2017 to 855 units, 40% below the 10-year average.

Meanwhile, sales of new single-family homes, including detached, linked and semi-detached houses and townhouses (excluding stacked townhouses) were up 85% year-over-year. However, the 2017 figure was the lowest for decades (117) and July 2018’s total was still 77% below the 10-year average.

“New home sales in the GTA typically take a breather in the summer months compared to the spring,” explained Patricia Arsenault, Altus Group’s Executive Vice-President, Data Solutions. “This July was no exception, although minimal new project launches in July, along with declining affordability of new condominium apartments due to recent price escalation, amplified the June-to-July decline in sales somewhat this year.”

Prices remain steady amid tight supply
Despite weaker sales, prices of new homes in the GTA were steady in July as inventory remained tight.

The benchmark price of new condominium apartments was $774,759, up 16.5% from last July, but virtually unchanged from June. The benchmark price of new single-family homes was $1,142,574, down 13.2% year-over-year and just 0.85 per cent above June 2018.

Total remaining new home inventory decreased to 14,784 units, comprised of 9,931 condo apartment units and 4,853 single-family units.

“We are still seeing a shortfall in condo apartment inventory,” said David Wilkes, BILD President & CEO. “Given the current pace of sales, we should have nine to twelve months’ worth of inventory, but we only have five. We expect that more condo apartment product will become available in the fall.”

Understanding what a real-estate market is trending toward is vital, as it can help sellers establish what price they want to aim for, while buyers can better determine exactly how much they should spend on a property, especially if the market is looking to be getting hot.

So what kinds of signs should you look for, especially when it comes to a local market? Is it better to focus on how many offers are being made on a property, or should you look at the scale of construction — as well as what types of buildings are being made.

To help, seven members of Forbes Real Estate Council, below, share the key signs they look for to tell whether or not a real estate market is heating up. Here’s what they recommend you watch for:

1. Days On Market

If the pace of days on market increases in certain zip codes or submarkets, it typically is a leading indicator that prices will follow, as investors and buyers feel they have to make quicker decisions for fear of someone else acquiring the property. – B.J. Turner, Dunleer

2. Overpriced Properties

When properties sell at such a premium without logically comparing to prior sales transactions and average household income affordability in that market, that is sign of market heating. The new pricing suggests demographic shifts (i.e. higher incomes) and economic drivers (i.e. urban revitalization or job growth) are at work to push property prices. – Babak Ziai, BrandView Capital Partners

3. Supply And Selling Speed

We watch for two key indicators when evaluating the health of a local housing market. The first indicator is the supply of inventory in the marketplace. When a market starts to heat up, the supply of well-located and appropriately priced homes vanishes. This leads directly into the second key indicator, which is when a listing goes under contract within days of hitting the MLS. Both indicators are valued tools in allowing us to evaluate how fast we must make thoughtful and strategic purchasing decisions. – Matt Pettinelli, CapGrow Partners LLC

4. Number Of Offers

A clear sign is the number of offers in for comparable projects in the respective submarket you are tracking. This simple barometer illustrates the depth of the buyer pool and demand within that neighborhood. High demand usually leads to increased seller pricing power. – Owen Fileti, L.A. Realty Partners

5. Inventory Size

Inventory is the strongest local indicator, in my opinion. That, crunched against the number of properties going pending each week, will give you a clear idea if the supply side of the equation is headed down or up. And that is massively correlative to the market direction. Secondarily, I also look at local job creation numbers. That is the demand side of the equation, and can also impact the market. – Keith Robinson, NextHome

6. Property Development Pace

This is mostly applicable for commercial real estate markets, but when development of skyscrapers is booming, that’s usually the beginning of the end. Most development funding is approved when times are good. By the time all the projects are completed, the market typically softens. This new glut of vacant space causes landlords to slash rents. So begins the inevitable commercial real estate downcycle. Then, when all the cranes have gone back into hibernation, is precisely the time to go shopping for office, warehouse and retail properties.  – Brad Johnson, Evergreen

7. Sold Units Versus New Listings

I always look at the sold units versus new listings ratio. As soon as the trend goes toward an increase in units being sold and/or decrease in new units coming on the market, I know the market is heating up. This is one of the best early indicators and crucial signs of a local market taking off. It’s the good old proven law of supply and demand. – John Reza Parsiani,

The financial year has started well for provincial lender ATB Financial with growth in loans and deposits delivering first quarter net income of $57.3 million.

Although that figure is down from $63.1 million a year ago, this was largely due to larger higher loan loss provision.

Loans were up 8.3 per cent over the same period last year ($45.1 billion from $41.7 billion). Deposits totalled $34.5 billion, up from $33.7 billion the year before.

“The numbers show we are continuing to make banking work for Albertans. They are turning to us to help start or grow their businesses, and they are trusting us as a place to put their hard-earned money,” said ATB’s President & CEO Curtis Stange. “Many Alberta businesses and entrepreneurs have survived turbulent times, and there are still headwinds we face, but together, we’re finding a way to thrive.”

The bank marked a milestone in the quarter ended June 30, 2018, with its 100,000th business customer.

Net interest income was $296.8 million, an increase of $9.3 million (3.2%) and $32.1 million (12.1%) over the last quarter and the same time last year.

“Our growing balance sheet is the main contributor for both increases as business loans and residential mortgage loans outgrew our increasing reliance on wholesale and collateralized borrowings,” ATB’s report states.

The cost of living was higher in July as energy prices and interest rates added to household expenditure.

Data from Statistics Canada show that the Consumer Price Index was up 3% on an annual basis following June’s 2.5% increase.

The largest influence on the CPI was the continued rise in energy costs, up 14.7% year-over-year, with gasoline up 25.4% and fuel oil and other fuels rising more than 28%.

The mortgage interest index was up 5.2% in the 12 months to July on the impact of the BoC’s interest rate rises.

There were also notable increases in the cost of transportation, air travel, and travel tours; and telephone services.

In all provinces, prices rose more in July on a year-over-year basis compared with the previous month.

The Bank of Canada’s preferred measures of core inflation remained stable in July.

“The relative stability of core inflation measures may give the Bank of Canada some solace,” commented TD Economics’ senior economist James Marple. “Still, with an economy beating expectations and a range of indicators pointing to limited excess capacity, maintaining stable inflation is likely to require further rate hikes by the central bank with the next one likely coming in October.”

The US has dominated an annual ranking of the Top 500 most innovative cities in the world but one Canadian city has made the highly-competitive top 10.

Tokyo tops the list, compiled annually since 2007 by Australian consultancy 2thinknow and based on 162 indicators. London, UK takes the second place.

Then comes the first wave of US cities to make the Top 500: San Francisco-San Jose moved down to number three, followed by New York, and Los Angeles.

