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Current state of Toronto’s new condo market

Ben Myers of Bullpen Research & Consulting was recently interviewed by Newinhomes.com about the state of Toronto’s new housing market. Ben is always interesting. And these are the sorts of things that I read in my spare time. So here’s an excerpt:

The average price of popular new condo floor plans in the City of Toronto in October 2019 was approximately $1,275 per-square-foot (psf) and with growth of 3% a year, prices would hit $1,475 psf in 2024. I wouldn’t be surprised to see annual average growth of 4%, which would get you to $1,625 psf in five years in Toronto.

This data was taken from BuzzBuzzHome and — by “popular new condo floor plans” — I believe he means that these are the floor plans that buyers tend to click on and review when they visit the site. So it’s a good indication of buyer demand.

Here’s another quote that stuck out:

Part of the reason that price growth has spiked is a rise in construction costs, development charges, and land prices – this cost-push inflation is passed on to consumers.

That sounds right. And I have been writing about this phenomenon all year. Most of us can probably remember when $1,000+ psf was a high water mark for new construction condos. Now it’s pretty much a floor.

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2020 Economic Outlook Whitepaper

Ontario Economic Overview

With 2019 approaching its end, Ontario’s economic growth for 2019, at just over 1%, is forecasted
to underperform the national average of 1.4%, with 2020 only expected to see about 0.75% growth
compared to Canada’s 1.1%. The Greater Toronto Area (GTA) and Ottawa-Gatineau regions are
expected to see stronger growth than the province as a whole, at 1.2% and 1.0%, respectively in
2020. To encourage growth across the nation the BoC is expected to cut the benchmark interest rate
before the end of 2019, followed by a another potential rate cut in early 2020 to provide the necessary
economic stimulus to overcome a slowing global economy. However, headwinds are building, with
slower U.S. expansion and elevated trade policy uncertainty likely to weigh on growth in 2020. The
housing market in Ontario is the silver lining, as this sector weighed on economic growth in 2018
and early 2019, specifically in the GTA, however, it sprung to life in the spring and continues to show
increased in both sales activity and pricing.

Ontario’s labour market remains strong as a healthy influx of immigrants continues to help
companies secure workers amid tight labour market conditions. With the unemployment rate at 5.8%
at the beginning of 2019, employment growth in the province ramped up and by the end of October,
the unemployment rate had decreased to 5.1%. Along with a thriving tech sector in the GTA, Ottawa
and the Kitchener-Waterloo regions, much of the employment growth has occurred in the FIRE
sector, which is once again benefiting from the recovery of the residential real estate market. On the
industrial space-using side, the Transportation and Logistics sector continues to experience steady
growth with the rise of e-commerce services like fulfillment centres and distribution facilities. Ontario
is expected to see employment grow by 2.7% in 2019 and 1.0% in 2020. However, there is a disconnect
between strong job markets and consumer spending. With inflation in Ontario for 2019 expected
to come in at 1.9%, highly indebted households are keeping a tighter grip on their wallets with very
little savings to fall back on. Furthermore, business activity indicators are showing some cracks with
an abatement of U.S. and U.K.-bound exports. The downgraded profile for U.S. GDP and weakness
in the U.K., the two largest Canadian export markets along with elevated political uncertainty could
continue to hamper business investment in Canada and Ontario.
As the Liberals begin their second term on Parliament Hill, the public administration sector is
expected to slow as a result of Federal government spending plans, which will impact Ottawa
specifically, however, the high-tech sector is expected to continue growing, driving demand for space.
Expect much of the federal government’s attention to be on the West coast of Canada, specifically
Alberta, as the Liberals attempt to quell the Wexit movement and appease the Conservatives, while
also attempting to create alliances with the NDP and Bloc.
The continued concerns about high consumer debt and newer concerns about inflationary pressures
being brought on by trade wars could weigh down the performance of commercial real estate.
However, with heavy investment in infrastructure, continued growth in both residential and nonresidential construction and growing labour markets, Ontario is poised for a steady conclusion to 2019
with strong fundamentals throughout 2020.

