Vancouver’s skyline will reach new heights in 2022 as The Stack becomes the city’s tallest ever tower.

Built by Oxford Properties Group, the tower at 1133 Melville will be 530 feet tall and provide a AAA class office development of 540 square feet, making it the largest office development currently underway in Vancouver.

Demolition has begun with construction due to start in Q1 2019 and completion in Q1 2022.

The new development will ease the tight vacancy rate in Vancouver which is the second lowest in North America at 4.7%.

It will also bring the latest design thinking to the city’s office market and is at the forefront of sustainability by targeting LEED Platinum status and is one of only two high-rise towers in Canada to be part of the Net Zero Carbon pilot.

“The Stack is one of the most-forward thinking office projects in Vancouver,” said Chuck We, Vice President of Office at Oxford. “Not only does it break new ground by incorporating employee wellness into the fabric of its design through its use of natural light, outdoor space and cycling amenities, we’re future-proofing the building with the adoption of Smart Building technology and multi-modal transportation options.”

The building will include 250 bike stalls and a dedicated drop-off zone for ride-sharing providers and (in the future) autonomous vehicles.

Tenants already lined up
The Stack has its first three tenants lined up with pre-leases for global services firm EY taking 60,000 sq. ft; and law firms Blakes and DLA Piper taking 80,000 sq. ft. and 67,000 sq. ft. respectively.

“The location provides quick access to our downtown clientele, the waterfront, great amenities and is a short walk to transit options. It’s going to be the premier business location in the entire city and we’re excited to be part of it,” commented Bill Maclagan, Managing Partner of the Vancouver office of Blakes.

The Stack development project is co-owned by Oxford and Canada Pension Plan Investment Board with each holding a 50% stake.

Toronto is often considered to be the least affordable housing market in Ontario but that’s not the case says Zoocasa.

The real estate website’s analysis shows that a median income earner ($65,859) in Toronto would be $41,282 short of what’s needed to buy the average-priced home ($785,223).

But despite a higher median income ($88,535), buying in Richmond Hill would require an extra $47,962 due to the average house price of $999,311.

That’s because 52% of Richmond Hill’s home sales are single-family detached properties compared to the varied mix of properties selling in Toronto.

The figures assume a 20% down payment and a 30-year mortgage rate of 3.14%.

The top 5 least affordable markets in Ontario are completed by Vaughan, Markham, and Oakville.

Ontario’s most affordable
For the most affordable options in the province, Thunder Bay leads with an average home price of $227,750. That would mean a median income earner ($66,163) would have more than twice the required income needed.

Sudbury, Ottawa, Whitby, and Waterloo complete the top 5.

August saw new home sales on pause in the Greater Toronto Area but there are signs that better things are ahead.

The Building Industry and Land Development Association (BILD) says that there were 974 new home sales according to data from Altus Group, including 171 single-family homes, a 50% increase year-over-year but 80% below the 10-year average.

Condo apartments saw a 1% decline in sales year-over-year. The 803 sales were 23% below the 10-year average.

Patricia Arsenault, Altus Group’s Executive Vice-President, Data Solutions, says that pent-up demand is building and should result in stronger activity for the fall market.

And BILD president and CEO David Wilkes is optimistic that things will improve once homebuyers, currently on the sidelines, become more confident in the economy and the impact of the mortgage stress test and other interventions ease.

“Once the market adjusts and more people start looking for homes, our region’s short supply of housing will mean that affordability will continue to be a challenge for many new home buyers,” he said.

In August, the benchmark price of new condominium apartments rose to $784,512, up 21.8% over the last 12 months. The benchmark price of new single-family homes was $1,129,129, down 12.4% over the last year.

Action required on supply
Mr Wilkes says that action is required by policymakers to address the low supply of homes in the GTA.

Inventory in August decreased to 13,619 units with 8,842 condo apartment units and 4,777 single-family units.

“Ahead of the municipal elections in the GTA, BILD has been talking to municipal leaders and residents about straightforward steps that municipalities can take to increase housing supply, including making sure that government charges on new homes are fair, funding and building critical infrastructure, cutting red tape and speeding up building permits and inspections,” said Wilkes.

The impact of the mortgage stress test is easing and the Greater Toronto Area’s housing market is showing growth – signalling the end of the market correction.

That’s the assessment from RE/MAX INTEGRA, Ontario-Atlantic Canada Region which says that demand for single-family homes is on the upswing and average prices are starting to rebound.