Toronto (8) is the only Canadian city to make the top 10, sitting below Singapore and Boston. It ranks fifth in the Americas.

“This year innovation is likely to come from large cities as usual, but we found on a population-adjusted basis many small cities are punching above their weight. It’s the year of big cities with physical networks and small cities with digital networks, going global,” said Christopher Hire, director of commercial data provider 2thinknow, which publishes the annual Innovation Cities Index.

The other innovative Canadian cities
While Toronto has secured a top 10 place, several other Canadian cities also rank among the top 500.

Larger Canadian cities continued their top rankings with few changes including Vancouver (25) and Québec City (58). Lower business costs and improved innovation policies lead Ottawa (126), Halifax (202) and Hamilton (205) to achieve above average positions relative to their smaller populations with potential to improve in future years.

The full list of Canadian cities in the top 500 is: Toronto (8), Montreal (22), Vancouver (25), Quebec (58), Calgary (86), Edmonton (125), Ottawa (126), Halifax (202), Hamilton (205), Winnipeg (223), London (278), Kitchener (288), Fredericton – St John (314), and Moncton (342).

Home resales in Canada were driven by the Greater Toronto Area in July with a 7.7% gain compared to 1.9% nationally.

The GTA also saw a flattening of price growth which has been declining in recent months. RBC’s senior economist Robert Hogue says that the national benchmark price appreciated at a faster rate (2.1% y/y) for the first time in 15 months.

In a monthly housing report, Hogue says that, with a few exceptions, price acceleration is unlikely to be a major factor in the Canadian housing market in the coming months.

“We see little risk that prices will accelerate much further in the near term. Except in a few areas (including Ottawa and Montreal where sellers have a slight upper hand), demand-supply conditions are balanced in the majority of markets in Canada, which does not support rapid price growth. Vancouver prices are in fact decelerating at present,” he writes in his report.

He added that he and his colleagues believe that the market is adapting to the impact of the mortgage stress test and while some sellers may still be reluctant to list their homes, RBC Economics forecasts a recovery of the resales market across most areas through the second half of 2018.

Supply boost for GTA, constraint nationally
The GTA saw more homes on the market in July but new listings were down 1.2% nationally.

There was a notable drop in new listings in Vancouver, Calgary and Edmonton, and to a lesser extent in Ottawa and Montreal.

In the 32 years since Promenade Mall opened on Bathurst Street in Vaughan, north of Toronto’s city limit, both the retail landscape and demand for suburban land has changed. The 2017 departure of bankrupt anchor tenant Sears, which occupied almost 20% of the mall’s space, was a further blow to the mall’s already declining traffic. Now, a redevelopment proposal looks to create an architectural centrepiece, while making the mall both less auto-centric and more transit and pedestrian-oriented, and introducing significant new residential density steps from the revitalized shopping centre.

Shortly before Sears’ bankruptcy filing, the property was acquired by Liberty Development, who are now advancing redevelopment plans. The Phase 1 Plan that was just submitted to the City of Vaughan contemplates modernization and expansion of the existing mall, physical improvements for existing retail tenants, and an increase in the number of potential shoppers. While some of this intensification is proposed through alterations to the existing mall, the bulk of the changes would involve building out of the sea of surface parking that currently encircles the property.

 

Designed by WZMH Architects, the first phase of the plan includes three residential apartment towers with heights of 28, 30, and 35 storeys, as well as a 28-storey, mixed-use building containing offices and a hotel, with a combined gross floor area of 144,613 square metres. The first phase would involve the demolition of 18,756 square metres of existing 89,479 square metres of space space in the south and east portions of the mall, while adding 15,773 square metres of new retail space.

The three proposed residential towers would contain a total of 1,066 units. The first two would respectively rise 35 and 30 storeys from a shared six-storey podium occupying the current footprint of the former Sears space. Their proposed total unit count is 748, including 363 one-bedroom units, 337 two-bedroom units, and 48 three-bedroom units. To the north of the existing mall entrance, the third residential tower is proposed to rise 28 storeys and contain 318 residential units, including 265 one-bedroom units and 53 two-bedroom units. The combined hotel and office building, would house 24,392 square metres of office uses and 15,203 square metres of hotel space, spread across 156 suites.

Significant public realm improvements are also on tap for the site. Landscape architects Schollen & Company have devised a plan that creates a pedestrian-friendly gateway plaza to the site’s Bathurst Street frontage, an outdoor amphitheatre at the west end of the property, and a pedestrianized north-south High Street fronted by commercial uses. Phase 1 is dashed in red below.

 

The Walt Disney Company is bringing its magic north of the border to call Toronto its newest theme park home.

A proposal to transform Toronto Islands into a global entertainment destination was announced this morning during a press conference held at Metro Toronto Convention Centre.

The $6.5-billion attraction, known as “Toronto Disney Resort,” centres on the construction of Canada’s very own Disneyland theme park – Toronto Disneyland – on the site of Billy Bishop Toronto City Airport.

Other public spaces on the islands beyond the airport site will be maintained as accessible park space and improved through a new parks lands management partnership with Disney.

“Here in Toronto at this spectacular location, we are dreaming of something truly magical that not only showcases the best of Disney’s storytelling but also creates a one-of-a-kind destination that will delight and entertain people for generations to come,” said Bob Iger, chairman and CEO of the Walt Disney Corporation.

“Everything we have learned from our six decades of exceeding expectations, along with our relentless innovation and famous creativity, will create a new destination that signals a new era for Disney theme parks.”

Disney will have a minority stake of 48% while the remaining majority stake of 52% will be owned by the Hiawatha Development Corporation, a new public-private consortium that will lead the undertaking of the project.

Hiawatha’s ownership is comprised of federal crown corporation Canada Lands Company (20%), Toronto-based commercial developer Oxford Properties (39%), Toronto-based investment firm Kilmer Van Norstrand Co. Ltd (16%), Toronto-based InstarAGF Asset Management Inc. (15%), and the City of Toronto (10%).


The Toronto Port Authority, the federal agency that currently owns and operates the airport, will be dissolved, and its portfolio over the airport’s lands and assets will become a purview of Canada Lands Company, which also owns and operates Downsview Park, the CN Tower, and the Old Port of Montreal.

“We are incredibly excited about today’s announcement,” said Michael Rensie, the president and CEO of Hiawatha. “Disney theme parks are known throughout the world for extraordinary rides, shows, and unique experiences that are enjoyed by the entire family. We are proud to be a part of the growing family of Disney parks and resorts worldwide.”

Hiawatha’s contribution is $250 million from the federal and municipal partners and $2.88 billion cash from Oxford Properties, Kilmer Van Norstrand, and Instar AGF. The remainder of its share in the investment comes from the provided land value.