GTA Office Overview

The GTA’s office market had a record year in 2019, while being recognized as one of the strongest
office markets in North America. Deeply entrenched in landlord control, the market saw its overall
market vacancy rate drop 50 bps year-over-year to end 2019 at 4.5%, with the average net asking
rental rate up 2.5% year-over-year to $19.85/SF per annum.
The good news on the supply front is that construction activity continues to increase, with 12.1 million
SF now under construction, representing 4.5% of existing inventory. This includes CIBC Square at
just under 1.6 million SF with CIBC as the lead tenant; the 1.2 million SF office project at 160 Front St.
W., by Cadillac Fairview with the Ontario Teachers’ Pension Plan as the lead tenant; as well as the
879,000 SF project at 16 York St. also developed by Cadillac Fairview with HSBC slated to be the lead
tenant. Furthermore, Oxford Properties continues to market their proposed 1.4 million SF (60-storey)
office tower, The HUB, at 30 Bay St. Along with these projects, Cadillac Fairview’s mixed-use East
Harbour development is planned to be Toronto East’s flagship destination with exceptional transit
connectivity.

With strong demand from finance and technology companies continuing to drive vacancy down,
rental rates are expected to continue increasing, and this new supply will not help alleviate the
tightening market conditions until they start being delivered between 2020 and 2022. As a result,
there are only three blocks of contiguous space 30,000 SF or larger in tech dominated submarkets
such as Downtown West and Liberty Village, and currently only 12 existing properties in the entire GTA
that can accommodate a tenant looking for 100,000 SF or more of contiguous space.
Downtown vacancy remains exceptionally tight as overall vacancy decreased to 2.1%, the lowest
downtown vacancy rate in North America. Landlords are keenly observant of this fact and are
increasingly selective in the types of tenants they are choosing for their space. In light of the strong
fundamentals supporting the Downtown market, landlords are looking for tenants with time-tested

sustainable operations and strong covenants before committing to a lease. While downtown vacancy
is moving down, suburban vacancy also experienced a drop of 190 bps year-over-year and the delta
between downtown and suburban vacancy rates has shrunken to 290 bps from a whopping 470 bps
at this time last year. As a result of the tight downtown market with limited options, tenants will likely
need to pay more attention to the suburban markets if they need a large amount of space in 2020.
The delta between downtown and suburban net asking rental rates is equally impressive. Downtown
rents ended 2019 at $31.71/SF, whereas suburban rents are around $16.31/SF, representing a difference
of $15.40/SF per annum. This is not indicative of the suburbs being in peril, as there remains strong
demand for space in the more urbanized suburban locations, such as Mississauga City Centre,
Vaughan Metropolitan Centre and Downtown Markham. With demand remaining strong, and new
supply limited in the short term, expect rental rates to continue edging up across the city.

The wild card for the GTA office market outlook will be the progression of Google’s Sidewalk Labs
project. The proposed ‘smart city’ development slated for the Port Lands on Toronto’s eastern
waterfront is generating controversy in terms of privacy of personal data, methodology behind
information gathering and how the development will be financed and managed. With 3.3 million SF
of office and retail space, the smart city is the largest attempt to integrate technology with urban
planning in North America. If the project were to get underway to the scope initially unveiled by

Sidewalk Labs, it would immediately impact the office, housing and employment markets. The GTA
receives approximately 100,000 new immigrants (international and domestic) to the area each year,
and the GTA economy is more than capable of providing the skilled talent at the quantity needed for
this project, as well as providing housing for them to live, without the increased demand upending
either the labour or housing markets.

GTA Industrial Overview
Despite the strong rhetoric regarding trade wars and weak retail sales, the GTA industrial market
has experienced continued strong demand. Industrial is the new retail, and much of the industrial
demand in the GTA is primarily driven by transportation, warehousing and logistics tenants, whereas
manufacturing did see a decline in the past year. The high cost of energy is one of the reasons
being cited for the pullback in manufacturing. The PC party pledged to reduce energy costs in their
provincial election campaign last year, however the benefits from lower energy costs will likely not
result in a wholesale return to manufacturing the GTA.