“The worst is now behind us. Pent-up demand will be a factor in the coming months, as homebuyers – many of whom delayed their purchasing plans – are entering the market,” says Christopher Alexander, the firm’s EVP and Regional Director.

He adds that momentum is expected to build towards the traditional fall market and remain buoyant for the rest of the year.

First-time buyers are leading the charge
Notable in the market is the participation of first-time homebuyers in the single-family detached $600K-900K sector.

There has been a 22% rise in buyers of these homes since June (4,086) but inventory is low in the 416 and may see more buyers searching in the 905 area where inventory is greater.

Luxury homes are also seeing growth with a 16% year-over-year rise in sales of single-family homes over $2 million.

Rollercoaster for market
“It’s been a real roller coaster for single-detached properties in the GTA over the past 32-month period,” explains Alexander. After reaching peak levels in early 2017, market-cooling tactics such as Ontario’s Fair Housing Plan in April, the federal government’s mortgage stress test expansion in October of 2017, and the Bank of Canada’s interest rate hike in January of 2018 created a great deal of uncertainty in the market.”

Although the stress test for high-ratio mortgages, introduced in 2016, had little impact on the market, Alexander says the subsequent interventions certainly did.

But he adds that the policy changes were needed to cool the increasingly hot market.

“The pace was simply unsustainable,” says Alexander. “While government intervention appeared heavy- handed at the time, in retrospect, the measures put in place served to cool down a wildly overheated market.”

Floodgates are open
Alexander says the future is bright for the GTA’s economy with population and employment gains helping to boost the housing market.

“After an extended period of housing market inertia, the floodgates are breaking open,” he says. “Upward movement in detached housing values and the threat of additional interest rate hikes in the future are prompting homebuyers to get off the fence and into the market. Rising consumer confidence, job security and an economy firing on all cylinders should continue to support healthy home-buying activity in the GTA for the remainder of the year and into 2019.”

Biarke Ingels Group has received approval for their King Street West condo community in Toronto. Originally proposed in 2016, the development was made as sets of pixels extruded upwards to create space for housing, retail and boutique offices. The concept was formed to avoid the footprints of heritage buildings that already exist on site. Alex Bozikovic, architecture critic of The Globe and Mail, reports that the development is about to start sales as King Street West pushes past its latest development hurdle.

 

King Street West is set in a transitional area of Toronto. Located at the meeting point of three 20th century neighborhood parks, BIG Westbank and Allied Properties REIT proposed a mixed use development with a public plaza that will create a new center for the community while connecting the various pedestrian pathways that crisscross the area. The building is organized as a traditional perimeter block with a public plaza in the center. Surrounding the plaza, King Street West rises as sets of pixels, each pixel set at the size of a room; rotated 45 degrees from the street grid to increase exposure to light and air.

The project features a distinct undulating facade to create additional green space. “With King Street West, we wanted to find an alternative to the tower and podium you see a lot of in Toronto and revisit some of Safdie’s revolutionary ideas, but rather than a utopian experiment on an island, have it nested into the heart of the city. It would be strange if one of the most diverse cities in the world had the most homogenous architecture.” Bjarke Ingels, Founding Partner, BIG.

The newest renderings of BIG King West have seen the concrete give way for stunning glass blocks.

Housing market dangers are “especially acute” in Australia, Hong Kong, Canada and Sweden, Oxford Economics said, noting this has historically posed a threat to economic activity.

“In all four, valuations are very elevated, there has been a lengthy housing boom, debt levels are high and there is a significant share of floating rate debt,” Adam Slater, lead economist at Oxford, said in a research note.

On the positive side, it notes risks are relatively limited in key markets like the U.S., Germany, France, China and Japan. In addition, across most economies there has been no significant recent rise in mortgage rates, which have even fallen in some cases.

“So, the classic ‘trigger’ for house price declines is largely absent,” Slater said. “However, rising rates are not strictly necessary for prices to start falling.”

House prices are falling in Australia, down almost 3 percent in the year through August in major cities, and 5.6 percent in the Sydney market. Meanwhile, three of the nation’s four major banks raised mortgage rates in recent weeks, blaming higher funding costs. The increases came even as the central bank leaves official rates at a record low.

Oxford said it compared markets across OECD countries from 1970 to 2013 and found a clear negative relationship. Where valuations had risen 35 percent or more above the long-term average over that period, real house prices fell 75 percent of the time over the following five years, it said.