Disney will provide $3.36 billion cash and have full creative control.

 

“This partnership is a celebration of creativity, collaboration, commitment, and innovation, and a testament to Toronto’s growing place in the world,” Toronto Mayor John Tory said. “Disney’s choice of Toronto for the location of its next international theme park is certainly a vote of confidence in our city and our future by the world’s most prestigious and renowned entertainment company.”

“Toronto Disney Resort will be an extraordinary destination that will provide Toronto with its largest year-round tourism engine and create self-funded improvements to Toronto Islands’ attractions and resilience to flooding,” continued Tory.

Upon opening, Toronto Disneyland will have a capacity for up to 45,000 guests – just over half of Magic Kingdom and Disneyland Anaheim. Theme park operations will employ about 8,000 people, and an additional 3,500 people will be employed in other areas such as hotel and transportation operations.

Following a four-year consultation and detailed design period, and subject to various final approvals, construction could begin in 2022 for an opening by summer 2028.

 

Planners estimate Toronto Disneyland will attract six million visitors in its first year of operations and grow to 12 million visitors per year after 20 years. Comparatively, Canada’s Wonderland already sees over 3.7 million visitors per year within its six-month-long seasonal operations period.

Toronto Disney Resort is expected to boost Toronto’s economy by $48.5 billion over the first 30 years, with 15,000 jobs created during the construction phase and generate a total of 40,000 direct and indirect jobs once open.

With airport operations at Billy Bishop ceasing to exist, there will be a greater focus on expanding Toronto Pearson International Airport as a mega regional hub.

Here are the preliminary plans for Toronto Disney Resort:

Toronto Disneyland

A media backgrounder on the scope of Toronto Disneyland, with preliminary conceptual renderings, show a new concept, all-season theme park that will be substantially different than the destinations in California and Florida.

The 350-acre theme park will occupy the 200-acre airport lands and require an additional 150 acres of infill to accommodate both the attractions, back-of-house facilities, hotels, public spaces, and other infrastructure.

The park will be designed with Toronto’s harsh winter climate in mind, while also taking advantage of it.

Like other Disney parks, there will be daily parades and a nightly fireworks show.

Some of the early concepts show an initial seven themed lands upon opening:

Mickey Avenue, Canada

Similar to Main Street, USA, and borrowing the concept of Shanghai Disneyland’s Mickey Avenue, this welcoming avenue – inspired by the colourful personalities of Mickey Mouse and his friends – with shops and restaurants will provide the first main entry into the theme park.

Fantasy Land

A 16-storey castle with a unique design will be located at the heart of the park, within Fantasy Land. Expect familiar rides such as Peter Pan’s Flight over London, an indoor Seven Dwarfs Mine Train, Little Mermaid’s Ariel Undersea Adventure, and the Hundred Acre Wood with Winnie the Pooh.

Frozen Land

One of the lands will be based on the world of Frozen, including the Arendelle castle, rides and live shows based on the hit film, and uniquely themed dining and shopping.

Star Wars: The Ice Planet

A ‘mountain range’ with three mountains reaching 13-storeys high will provide the setting for the ice planets in the Star Wars universe. Expect giant replicas of the attacking imperial forces’ AT-ATs outside, and a cavernous indoor environment inside the mountain for the rebel base, with the Millennium Falcon doubling as a restaurant and various indoor rides such as Star Tours and a ‘dark roller coaster’.

Marvel Universe

Explore the base of The Avengers and the hidden, super-modern nation of Wakanda from Black Panther, with unique indoor rides, dining, and shopping.

The Gardens

Similar to Epcot, a 10-acre land will be exhibition space to host special seasonal events and festivities throughout the year.

During the cold winter and early-spring months, it will feature one of the world’s largest ice and snow festivals. Imagine dozens of giant ice and snow sculptures of Star Wars characters, Mickey Mouse and his friends, and more, which all illuminate with colours at night.

As for the summer and early fall months, the gardens could be used for festivals celebrating flowers, food, and wine.

Future expansion

Approximately 60 acres, accomplished through lake infill, will be reserved for the future addition of two or three lands.

 

Disney takeover of Toronto Islands’ park space and attractions

Under the agreement, Disney will improve, manage, and operate Toronto Islands’ existing green spaces and attractions – a takeover of the responsibilities currently under the City of Toronto’s Parks, Forestry and Recreation Division.

 

Disney is anticipated to invest $475 million towards improvements over a five-year timeline. This includes:

  • $65 million for landscaping and other public realm improvements.
  • $250 million for flood prevention and mitigation projects on the islands, including new perimeter flood dikes that blend in with the natural landscape, elevating vulnerable areas by up to two metres, and new water pumps. Toronto Islands will be able to withstand a 1 in 1,000-year flood event following these improvements.
  • $50 million for new and improved outdoor recreational facilities, including $20 million to improve waterways and facilities for rowing, canoe, and kayak sports.
  • $10 million for new pay-to-use recreational facilities and equipment, such as bike rentals, beach chairs,
  • Most of Centreville Amusement Park will close for its conversion into a $100-million dining hub with five new restaurants and a live entertainment area. Only the vintage carousel, antique windmill ferris wheel, Far Enough Farm petting zoo, and the newly built aerial gondola will remain.

Overall, after further phases of expansion with additional attractions, Toronto Islands could resemble a resort attraction model similar to Sentosa, a popular island resort next to downtown Singapore, with Universal Studios Singapore as one of the island’s anchor attractions.

 

 

Two Disney-themed hotels

Two hotels adjacent to the Disneyland park are proposed.

The upscale Toronto Disneyland Hotel on the eastern side of the airport property, next to the park’s exterior entrance and ticketing plaza, will have 350 rooms. The hotel will boast some of the best views of the downtown Toronto skyline.

On the western side of the theme park, immediately south of Hanlan’s Point Beach, will be Disney’s Port Toronto Hotel – a mid-scale, ship-themed hotel property with 700 rooms. The existing clothing optional beach area will be relocated to Ward’s Island Beach on the easternmost end of Toronto Islands.

Both hotels will have the Disney resort’s flagship restaurants.

 

New transportation links

To support the ingress and egress of large crowds and ‘cast members’ (the term Disney uses to describe its staff and employees) to Toronto Disneyland, the hotels, and other Toronto Disney Resort areas on Toronto Islands, there will be a multi-modal approach to improving transportation connections while maintaining a car-free environment on the islands.

Western Channel Bridges

Two bridges will be built over the Western Channel between the existing airport passenger pick-up and drop-off facility in downtown Toronto’s Bathurst neighbourhood and the islands, with one 50-metre wide bridge for pedestrians only and a second 15-metre wide bridge on the far western end for the movement of goods, supplies, and materials.

The pedestrian-only bridge will directly lead to the main entrance and ticketing plaza of Toronto Disneyland.