Along with the insatiable demand and limited supply, the GTA is now facing land shortages, which will
impact the velocity and costs of future construction activity. Projections show that the GTA industrial
vacancy rate will continue edging down below 1.0% in 2020, before starting to climb slightly back
above the 1.5% range by 2021. Such incredibly tight conditions will continue to exert upward pressure
on the overall average asking net rental rates, with expectations for rents to reach approximately
$9.45/SF in 2020 and eclipsing $10.00/SF in 2021.

GTA Retail Overview
The GTA retail market continues to receive new international retailers who are either looking to enter the
GTA market, or are using the GTA as a launching pad to the rest of Canada. The newly opened Eataly,
which opened its doors in November at the Manulife Centre in Toronto, is a perfect example of this. The
retail markets vacancy rate edged down 40 bps year-over-year to end 2019 at an impressive 1.8%, with
the average net asking rent up 7.5% over the same period to $26.97/SF per annum. However, market
rent growth has been slightly weaker, reflecting concerns about the retail market in relation to weak
retail sales and retailer performance.

Construction activity has been relatively slow, with only 2.2 million SF of new supply delivered since
Q3 2017, and construction activity has moved down from 3.7 million SF last year to 3.2 million SF at
year-end 2019, representing only 1.1% of existing inventory, with much of this construction activity
being part of mixed-use projects, or expansions to existing malls. Despite the new vacant space that
came to the market as a result of Sears Canada closing in Q1 2018, the limited amount of new supply
has not been enough to satisfy the demand from tenants who are struggling to find space amid low
vacancy and increasing rents. However, with recently announced store closures, and street front and
even mall vacancies creeping back onto the market, expect vacancy rates to rise over the coming
year to end 2020 at 2.4%.

Despite the impressive fundamentals, the economic forecast could prove detrimental to the
retail landscape. The latest national GDP data indicates that retail activity has come off the boil.
Furthermore, retail sales have been showing weakness for some time, with much of the total increase
in retail sales has been the result of inflation and population growth. Although retail sales growth
is expected to remain positive, high consumer debt is expected to hinder retail sales going forward,
despite any expectations for the BoC to cut interest rates. However, GTA retail sales are expected to
increase by over 2.0% each year out to at least 2025, but much of that growth will be captured by
e-commerce as opposed to brick and mortar retail.
In order to combat the effects of e-commerce on the retail market, landlords of premier quality
properties continue to work on improving their properties, making them experiential destinations.
The making of an experiential destination goes beyond just having more restaurants and services
in malls, and can include ventures such as Ivanhoe Cambridge and Cirque du Soleil teaming up to
offer family entertainment centres in shopping centres, which is due to launch early 2020. Landlords
are looking at ways to further differentiate themselves from the rest of the pack in order to attract
more shoppers as well as new and better retailers. Expect to see this, along with more intensification
of retail properties and repurposing of parking lots in suburban malls, as seen at properties such as
Yorkdale Mall, and Aoyuan’s redevelopment plans for Newtonbrook Plaza.

Ottawa Office Overview
Ottawa commercial real estate is experiencing a renaissance with renewed interest along the LRT
line and other well-located properties for the purpose of redevelopment or development. Occupancy
gains were attributed to leasing by technology and federal government tenants throughout 2019
with the now fully operational phase 1 of the LRT line acting as the biggest demand driver. The LRT
has made well-positioned buildings winners in the office market, particularly properties that have
stops integrated into their buildings. The LRT’s completion will secure higher rental rates in buildings in
close proximity and become a main feature in retaining old tenants and attracting new ones. Easier
accessibility outside of the Downtown Core could also continue lowering vacancy rates in both the
western and eastern submarkets. Furthermore, with federal spending likely to curb due to the election
outcome, government leasing is likely to slow down; however, this will allow private sector tenants to
either expand or move into the market with less competition.

Overall vacancy in Ottawa is down 80 bps year-over-year to end 2019 at 4.2%; however, net asking
rents were up only 1.7% over the same period, to $16.98/SF/annum. Construction activity has been
underwhelming over the past years but a handful of projects should begin to change the narrative
across the city. Of the projects that are under construction, most are larger mixed-use projects,
with only a portion slated to be office space. The largest example of this being the waterfront
development Zibi, expected to bring approximately 240,000 SF of office space to the market. Close
behind is 900 Albert St., a mixed-use and transit oriented development comprised of 200,000 SF of
office space. Like many of these projects, 900 Albert St. is located along the new LRT Line. However,
other projects, such as Taggart’s 153,000 SF design build in the Kanata West business Park for Kinaxis,
a supply chain planning software company, should kick off shortly.