“This points to many OECD countries seeing stagnant or negative real house price growth in the next few years: the scope for a further house price ‘melt-up’ in highly valued markets looks extremely limited,” Slater said.

Stretched valuations also matter because house price changes can have a significant impact on economic activity, Oxford said, citing a sample of 83 house price booms. It also found house prices tended to fall after booms, and often substantially.

“For the G7 countries, we find a positive relationship between consumer spending and real house prices from 1997, albeit possibly weakening in recent years,” Slater said.

Toronto is home to some of the world’s most innovative technology companies and now arguably the most famous name in tech has announced a major real estate investment in the city.

Microsoft will base its Canadian operations in a new state-of-the-art headquarters in 132,000 square feet over four floors of 81 Bay Street, CIBC Square, with a move-in date of September 2020.

The inclusion of Microsoft to downtown Toronto will only serve to reinforce the city’s reputation as a technology hotspot, good news for commercial real estate.

The GTA’s residential real estate market is also likely to feel some impact as staff from the existing Mississauga headquarters seek a shorter commute and more jobs are created in the downtown centre.

Welcomed with open arms
“This announcement by Microsoft offers yet more evidence of the strength of Toronto as a global technology centre, and as a desirable home for major corporations. By choosing South Core as its new home, Microsoft is embracing one of the hottest new areas of downtown and Toronto welcomes them with open arms,” said Toronto Mayor John Tory.

Along with its Canadian headquarters relocation, Microsoft is also planning the relocation and expansion of its research and development lab in Montreal, relocation of its Vancouver sales office, and renovation and redesign of its Ottawa, Calgary and Montreal sales offices.

Last month, the Ontario labor market experienced the worst setback nationwide in terms of employment numbers, losing 80,100 part-time jobs.

This was the province’s largest employment drop since 2009, contributing to fears of even lowered purchasing power in a market already characterized by inflamed prices.

The loss largely contributed to the unexpected loss of 92,000 part-time jobs nationwide in August, Statistics Canada said late last week. This was the second worst month-over-month decline since last decade’s recession, offsetting a 40,400 gain in full-time positions.

National unemployment went up to 6% as a result, compared to July’s 5.8% and exceeding Bloomberg pollsters’ predictions of 5.9%. Meanwhile, wage increases have crawled to their slowest rate this year.

 

A new report by Point2 Homes stated that multiple trends – including weaker purchasing power brought about by unemployment – worked together to pull down the national home ownership rate for the first time in nearly 5 decades.

“The burst of China’s speculative bubble sent shock waves through the global economy… with especially large effects on Canada’s resource-based, export-driven economy,” the report explained.

“The collapse of oil prices and the country’s heavy reliance on exports to its Asian partner pushed Canada into a recession. The ensuing economic deceleration affected wages, hence lowering people’s purchasing power. Home prices, however, kept going up, leading to the decline in homeownership rates revealed by the 2016 StatsCan numbers.”

Investment in Canadian commercial real estate has reached a new record high, beating the previous record set in Q1 2017.

Q2 2018 saw $16.5 billion of CRE transactions, 38% above the previous high of $11.97 billion and 105% above the 5-year quarterly average. The half-year total is also a new record high at $26.8 billion.

CBRE reports that two major M&A closings in the quarter – Choice Properties’ acquisition of CREIT and Blackstone’s acquisition of PIRET – accounted for 45% of the total activity in the quarter.

Activity was further driven by large single asset deals including Hines and Oaktree Capital Management’s $107 million purchase of Calgary’s First Tower office building and Tigra Vista Inc.’s $256 million acquisition of Toronto’s Parkway Place.

“With two large M&A transactions closing within the second quarter, it’s not surprising that investment volume was the strongest ever in Canadian history. In fact, the average deal size in Q2 was up 67% year-over-year to $9.4 million, which is reflective of the size and significance of the investors in real estate today,” Peter Senst, President, Canadian Capital Markets at CBRE Canada.

A tale of two cities

Toronto and Vancouver are still the clear leaders for commercial real estate investment.

CBRE’s figures show that Toronto accounted for more than a third of total Q2 2018 transactions with more than $5.7 billion, a new quarterly record for the market and beating the previous high ($4.7 billion in Q2 2013) by 20%.

Vancouver saw more than $3.9 billion of CRE investment in the quarter.

Compared to the 5-year quarterly averages Toronto was 82% above and Vancouver was 91% above.