To support the crowds, this will also necessitate the closure of Eireann Quay Road south of Queens Quay West into a pedestrian-only road.

Disney Transport

Disney Transport, the Disney Parks & Resorts division that operates the public transit system at Walt Disney World in Florida, will takeover the operation of the Toronto Island ferries from the City of Toronto’s Parks, Forestry, and Recreation division.

 

This includes the acquisition of additional large vessels, particularly for the main route to Toronto Disneyland’s entrance and ticketing plaza, and other improvements to existing ferry terminals elsewhere on the islands.

Additionally, Disney Transport will take over the construction and operations of the new Jack Layton Ferry Terminal. There will be some modifications to the chosen 2016 terminal redesign to adjust to the needs of Disney’s anticipated crowd volumes.

 

Parkades

While there will be an emphasis on public transportation services, including the Disney Transport ferries, several new multi-storey parking facilities will be constructed for Toronto Disney Resort guests:

  • 1,000 car parking lot at Stadium Road Lot at 12-34 Little Norway Crescent
  • A new six-storey underground parking lot with 4,000 stalls at the current site of Little Norway Park, with new green spaces and playing fields built above the park.
  • A new five-storey parking lot at Lot A (Gore Lot) of Exhibition Place with 6,000 stalls.
  • Cast member-only parking facilities will be built elsewhere at yet-to-be determined locations, with cast members shuttled to the pedestrian tunnel.

Airport Pedestrian Tunnel

Billy Bishop Toronto City Airport’s existing airport pedestrian tunnel will be re-purposed into a tunnel for the entrance and exit passage for cast members to use. This will ensure cast members arrive to their workplace out of sight in secret in order to maintain the Disney magic for guests.

 

Potential future transportation

Future transportation connections include built-in provisions for a subway station near Toronto Disneyland’s main entrance and ticketing plaza, should a decision be made to extend the subway to Toronto Islands.

Other options potentially even include a people mover rail line between Union Station and the main entrance via Bathurst.

Hanlan’s Point’s origins as an amusement park

If the Disney resort plan proceeds, it will represent a “full circle” journey for Toronto Islands’ use as a theme park/amusement park destination for the region.

“There is no question Toronto Islands is returning to its roots as an amusement destination for our world-class city,” said Tory.

Hanlan’s Point, which is on the proposed footprint of Toronto Disneyland, was once the home of Hanlan’s Point Amusement Park. This amusement park operated from the 1880s to the 1920s with numerous rides and attractions such as a roller coaster, scenic railway, carousel, carnival games, a theatre, dance pavilion, and grandstand for larger live entertainment shows.

The Hanlan family also built a hotel on the western edge of the islands – right next to the amusement park at the approximate location of the existing nude beach, near the location of the proposed Disney’s Port Toronto Hotel.

Then in 1910, Hanlan’s Point Stadium was constructed next to the amusement park. The 18,000-seat stadium was the home of the Toronto Maple Leafs baseball club and is known as the home of Babe Ruth’s first professional home run.

The future is looking positive for the commercial real estate market in the Greater Toronto Area.

Members of the Toronto Real Estate Board’s Commercial Network reported a 3.6% rise in leasing in July, with approximately 2.1 million square feet of industrial, commercial/retail and office space leased through the MLS.

Offices saw transactions rise by more than a third and the amount of office space leased has almost doubled from July 2017 levels. Industrial accounted for more than two thirds of leased space but saw a 41% decline in transactions year-over-year.

The average industrial lease rate was down from $7.49 in July 2017 to $7.25 in July 2018. The average commercial/retail lease rate was also down from $27.74 in July 2017 to $20.12 in July 2018. The average office lease rate was up from $12.43 in July 2017 to $14.85 in July 2018.

“The economy of the Greater Toronto Area continues to be strong. We have low unemployment, with job creation in many sectors of the economy. The latest GDP figures for Canada were also positive. With this in mind, it is not surprising that the amount of space leased this past July was up compared to the same time last year,” said TREB president Garry Bhaura.

Sales ease but prices rise
Sales in the sector (where prices were disclosed) were lower in July compared to a year earlier.

Industrial sales totalled 8, down from 19 in July 2017; there were 10 office sales (12 in July 2017); and commercial eased from 19 to 18.

Prices increased though for commercial (up 26% to $356.32 psf) and industrial (up 13.4% to $213.56 psf). For offices, prices declined 16.3% to $216.13 psf.

Optimistic for future
Mr Bhaura says that the long-term future of the GTA market remains positive.

“I am optimistic that the GTA will remain a destination for new companies and new households over the long-term, despite the potential for short-term economic volatility due to trade concerns,” he said.

Colliers International Group has reported strong gains across its global real estate business for the second quarter 2018.

The Toronto-headquartered firm’s revenue was up 14% year-over-year in the quarter ended June 30, 2018, to U$667.4 million with GAAP operating earnings of $45.6 million, up from $41.2 million a year earlier.

In North America, revenue was up 12% to $388.6 million with internal growth for the quarter driven by Lease Brokerage, particularly on the US West Coast and in Canada.

“Once again, Colliers generated strong results in the second quarter, through a combination of acquisitions and solid internal growth. Based on results to date, current business pipelines and acquisitions completed subsequent to the quarter end, we remain optimistic about our growth prospects for the balance of the year,” said Jay S. Hennick, Chairman and CEO of Colliers International.

Three acquisitions helped drive growth
Mr Hennick noted the three key services business acquisitions in North America completed by the firm in the second quarter of 2018.

Its investment in Harrison Street Real Estate Capital will form Colliers’ new Investment Management platform alongside its existing European investment business. The new division will have assets under management of more than $20 billion.

With this important new platform for growth now in place, an investment-grade balance sheet, disciplined growth strategy and a proven track record of success, we are well positioned to continue creating value for shareholders in 2018 and beyond,” he concluded.

Ottawa’s home sales market remains strong with condo class properties the clear leader.

Sales through the region’s MLS in July totalled 1,614, up 5.9% from the 1,524 a year earlier. Both years have exceeded the 5-year average of 1,501.

Of July’s sales, 1,238 were residential class with 376 in the condo class. The year-over-year increase was 3.6% for residential class and 14.3% for condo class.

“Ottawa’s condo market continues to positively impact overall residential sales trends with year-to-date condo unit sales up 16.5% from this time last year,” states Ralph Shaw, Ottawa Real Estate Board President. “As well, our overall inventory levels in both the residential and condo market are improving which will help ease pressure on prices. Units available are currently down 16% down from July 2017 rather than the 24% we were down at the beginning of the year.”

Average sales prices were up 5% for residential class and 5.3% for condo class homes to $441,206 and $280,526 respectively.