Although high-tech companies and the Federal government have long been part of the office market
tenant mix in Ottawa, the Federal government is beginning to embrace the concept of flexible work
space and choosing to occupy more space in the suburban markets over the last few years, which
has resulted in higher vacancy downtown. This has created opportunities for high-tech tenants who
might be looking for more urban locations with access to public transit. Expect demand to outstrip
supply in 2020 and beyond, with vacancy continuing to edge down.

Ottawa Industrial Overview
The Ottawa industrial market has experienced relatively strong demand throughout 2019, with
vacancy down 100 bps to end 2019 at 1.7%. As a result of tightening market conditions market rents
continue to increase, despite asking net rental rates appearing flat year-over-year at $10.63/SF per
annum at the end of 2019. This continues to raise the question of whether tenants are willing to wait
for new space or pay record high rental rates for existing older stock.

Although the market experienced significant new supply in 2019, 1.0 million SF of the 1.2 million SF
delivered in 2019 was the result of the new Amazon fulfilment centre, resulting in no real alleviation to
continuously tightening conditions. Both the developer and the City of Ottawa hope that this project
will breathe new life to the city’s industrial development pipeline and kick off more new speculative
construction in the region.

Looking forward, there is currently only one major project to speak of that could satiate demand
from new or expanding tenants in the Ottawa market. Broccolini’s proposed 700,000 SF speculative
development is interesting not only because of its size, but also because they have applied to the
City to raise the height of the building from just under 50 feet to almost 100 ft. The question is, what
would you do with a 100-foot tall single storey industrial building? Despite this potential project,
the lack of new supply and availability of quality space, in particular large blocks, will contribute to
continued tight market conditions and higher asking rental rates.

Ottawa Retail Overview
The Ottawa retail market has experienced a 120 bps year-over-year drop in vacancy to 2.7% at the
end of 2019. This drop is partially the result of retailers opening new locations at the Cadillac Fairview
Rideau Centre earlier this year and the slow rollout of legal cannabis brick-and-mortar stores. As a
result, average net asking rental rates have steadily increased, however, they are only up 1.5% yearover-year to end 2019 at $20.96/SF per annum.

Construction activity has been relatively slow as well with only 534,000 SF of new supply delivered
since Q2 2017 and only another 252,000 SF currently under construction, mainly as part of the
podiums of mixed-use residential projects along the new LRT lines. Given the forecast of demand for
space along the LRT lines, this construction activity will likely not meet demand over the coming years,
and redevelopment of the areas adjacent to the new transit line seems likely.
Ottawa’s retail sales growth is expected to remain strong in 2020, at 2.1% growth, however, as the
potential for pullbacks in the public administration sector weigh on the outlook, retail sales growth
is expected to fall below 2.0% for the foreseeable future thereafter. Furthermore, high debt service
costs and competition from the rise of e-commerce, especially now that Amazon is in town, will take
a bite out of retail sales activity. Developers will look to give buildings in close proximity to the LRT a
facelift while retailers in older buildings, in less than ideal locations, may have to close their doors due
to increased costs and lackluster sales growth. The upside of this shift would be new and fresh retail
space available upon completion, leading to continued interest from diversified international retailers.

Landlords continue to look for ways to differentiate their properties and make them more experiential
destinations in order to combat the effects of e-commerce on the retail market, and the Ottawa
market has not been immune to this. Expect to see more intensification of retail properties and
repurposing of parking lots, specifically along the LRT lines in the coming years.

Source: CoStar

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Time is now with GTA’s housing-supply crunch

Like all markets, the housing market in Ontario is driven by the laws of supply and demand. Strong demand for housing has created a persistent supply challenge that can only be solved, simply, by boosting the number of new homes being built.

This approach makes sense. It is supported by numerous economists and academics. This is why the Building Industry and Land Development Association is encouraged by the provincial government’s focus on boosting housing supply.