Calgary, Montreal and Edmonton rounded out the top five with $2.5 billion, $1.7 billion and $1.5 billion, respectively.

“Interest in Canadian commercial real estate today has a lot to do with Canada’s global market leading fundamentals. Toronto and Vancouver together have maintained the two tightest downtown office vacancies for four consecutive quarters and the two lowest industrial availability rates for six consecutive quarters in North America,” added Senst.

Industrial, multifamily lead

Although industrial investment outpaced all other sectors in Q2 2018 (37% of the quarter’s total CRE investment of $6 billion), CBRE says that without the M&A activity multifamily and industrial tied at $1.9 billion.

Simply put, investors want multi-family exposure because it is a good long-term investment strategy. No matter the economic or political state, people are always going to need places to live, which translates to a consistent flow of income for investors,” said Senst.

This isn’t a recipe for a lunch sandwich; it’s the recipe for rental property investing with little or no cash of your own. There is plenty of pie-in-the-sky noise out there about getting rich quick investing in real estate. This is a realistic article about one way to invest with little or no money of your own. There is one strategy that isn’t talked about a lot, but it could work in your market.

This strategy utilizes lease purchases to acquire a rental property and place a tenant in it using lease options. This can be a win-win-win for the three parties involved.

A. The Frustrated Seller
A seller who has had trouble selling the normal ways or must sell quickly to move and take a job is a great candidate for this investment strategy. You provide them with a way to move out of their home and not pay any other payments. They can move on with their life while you take over their house payments. They get to move right away, and you get control of the home.

B. A Rent-to-Buy Tenant
There are people out there who want to own a home, but they cannot due to credit problems, lack of a down payment, or both. You offer them a lease purchase on the home, and they can rent it while they fix their credit and save their down payment.

C. You, The Investor
By locating distressed sellers and helping them to move and also helping people who want to buy and get into a home, you’re providing a service to both. You’re going to profit handsomely as well, and here is how:

Steps in the Sandwich Lease Process

Step 1
You locate a seller who needs to move quickly, and they have a home with a low enough payment that you can rent it out for more each month; that’s your positive cash flow. You execute a lease purchase with them, giving you the option to buy the home at some date in the future, usually 3 to 5 years away at an agreed-upon price. You agree to pay their payments, and you pay them an option premium that helps them to move. This is whatever you can agree upon, but for this example, use $1,500.

Step 2
You have been marketing for rent-to-own buyers and have shown photos of the home to one who indicates they’d like to buy once they see the home. You execute a lease purchase agreement with them for the same period as the one with the seller. They have the option, not the obligation, to buy the home on or before that date. You charge them an option premium of $1,500, so you’re into this deal with no cash out of pocket. They like this, as it’s a lot less than a down payment.

Step 3
Your agreement sets the monthly lease payment at a higher number than the payment you’re making on the home. This is your monthly cash flow. The price at which you will allow them to buy the home is higher than the one you’ve agreed to with the seller.

You now have a profitable monthly rental with a profit at the end of the lease from the sale of the home. If the tenant doesn’t buy, you can renew your deal with the seller and place another tenant in the home, or you can walk away.

This isn’t a strategy for every market or every investor, but it’s providing nice cash flows for those who can use it appropriately.

The Toronto real estate market is always in flux and, as an investor you should be ready to switch up your strategy to maximize your dollars and of course, your ROI.

The real estate market is always in flux and this can make investing exciting but it can also make it extremely difficult for investors. The market can change week to week as much as it can change year over year and, as real estate agents, we need to be ready for every type of curveball the market sends our way.

As experts in our field, we’re constantly tracking the active market and are adjusting our strategies in order to earn our clients the best returns possible. By monitoring trends and pricing in all areas and on all products, we’re finding the best investment opportunities based on the market at the time.

Over the past few years we’ve been strong advocates for investing in Toronto’s pre-construction condo market but as pre-construction prices creep up beyond their resale counterparts, not all pre-construction developments in Toronto make for good investments. This doesn’t mean there aren’t great pre-construction investments, it simply means that it’s time to consider alternative options and their respective returns when investing.

There are a number of advantages to investing in the resale condo market and today we’ll cover our top reasons why you should consider resale investment opportunities in the Toronto market.