Rural neighbourhoods show gains
“We are noticing a surge in unit sales in the rural areas, particularly the west end,” notes Shaw. “This is not only driven by availability but likely includes other attractive aspects in these well-established communities such as reasonable commute times, convenient shopping options, and great schools and recreational facilities which aren’t overtaxed.”

Real estate is attracting more cash from institutional investors globally with those allocating at least U$1 billion growing in the past year.

In 2017, 422 investors were part of real estate’s ‘Billion Dollar Club’ but in 2018 that has risen to 499, a 13% increase according to industry analysts Preqin.

“The allocations of these investors now exceed $2.5tn, accounting for the vast majority of capital dedicated to the industry. It is striking that this figure has grown so much over the past year, and perhaps reflects a trend towards inflation-hedging and noncorrelated assets on the part of investors,” said Tom Carr, Preqin’s head of real estate.

The Billion Dollar Club comprises just 8% of active investors in real estate but with a total allocation of $2.5 trillion they hold 84% of total assets under management in the industry.

North American members of the club make up 34% of the global total with Europe taking a 47% share.

Public pension funds make up 28% of the club while insurance companies are the second largest group with 21%. Each accounts for 26% of aggregate allocations.

With opportunities for investment in real estate globally and across risk/return profiles, Carr believes there could be further institutional investors allocating $1bn+ to the sector.

“We may see more investors position themselves in anticipation of a market shift in the coming months and embrace real estate investments further, in which case the Billion Dollar Club could continue to swell,” he said.

There was strong growth for resales in the Greater Toronto Area in July with sales up 18.6% year-over-year to 6,961 units.

Toronto Real Estate Board says that the average sales price was up 4.8% to $782,189 including a moderate rise for detached home types.

Preliminary seasonal adjustment shows a 6.6% rise in sales compared to June with the average sales price showing a 3.3% rise month-over-month.

That puts seasonally-adjusted sales at a 2018 high point and the average sales price at the highest level since May 2017.

“We have certainly experienced an increase in demand for ownership housing so far this summer. It appears that some people who initially moved to the sidelines due to the psychological impact of the Fair Housing Plan and changes to mortgage lending guidelines have re-entered the market. Home buyers in the GTA recognize that ownership housing is a quality long-term investment,” said Jason Mercer, TREB’s Director of Market Analysis.

Supply issues remain
However, new listings were down 1.8% year-over-year and TREB president Garry Bhaura says more needs to be done by officials to address the low inventory issues.

“The new provincial government and candidates for the upcoming municipal elections need to concentrate on policies focused on enhancing the supply of housing and reducing the upfront tax burden represented by land transfer taxes, province-wide and additionally in the City of Toronto,” said Mr. Bhaura.

Regent Park in Toronto is undergoing one of the most ambitious and incredible revitalizations in the history of the city, and Daniels is playing a leading role. The latest high-rise condo in the community was just announced – we’d like to introduce you to Artworks Tower.

Artworks Tower will rise 33 storeys and feature one- to three-bedroom units, starting from the high $300,000s. Located at Dundas and River, Artworks Tower bookends all the amazing development that has been completed and is underway in Regent Park.

Where does the name come from? The Regent Park community is known for its vibrant art scene – something Daniels has been supporting and strengthening through the revitalization.

“Art does, in fact, ‘work’. It works to unite us, to excite us, and to put us on the world stage,” reads the project website. “You may not know this, but art has been ‘working’ in Regent Park long before the revitalization. Now, more than ever, we celebrate the achievement of a community coming into its colourful own…with Artworks.”

The neighbourhood amenities include the Athletic Field the Aquatic Centre, many restaurants and coffee shops, community centres and artist hubs like Daniels Spectrum, and convenient access to transit and other nearby communities like St. Lawrence Market, Distillery District, and Corktown.

Daniels has a reputation for including innovative building amenities in their projects, and Artworks Tower is no exception. Artworks will feature co-working space, an outdoor terrace, a kids’ zone, a party room, an arcade, and a mega gym with indoor and outdoor crossfit spaces!

Join the Artworks Tower Inner Circle   

The best way to ensure you’re among the first to receive updates about Artworks Tower is to join the Inner Circle.

As a member of the Inner Circle, you will receive an invite to the first advanced sale, giving you the first choice of suites, floors, and views. You’ll also receive invites to members’ only events hosted by Daniels, as well as access to other insider info!

There is a fee of $300 to join the Inner Circle. This fee gets applied to the purchase price of the unit you buy. If you decide not to buy at Artworks Tower, then your money is fully refunded, no questions asked! There’s no fine print or anything – it’s completely risk-free!

Artworks Tower is opening this fall with prices starting in the high $300,000s. Receive priority info by joining the Inner Circle or register to receive general info and an invite to the public opening.

There’s no set amount for deposits, however. If the owner’s demand for a large deposit is a major sticking point, you could ask your real estate representative to try to negotiate a lower deposit amount with the seller.

A deposit is a money you put down to secure a property that you want to purchase. Providing a deposit is both a gesture of good faith and a serious commitment. Once the seller accepts your written offer, it becomes an Agreement of Purchase and Sale (APS), which is a legally binding contract.

Once the APS is signed and the deposit is provided to the seller’s rep, attempting to renege on the APS by saying, “Sorry, I’m no longer interested” is highly inadvisable. You will almost certainly lose your deposit. The seller also might sue you for damages for any difference between the amount of your offer and the amount they accept from another buyer, along with any additional legal fees and carrying costs. You don’t want to go down that road.

Deposits are sometimes returned to would-be buyers when conditions are placed on an offer and the conditions aren’t satisfied. For instance, if you make an offer on a house on the condition of financing, but your bank won’t approve it. Or your purchase depends upon the successful sale of your current home, but it doesn’t sell in time. Or you make your purchase conditional on a home inspection and the home inspector discovers a problem that stops you from moving forward.

If you can’t go through with the purchase because your conditions haven’t been met and you want your deposit back, you’ll have to sign a release form and get the seller’s signature, too. It’s a pretty straightforward procedure and sellers will usually go along with such requests. But if the seller suspects you didn’t act in good faith, they could refuse to hand over the money.

What happens next? Well, the deposit would stay in a trust account, usually with the seller’s brokerage, and the dispute between you and the seller would become a legal matter. If you and the seller are unable to arrive at a settlement, a judge could eventually release the funds through a court order. But I’ll warn you: that can take a long time.

It’s a myth that a seller can pocket a buyer’s deposit any time a deal falls through. Cases involving deposits of $25,000 or less can be decided in small claims court, which is relatively inexpensive and easy for ordinary Ontarians to use. Cases involving larger deposits, however, are decided in Ontario’s much more formal Superior Court of Justice. Court cases can quickly become expensive, so you should carefully consider all of your options before taking this route.