Every month, BILD releases the previous month’s new home sales data, gathered by Altus Group, tracking the relative health of the new housing market as reflected in sales, inventory, price per square foot and comparisons to historical trends. The data we released for September pointed to a modest recovery from the slump of the previous year, but, given that new home sales and inventory increased in tandem, the data underscored that the GTA continues to experience a significant housing-supply crunch.

In previous columns, I have highlighted that the GTA is one of the fastest growing metropolitan areas in North America, with an average of 115,000 net new residents per year. Our population is expected to reach 9.7 million by 2041. Given this robust growth in population, demand for housing of all types — to buy or rent — is strong and will remain so.

The challenge is that the supply side of the housing equation in Ontario is highly regulated and dependent on factors that can make it less responsive to demand signals. The first of these factors is the supply of land designated for residential construction and serviced with the appropriate infrastructure. Within the cities of the GTA, the amount of available lands for new residential construction has been steadily decreasing.

Another factor that restricts our housing supply relates to planning and approvals. New housing cannot simply be built any time, anywhere. All new housing projects go through a complex and lengthy approval process, subject to multiple pieces of provincial regulation, which is interpreted and administered by municipal governments. This slows the supply side from being able to meet demand signals. As a result, in the GTA it takes on average of 10 years to complete a typical highrise project and 11 years to complete a typical lowrise project.

Like a growing number of governments around the world, the Ontario provincial government has recognized that achieving balance in the housing market starts with increasing supply. The government recognizes that adding new homes helps moderate prices, creates trickle-down housing opportunities for those looking to enter the housing market and has a beneficial impact on the rental market.

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Jean Nouvel designs lush Aquarela community for Ecuador

French architect Jean Nouvel has designed a sprawling, stone-clad residential development for the outskirts of Quito that echoes its mountainous surroundings.

Ateliers Jean Nouvel has created Aquarela for Cumbayá, a rural area east of the Ecuadorian capital, in collaboration with local architectural developer Uribe & Schwarzkopf.

The 136,580-square-metre project will comprise nine residential blocks wrapped by curved balconies covered in stone. Greenery will be planted in rocky gardens inside these – and flow over the tops – to give each resident a connection to the outdoors.

Behind the rocky exterior, the walls of the homes will comprise large expanses of glass and tall slatted wooden shutters that will fold open to reveal the mountainous backdrop.

Each residential block will also have access to its own rooftop pool and a number of elevators so each resident only shares their lift access with one other tenant. Renderings of the scheme released by Uribe & Schwarzkopf show that greenery will continue inside, with plant-covered walls lining the lobby.

A typical two-bedroom apartment inside will have an open-plan living area with glazed doors that lead onto a private terrace surrounded by rockery. Each bedroom will also have an en-suite bathroom.

The first portion of Aquarela is already under construction, and slated for completion in 2020. This block will include the clubhouse with a range of amenities, such as a bowling lane, an ice rink, a yoga studio, music room, mini-golf and a cinema.

Other facilities include access to football, squash and tennis courts; areas designed for young children and teens; workspaces, a hairdressers, event spaces, a gym, spa and a swimming pool

French architect Nouvel recently completed the National Museum of Qatar in Doha and the Louvre Abu Dhabi in the United Arab Emirates capital. He hit the news last month when it was revealed he was counter-suing the Philharmonie de Paris over a “totally disproportionate” late-fee.

Nouvel, the 2008 laureate of the annual Pritzker Prize, joins a host of well-known international architects that Uribe & Schwarzkopf has enlisted for major projects in Quito.

Arquitectónica and YOO studios, which is run by Philippe Starck and John Hitchcox, worked together to complete YOO Quito residences in the city’s González Suárez area. The project features a metallic cloud-like structure on top, which has become a significant marker on the skyline.

Dutch designer Marcel Wanders collaborated with YOO on the Oh Quito, a two-tower residential development, which is nearing completion.

Bjarke Ingel’s firm BIG is also working on two Uribe & Schwarzkopf projects in Quito: a mixed-used tower called EPIQ, which is covered in pink, herringbone-patterned cladding, and the curved IQON tower, which is set to become the tallest building in the city.