MYTH #1
Pre-Construction is Cheaper than Resale

It wasn’t long ago that pre-construction condos were almost always priced below their resale counterparts, which is why the pre-construction market has earned such a good reputation among investors. But today, with a growing number of pre-construction condos being built, the cost to build is more expensive. It’s a simple case of supply and demand.

Babak Eslahjoub of Core Architects said to The Globe and Mail that “construction costs are going up as a result of the demand being quite high; we’re the victim of our own success.” The price of land, material and labour have all increased for developers and they, too, need to make a profit off their investment and need to price projects accordingly.

It’s important that your Realtor is always looking for the best investment opportunities—whether that’s resale or pre-construction—with the best profit margins, and this will vary depending on the area and the state of the market.

MYTH #2
Investing in Pre-Construction Guarantees a Higher ROI

As we mentioned above, in the past, pre-construction condos were almost always priced below their resale counterparts but as of late, these pre-sale prices have become, in many instances, too aggressive and many are unjustifiable in the current market.

If you’re over paying for the product you lose the inherent advantage that pre-construction offers: equity gained during the holding period.

MYTH #3
The Best Pre-Construction Deals Always Sell Out in a Day

Consumers are getting fooled by the hype around any hot new projects in a great location and are quick to pull the trigger by putting their money into them. Some pre-construction condo developments are actually charging more per square foot than resale is trading for in the same area. The lack of education for some investors could lead them to overpaying.

As builders continue to command high prices the trend will continue as there are always going to be buyers that will pay the price. This is specifically true for end-users whose intentions are to live in the building long-term. This is why it’s so important to work with a Realtor that you know is looking out for your best interests and who will tell you whether they believe in the project or not. Frankly, I won’t sell anything I wouldn’t buy myself.

WHO CAN INVEST IN RESALE

If you meet these three major qualifications you’re likely a good candidate for resale investing.

  • You have a 20%+ down payment ready to go.
  • You can qualify for a mortgage today.
  • You don’t mind being a landlord for an extended period of time.

FINDING THE RIGHT INVESTMENT FOR YOU

There are a number of factors that come to play when deciding which investment is for you. If you meet the above qualifications resale mightjust be the right one.

I say might because I always recommend that if you’re thinking of investing that you book a call with me to discuss your unique situation and goals. The market is always changing and my recommendations will always change with it.

It’s important to find a property that is priced well and in the right location with good market growth potential. This means it matters what you’re buying as much as for what price. I’ll discuss your options at hand and recommend a strategy that will maximize your return.

WHY RESALE IS A GOOD INVESTMENT

As it stands right now in the market, you may be able to make money faster in resale as the market adjusts. The key is finding the right price; ideally for properties that are equal or less than pre-construction in the same area. If you can buy a fairly new resale condo with a good floor plan, from a reputable builder, in an area where pre-construction is being built — that new build next door will float your resale investment price up when it comes time to sell.

Let’s say you find a 700sqft resale property that is going for $850 per square foot compared to the same sized pre-construction property that’s selling for $950 per square foot.

While you won’t get the same price per square foot as a brand new building come resale, if  you’ve bought in a reputable building that still sells very well, we can maximize your sale price and achieve a similar price per foot through things like staging. So not only have you purchased for less, but you get to boost your resale value because of the new buildings in the area — not to mention the extra income you’ve earned from renting it out for six years rather than just two.

FINANCING YOUR RESALE CONDO

The difference with resale is that you’ll need to have your financing and deposit monies (20% down) ready on closing, which would be in two to four months rather than pre-construction’s typical 15% down in the first year, followed by the remaining 5% three to four years later. But, if financing isn’t a road block, you have the opportunity to start building equity and earning rental income from your investment right away. Meanwhile, your tenant begins to pay down your mortgage today.

PAYING DOWN YOUR MORTGAGE PRINCIPAL

One of the major benefits of purchasing resale — if you can handle the hassle of being a long-term landlord — is that your tenant begins to pay down your mortgage principal today. Couple this with equity gains and you have yourself a healthy investment!

HOLDING YOUR INVESTMENT CONDO

Remember, real estate is a long-term investment. If you’re goal is equity gains — whether resale or pre-construction — expect to hold your property for at least six or seven years. This will protect your investment and allow enough time to generate a healthy return — especially in Toronto’s high performing condo market. New builds will boost resale values of their neighbouring buildings, provided you buy the right product.

A lot more to this conversation and a lot of moving parts to consider. This is why we always recommend speaking to an Realtor who is well versed in the Toronto market and who regularly invests their own money in real-estate.