If you’re serious about buying this house, I strongly recommend working closely with both a lender — to get your financial ducks in a row — and a real estate salesperson before you commit yourself to a deal and hand over a deposit.

In a sign that the Toronto area real estate market is in recovery mode, year-over-year resale home prices and sales rose for a second consecutive month in July.

Selling prices climbed 4.8 per cent to $782,129 last month, up from $745,971 in the same period last year, for all types of homes in the region, according to the latest numbers from the Toronto Real Estate Board released Friday.

The number of home sales also rose 18.6 per cent year over year in July, while new listings declined 1.8 per cent.

“It appears that some people who initially moved to the sidelines due to the psychological impact of the (Ontario) Fair Housing Plan and changes to mortgage lending guidelines have re-entered the market,” said Jason Mercer, the board’s director of market analysis.

July was the fifth consecutive month-to-month rise in Toronto region housing prices: up 3.1 per cent from June, according to the real estate industry’s Multiple Listing Service Home Price Index.

Condominiums continued to outperform lowrise housing such as detached, semi-detached and town homes. Condo prices rose 8.9 per cent on average last month to $546,984. About three-quarters of the 2,002 condos sold last month were in the city of Toronto.

Of the 2,390 detached houses that sold in the region, three-quarters were outside the city. Regionwide, detached house prices rose only 0.5 per cent on average to $1 million, but the scarcity helped increase prices 3.6 per cent inside the city, while they remained flat in the surrounding 905 communities. A detached house in Toronto cost $1.35 million on average, compared to $907,347 in the surrounding regions.

The lift in resale home numbers so far this summer — June prices and sales both rose about 2 per cent above 2017 levels — appears to signal the stronger second half of this year that the real estate board and industry executives have been predicting.

The real estate industry’s MLS Home Price Index showed a slight 0.59 per cent decline in July, but the board’s release said, “The annual growth rate looks to be trending toward positive territory in the near future.”

Seasonally adjusted figures, nevertheless, also showed year-over-year growth of 3.1 per cent in prices and 6.6 per cent in the number of home transactions.

Urbanation, the authority on condo market intelligence in the Greater Toronto Area, released its market results for the second quarter of 2018, reporting a drop in sales as developers respond to the buyer slowdown.

In 2017, pre-sales hit a record high, so it’s not surprising the total number of condo units under construction in Q-2018 hit a high of 63,904 (95% of which were pre-sold). Construction starts also hit a record high last quarter, reaching 7,981.

5,759 new condo units came to market in Q2-2018, and 56% were sold by the end of the quarter. Compare this to the same period last year when 9,521 units hit the market and 80% pre-sold. Clearly the new condo market is moderating. Unsold inventory in development jumped to 9,341 units, the highest in six quarters, but lower than the 10-year average of 15,807.

“The slowdown in new condo activity this year was fully anticipated following the record-breaking pace of activity last year,” reads the report release. “First half 2018 sales of 9,058 units were down 58% from 2017 (21,316) and 13% below the 10-year first half average of 10,471 sales.”

The average opening price in Q2-2018 was $835 per square foot, an 18% year-over-year increase, but down from the high of $954 per square foot in Q4-2017.

With skyrocketing prices in 2017, some buyers have been hesitant to get into the new condo market, plus resale prices have calmed down. As a result, developers are holding back on new launches. Compared to the same quarter last year, there were 51% fewer site openings.

“Fewer new pre-construction condo sales this year will help to keep the supply pipeline in check as construction starts and completions move to new highs over the next couple years,” says Shaun Hildebrand, President of Urbanation. “Ultimately, low unsold inventory and a stabilizing resale market will provide support for the new condo market in the second half of 2018.”

There were 6,019 condo transactions in the resale market in Q2-2018, which is 5% higher than the average for the quarter. Annual resale price growth came in at 5%, which is a significant slowdown from the 30% growth recorded in Q2-2017. Low supply is supporting price growth; for the last 10 consecutive quarters listings have dropped year-over-year.

As Urbanation points out, it makes sense that new condo sales and prices are easing up a bit after a year of record highs. As single-family home prices drop, condo units are still the most affordable option in the GTA, so demand is still there! We can’t wait to see what the second half of the year holds for the new condo market.

There was a record high for new condo starts in the GTA in the second quarter of 2018 (7,981) while sales slumped.

There was also a record high for condos under construction (63,905, 95% pre-sold) driven by a high level of pre-sales in 2017.

However, a report from Urbanation says that pre-sales of new condos in Q2 2018 was down 57% year-over-year to 4,977 units with a slower pace of new projects and absorptions moderating to their longer-term average.

Of the 5,759 units brought to market in pre-construction projects in Q2-2018, 56% were pre-sold by quarter end, which compares to an 80% opening absorption of the record 9,521 units launched in Q2-2017.

No surprise after 2017 high
The slowdown in sales is no surprise following the record breaking high of 2017.

First half 2018 sales of 9,058 units were down 58% from 2017 (21,316) and 13% below the 10-year first half average of 10,471 sales.

“Fewer new pre-construction condo sales this year will help to keep the supply pipeline in check as construction starts and completions move to new highs over the next couple years”, said Shaun Hildebrand, President of Urbanation. “Ultimately, low unsold inventory and a stabilizing resale market will provide support for the new condo market in the second half of 2018.”

Other highlights

  • The average opening price for new launches in Q2-2018 was $835 psf, up 18% year-over-year but down from the high of $954 psf for units launched in Q4-2017.
  • Unsold inventory in development moved up to 9,341 units — the highest level in six quarters but well below the 10-year average of 15,807 units
  • Condominium apartment resale volume was down 17% annually in Q2, marking an improvement over the 31% drop recorded in the previous quarter. Second quarter resales of 6,019 units remained 5% higher than the 10-year Q2 average (5,708)
  • Annual resale price growth of 5% in Q2-2018 represented a strong deceleration from the 30% annual growth recorded a year ago in Q2-2017. Continued positive resale price growth has been supported by low levels of supply, as total listings have declined year-over-year for 10 consecutive quarters

Condo investment in Toronto tenders diminishing returns, but the discerning real estate investor can still turn a tidy profit.

Two-plus-twos— that is, two bedrooms and two bathrooms—are among the scarcest commodity in downtown Toronto real estate today. In a city wherein glass towers are sprouting faster than weeds, units are shrinking in size.

According to Manu Singh, a veteran investor and broker with Right At Home Realty, close to 70% of units in new builds are smaller than two-plus-twos, ergo, they teem with value.

“For an investor, the more scarce a product or service, the more valuable it will be down the road,” Singh told CREW. “That applies to everything, but when it comes to real estate you definitely want to be on the scarcity side, in terms of the unit you purchase.