BIG announced the Ecuador projects shortly after Moshe Safdie unveiled his project Qorner tower for the city.

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Council Approves Niagara Falls’ New Tallest Building

A proposed 72-storey, mixed-use tower set to become the tallest in Niagara Falls was approved at a Council meeting in that city yesterday evening. The condominium and hotel tower at 6609 Stanley Avenue is set to rise 253.45 m high, surpassing the 56-storey, 177.1 m/581 ft north tower of the Hilton Niagara Falls, which has been the tallest building in that city since 2009.

Since news about the tower broke at the end of October, additional details and images have been released for the proposed landmark and its distinctive “bottle opener” design by Toronto-based Hariri Pontarini Architects, evocative of the 2008-built Shanghai World Financial Center. New renderings build off of the initial elevation diagrams, offering a better representation of the tower’s massing and exterior finishes.

Detailed renderings of the building’s bottle opener crown includes high-definition views of the upper amenities, set to include a 56th-floor “sky lounge” topped by a “sky garden” with an outdoor infinity pool, and a “sky link” aerial bridge. All of these spaces would overlook the Falls and the existing city skyline in the foreground, as well as distant views of the Toronto and Buffalo skylines on clear days.

Tuesday evening’s public meeting resulted in the issuing of amendments to the City’s official plan and zoning bylaw which allowed buildings as high as 30 storeys on that block. Around $2.7 million in community benefits are being implemented in exchange for the lofty 72-storey height.

The tower will feature a 456-room hotel on its lower half, with 275 residential units housed above. This infusion of density will help to mend a longstanding tear in the local urban fabric, with a two-storey concrete hulk from an earlier failed hotel construction project currently occupying the development site, which has sat vacant for 15 years.

 

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Toronto housing market posts biggest price gain in 21 months

The Toronto housing market continued to rebound in September, with prices rising the most in 21 months, bringing the cost of a typical home close to the record high set in 2017.

The benchmark price across all types of homes rose 5.2 per cent from a year earlier to $805,500, the highest annual rate of growth since December 2017. That’s about $10,000 short of the record set more than two years ago when soaring prices prompted a series of government policy changes to cool the market. Prices were driven higher by a decline in supply, with active listings down 14 per cent to 17,254.

Sales in the Toronto region jumped 22 per cent to 7,825 units from the same period last year, the Toronto Real Estate Board said Thursday. All housing segments saw double-digit gains, led by a 29 per cent sales jump for detached homes. Sales were well below the record set in September 2016 of more than 9,800, and on a seasonally-adjusted basis, sales fell 0.3 per cent from August.

The average price of a home in Toronto rose 5.8 per cent to $843,115, the highest price this year, though well below the peak of almost $921,000 set in April 2017.

Demand for homes in Canada’s biggest city continues to grow amid lower interest rates and a crunch in supply thanks to strong immigration flows. Buyers have also adjusted to stricter mortgage-lending rules put in place to cool the market. Sales in Vancouver rebounded 46 per cent last month after a policy-driven slump, though prices continue to dip.

 

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3 Toronto condo market trends to watch in 2020

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Tarion adds new protection for condo buyers

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

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

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

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

  • pre-construction condominiums come with the risk that they may never be completed;
  • early termination conditions that would allow a developer to cancel a project;
  • information about the status of the development (e.g., formal zoning approval, relevant approval authority and date of commencement of construction);
  • information about any restrictions on the developer’s land title that may prevent the project from going forward;
  • a purchaser has an initial 10 days under the Condominium Act, 1998 to cancel a sales agreement; and
  • the expected date when a purchaser can take occupancy.

The new information sheet will be required for all agreements of purchase and sale for units where the purchase agreement for the project or phase of the project is signed after January 1, 2020.

However, leasehold, common element and vacant land condominiums are excluded from the requirement.