“There’s more value to a two-plus-two, or even three-bedroom unit, because when they flip it for a profit they’ll have less competition and less supply that can dilute the sales price because buyers won’t have as much choice.”

Not only is there a dearth of two-plus-twos in downtown Toronto, they appeal to a wider cohort of buyers. Downsizers prefer the two-plus-two because, while significantly smaller than the house they sold, it’s still large enough to host their visiting children, who will have their own bedroom and bathroom.

Young professionals, too, flock to two-plus-twos, and are willing to pay premiums.

“You have extra room for a nursery and extra washroom for guests,” said Singh, adding that young professionals who cannot afford Toronto’s exorbitant rents or to buy a place of their own are also ideal candidates to rent a two-plus-two.

“Roommates are popular in the downtown core for urban professionals. You can increase the rent because you can split it among two income-earners.”

Toronto’s condo units are getting smaller by the build, so Singh recommends anything over 1,000 square feet.

“From an investor point of view, you want to focus on getting a larger two-plus-two in terms of square footage,” he said. “If you can get greater than 1,000 square feet, it’s a great investment because, again, newer developments are becoming smaller and smaller for the specs. In general, two-plus-twos rent higher and they sell better for those reasons. It’s great for investors.”

According to Sunny Sharma, president and co-owner of Century 21 Leading Edge VIP Realty Inc., the bedroom and bathroom combination is usually split so that each resident can have a semblance of privacy.

Alternatively, in student areas one-bedroom-plus dens equipped with two bathrooms are popular are commonly rented to university and college students.

But during preconstruction, two-plus-twos offer the best bang for your buck when it comes to square footage.

“The two-plus-two per square foot might be a little cheaper during preconstruction than one-bedroom-plus-dens and two-bedrooms because the demand isn’t as high,” said Sharma.

Housing affordability is the most important issue in British Columbia, beating healthcare, energy & pipelines, and the economy.

A report from Insights West shows that BC residents are three times more likely to cite housing affordability as the hot issue (36%) than healthcare (11%) while the economy is the top concern of just 7%.

The scorecard for BC Premier John Horgan shows a decline in approval after just over a year in office.

Housing affordability is a significant concern for the province’s younger residents, with the majority of those aged 18-34 (51%) saying that it is the most important issue facing the province. This issue also resonates more highly for Metro Vancouverites (47%) than the rest of BC.

Asked if they thought the BC government had done a good or bad job of handling house prices and housing affordability, 54% said ‘bad’ including 21% who said ‘very bad’; 24% said ‘good’ with just 2% saying ‘very good’; 24% weren’t sure.

These were among the provincial government’s lowest rankings along with homelessness and poverty.

 

Ongoing talk of trade wars and tariffs is dampening sentiment among Canadian consumers.

The weekly Bloomberg Nanos Canadian Confidence Index has declined again in the latest reading (54.31) and although the pace of decline slowed, the index is at a 12-month low.

Just four week’s ago the index was at 55.28 and it started the year on 61.91.

Sub-indexes diverged with the one tracking job security and personal finances was higher (60.54 vs 59.69 four weeks ago) while expectation for the economy and real estate prices was down (48.08 vs 50.88 4 weeks ago).

“The proportion of Canadians who think the Canadian economy will get stronger has hit a low not seen since 2015,” said Nanos Research, Chief Data Scientist, Nik Nanos. “The fact that Canadians are almost four times more likely to believe the Canadian economy will get weaker than stronger in the next six months speaks to a noticeable level of economic anxiety.”

Overall confidence was unchanged among homeowners while renters were generally more confident.

Vancouver will make changes to bylaws to make it easier to build laneway housing.

The City Council voted in favour of the changes this week which will help to achieve the Housing Vancouver target of 4,000 new laneway homes over the next 10 years.

“It’s great to see City Council support changes to get more laneway homes built in neighbourhoods across the city,” said Mayor Gregor Robertson. “We’ve heard loud and clear that Vancouver residents want more housing choices and laneway homes are a great option for middle-income households.”

The agreement on the changes means several benefits:

  • Streamlining approvals for one and a half storey laneway homes by introducing an outright review process similar to the current process for one storey laneway homes
  • Supporting more functional and flexible laneway home design by increasing allowable heights and updating the method of measuring height
  • Improving livability by introducing minimum room size requirements
  • Providing more flexibility for the location and design of one-storey laneway houses

Since 2009, the Laneway Housing Program has approved more than 3,900 laneway homes across the city.

“These changes are a result of consultation with the public through Housing Vancouver about housing needs, as well as focused engagement with owners and renters of laneway homes, industry engagement, and staff analysis,” says Paula Huber, Senior Planner. “By removing identified barriers to building a laneway home, we are making it easier and faster to build the type of housing we know people want and need.”

The technology sector is continuing to view Toronto as a great place to be based, driving demand for offices and other CRE units, while also supporting employment in the city.

A report from CBRE shows that 28,900 technology jobs were added in 2017, a rise of 13.6% from the previous year.

“High-quality and well-educated tech talent, cost-efficiencies and welcoming immigration policies are competitive advantages for the Canadian tech markets. Toronto continues to outpace other North American markets, having added more tech jobs in 2017 than the San Francisco Bay Area, Seattle and Washington, D.C. combined,” commented Paul Morassutti, Executive Managing Director at CBRE Canada. “Canada’s tech markets are booming. In downtown Toronto alone, tech demand sits at 36% of all current office space demand.”

Toronto ranks fourth in the top 5 markets for tech talent in 2018, which also includes San Francisco Bay Area (1), Seattle (2), Washington DC (3), and New York (5).

Ottawa, Montreal increasingly appealing
While Toronto is a top 5 tech town, two other Canadian cities are climbing the ranks; Ottawa and Montreal are ranked 13th and 14th respectively in CBRE’s scorecard.

Ottawa beats North American peers for concentration of tech talent; while Toronto is third at 8.9%, Ottawa’s 11.2% means it has more than three times the US national average of 3.5%.

“Ottawa is shedding its government town image. It is home to over 1,700 technology companies and employs over 70,000 tech talent employees,” said Shawn Hamilton, Managing Director of CBRE Ottawa. “In the last five years, urban tech has grown to be the second largest user group in downtown Ottawa, bigger than the accounting and legal sectors combined. Shopify continues to be our homegrown success story and has the international appeal to encourage tech clustering.”

Toronto ranks as North America’s fourth largest tech talent market, with over 241,000 tech workers, representing an increase of 51.5% over the past five years. Tech industry growth has accelerated demand for downtown Toronto office space, pushing vacancy down to 2.9% in Q2 2018, the lowest on record for the city and across North America.