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The real estate agent who’s set a world record, twice

When real estate agent Ben Caballero achieved verified home sales of 3,556 it earned him a place in the record books.
But last year, Caballero did what many thought impossible by beating his own record by 67%, selling an eyewatering 5,801 homes through the MLS in just one year.
The total number of homes sold by the HomesUSA.com broker/owner from Dallas, TX, in 2018 meant that he has been reconfirmed by Guinness World Records as the current holder of title ‘Most annual home sales transactions through MLS by an individual sell side real estate agent – current.’
As a former builder, Caballero specializes in selling new homes via his platform for more than 60 builders in Dallas-Fort Worth, Houston, Austin, and San Antonio.
“Being honored by Guinness World Records for a second time is twice as nice,” said Ben Caballero. “Achieving the first Guinness World Records title was the honor of a lifetime. Breaking my own record is, well, indescribable.”
His total annual home sales exceed $1 billion for the first time in 2015, a feat he repeated until last year, when he became the first real estate agent to exceed $2 billion in total home sales.
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Ask An Agent: What Will Real Estate Sales Look Like In 3-5 Years?

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

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

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

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

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

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

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

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

Shortage of large condos

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

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

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

Boomers staying in homes longer creates housing shortage for millennial buyers

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

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

More long-term renters

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

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

Buyers owning homes outside Toronto means increased dependency on public transit

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

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

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

Laneway housing

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

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

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

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7 year high for demand for CRE among global institutions

Global institutions are increasing their allocations to commercial real estate assets as confidence in the sector remains high.

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

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

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

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

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

Real estate is an important and growing allocation in institutional portfolios,” said Dustin Baker, Director of the Baker Program in Real Estate at Cornell University. “Despite concerns about late-cycle risk, real estate fundamentals – including supply and demand trends – remain broadly favorable. This has been driving strong returns, which in turn is contributing to continued liquidity in the asset class.”

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Toronto condo apartment sales up 11% in third quarter

The buoyant economic conditions in Toronto mean more people moving to the city for work and wanting the most affordable housing options.

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

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

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

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

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

“Condominium apartments are obviously a popular choice amongst first-time homebuyers. Moreover, it is also important to remember that condominium apartments owned by investors represent a huge component of the GTA rental stock and certainly account for most additions to the rental stock, on net, over the past decade. With this in mind, a well-supplied condo segment will be important moving forward to ensure that we can keep up with population growth driven by a strong and diverse regional economy,” said Jason Mercer, TREB’s Chief Market Analyst.

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GTA Sales Activity Rebounds From Five Straight Quarters of Decline

Q2 2019 registered a total of 563 investment property sales transactions over $1 million, representing a total investment value of $5.8 billion

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

GTA Property Transactions – All Sectors by Quarter

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

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

Q2 2019 GTA Property Transactions – Total $ Volume by Sector

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

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

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

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

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

Two notable transactions this quarter include:

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

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

Purchaser activity this quarter was predominantly comprised of private investors, while institutional buyers and public investors acquired the larger trophy assets. Once again, foreign investors were not as prominent this quarter. It is anticipated that the record activity that occurred in Q2 2019 will continue into the second half of 2019. Challenges remain in the market as willing buyers are being met with a lack of product.

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GTA New Home Sales – YTD (Jan to June) 2019

Year-to-date new home sales totals for January – June 2019 in the Greater Toronto Area are as follows.

YTD (Jan to June) 2019 Results

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

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

Total New Homes: 17,127 sales; up +43% from 2018; down -14% from 10 year average

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New rental supply needs to double in Toronto

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

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

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

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

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

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

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Canada’s condo markets intensify, outstripping the rest of NA

Condo markets in Toronto, Vancouver, and Montreal have accelerated significantly this fall, especially when compared to other major cities south of the border.

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

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

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

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

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

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

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

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

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

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

“While price and value are always top of mind for buyers, there are some aspects about a home that you can’t change,” Alexander stated at the time. “These liveability factors are what make your home more than just the place you live.”

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Colliers rises to the challenge with strata sell-out in 2 weeks

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

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

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

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

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

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TD only Canadian bank among world’s most sustainable companies

With investors and consumers giving greater scrutiny to the companies they do business with regarding their environmental, social, and economic performance, being a ‘sustainable business’ is a badge of honour.

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

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

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

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

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

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

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BC sets out plan to modernize housing approvals

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

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

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

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

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

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

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

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

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