“Companies looking to house operations are putting serious thought to locating in Canada. Compared to cities such as New York, Washington, D.C., Newark and Los Angeles, Toronto is among the best value for quality options for tech firms thanks to less expensive access to labour and real estate, but also high educational attainment levels. In short, Canada provides access to very high quality labour at a fraction of the cost,” said Paul Morassutti, Executive Managing Director at CBRE Canada.

Canada is not just running out of residential real estate in its key markets — the country’s commercial and industrial real estate is also filling up fast.

Availability of industrial property across the country fell to a historically low level of 3.9 per cent in 2018, while supply tightened in eight of the 10 major commercial real estate markets, according to CBRE Group, Inc., the real estate services and investment firm.

Though Canada has 70.6 million square feet of available industrial space left across the country, leading to the highest net rent the country has ever seen, at $7.21 per sq ft in the second quarter.

“Availability in Canada’s major industrial markets continue to plummet, which is putting pressure on tenants,”  Werner Dietl, executive vice-president and GTA regional managing director at CBRE Canada, said in a report published Tuesday.

However, strong demand for industrial space in Canada has led to a 47.1 per cent increase in construction activity, CBRE said.

The new facilities should ideally be located close to city highways and near population centres, which has compelled some markets such as Montreal to increase its transit capacity in a bid to attract more commercial operations.

Demand for e-commerce, food distribution and warehousing were leading factors driving demand for industrial real estate in the country.

“It’s no secret that e-commerce is driving a lot of activity globally. With the change in of how people are shopping, we’re seeing a shift in how retailers are running. We also see it in the food sector, which is showing investments in more effective distribution.” Dietl said.

Toronto is currently the most constrained industrial market in North America, sitting at a 2.2 per cent availability, thanks to its ideal location and demographics that appeal to both foreign and local companies.

Vancouver is North America’s second tightest market, with 2.4 per cent of industrial availability left. The average net asking lease rates on the West Coast city stood at $11.59 per square feet, a 33 per cent increase rate since the start of 2017.

While Vancouver and Toronto markets were tight, Calgary marked its sixth consecutive quarter of rising vacancy rates, due to low unemployment rates and lower economic activity. However, the rise of e-commerce and cannabis facilities across the province has led to new construction, to offset the oil-led downturn. As much as 3.5 million sq ft. of industrial space is at the construction stage to meet rising demand in those sectors, CBRE estimates.

Toronto’s low rental vacancy rate has been pushing rents upwards for months, and last quarter was no exception.

The average rent for a 732 square-foot Toronto apartment rose 11.2 per cent year-over-year to $2,302 last quarter, according to a new report from Urbanation.

Meanwhile, condo lease transactions fell 8 per cent to just 7,754 as the rental market hit what Urbanation senior VP Shaun Hildebrand calls a “critically low level” of supply.

But there is some good news: The number of applications for new purpose-built rentals was 3.5 times greater than Q2 2017, with 5,920 new units proposed last quarter.

The reason for the uptick in applications? Developers are looking to capitalize on sky-high rents, says Hildebrand.

“[The rise in applications] is a direct response to the growth in rents,” Hildebrand tells Livabl. “It offsets a lot of the negative impacts of rent control [on purpose-built rental construction.]”

While Hildebrand says that he believes the level of construction is still too low, he believes that last quarter’s increase signals a move in the right direction.

“If we continue along this path, we eventually will get to the point where we get to a balanced market,” he says. “Not anytime soon, but if we continue this trajectory, then yes.”

Hildebrand says it is critical not to rely on condo investors to supply the city with rental stock, especially since there are some signs that investors may be selling their units instead of placing them on the rental market.

“When we look at the percentage of condo units that were added into the rental pool last quarter, that percentage has been declining,” he says. “Fewer investors are holding onto their units after they get built.”

As for the much-decried rent control legislation — which came into effect last April, as part of the province’s Fair Housing Plan — Hildebrand says that, while rental construction does seem to be on the rise, the policy is still negatively impacting the market in other ways.

“Rent control is still an issue because tenant turnover has been declining,” he says. “Reasonable rate of rent growth has been jeopardized because tenants aren’t moving as often.”

Hildebrand says that with fewer units being rented out, and fewer being turned over, the city becomes caught in what he calls a “supply trap,” with less activity across the board, placing an upward pressure on rent prices.

Still, he is hopeful that the market could be in what he calls the “early stages of an upward trajectory.”

“We’re still going to be undersupplied for a long, long time,” he says. “It’s going to take awhile to see supply reach a level that will satisfy the amount of demand.”

Canada’s economy saw some slight growth in April as real GDP gained 0.1%, the third month of growth following a decline in January.

Statistics Canada reports that 12 of 20 industrial sectors gained, driven by a 0.2% rise for goods producing industries despite a decline for construction.

Services industries were broadly unchanged but real estate brokers and agents posted their first gains of 2018 with a 0.5% rise in output. The industry posted three monthly declines at the start of the year following the introduction of the new mortgage rules in January.

The colder-than-usual weather in April impacted many industries including retail and motor dealers and parts; energy firms gained.

For construction, there was a 0.5% decline with residential construction falling 1% as building activity declined in most types of structures. The monthly decline for the sector overall was the largest since the strike-influenced decline of May 2017.

The latest Senior Loan Officer Survey from the Bank of Canada shows how lending conditions have changed in the second quarter of 2018.

The new mortgage rules introduced at the start of the year continue to impact mortgage approval rates for low-ratio mortgages while the changes to regulations introduced at the end of 2016 are still impacting high-ratio loans.

The report shows that for the remaining pool of qualifying borrowers, lenders eased pricing conditions for both low and high ratio mortgages while non-price lending conditions remained unchanged.

The survey points to a tightening of mortgage lending conditions in the third quarter.

There were few changes for conditions in non-mortgage lending and demand for non-mortgage borrowing was unchanged.

The Bank of Canada will meet to decide on its latest move on interest rates next week and many are expecting an increase.

But once July’s hike is done, things become less clear as the economy is showing some mixed signals.

Two economists from Canada’s big banks have given their assessment of the likelihood of rate rises and both are confident that homeowners are facing higher mortgage costs from this month.

CIBC’s Avery Shenfeld says that the recent GDP and outlook survey were positive and a strong labour force survey for June is also expected.

“That will be the last piece of the puzzle for a Bank of Canada rate hike in July, but we’re also of the view that economic growth will moderate enough after Q2 to force another extended pause on rates,” he says.

Meanwhile, TD Economic’s James Marple is also expecting June’s labour figures to support a July interest rate rise; and concurs with Shenfeld’s call for a pause afterwards.

“Given a more cautious outlook and ongoing threat of escalating trade wars, we suspect it will be some time before we see another hike,” he says.

Marple notes that the housing market has shown some signs of stabilization with  some markets, Ottawa and Montreal for example, showing “decent positive momentum.”