Ephraim Vecina
Canadian Real Estate Wealth

The recent influx of tenants and investors in New Westminster’s commercial properties might be a good indicator of the city’s prospects as a strong contributor to the national market.

In the first half of 2017 alone, total commercial building permits in New Westminster amounted to $6 million, and more commercial building construction is incoming, according to Blair Fryer, the Royal City’s communications and economic development manager.

“Much of the commercial under construction is ground-level shopping at the bottom of mixed use towers, which are dominated by the residential component,” Fryer told Western Investor.

Fryer stated that Westminster Toyota has already submitted applications to build a new dealership in Queensborough, with the old Keg building being renovated into new Kelly O’Bryan’s/Carlos O’Bryan’s location. Applications for a new banquet hall and a new entertainment complex under the banner of Extreme Air Park are also pending.

Other upcoming projects involve a $2 million application to expand a liquor store and increase commercial space, along with a five residential units, on Front Street; as well as a mixed-use development that will add nearly 11,000 square feet of retail and offices with two new residential buildings.

One notable transaction was the sale of the 8-storey Anvil Centre office tower in downtown New Westminster. Gambling firm Evolution Gaming is set to take one floor of the building for its new 16,000-square-foot studio that will house 10 live tables for blackjack, two types of baccarat, and two types of roulette. Evolution Gaming’s operation is projected to create 170 jobs, according to Roger Leggett, vice-president of leasing agency Cushman & Wakefield.

Copyright © 2017 Key Media Pty Ltd

Location is key to the draw of Polygon’s Currents at Water’s Edge

Simon Briault
The Vancouver Sun

Currents at Water’s Edge

Project location: 3188 Riverwalk Avenue, Vancouver

Project size: 141 homes, one to three bedrooms, 560 — 1,742 square feet. One-bedroom homes start from the high $500,000s and two-bedroom homes from the high $700,000s

Developer: Polygon Currents Homes Ltd.

Architect: GBL Architects Inc.

Interior designer: Polygon Interior Design Ltd.

Sales centre: 3202 Riverwalk Avenue, Vancouver

Sales phone: 604-451-8518

Hours: noon — 6 p.m., Sat — Thurs

Website: http://www.polyhomes.com

In just a few years, the 130-acre piece of land between Boundary Road and Kerr Street in south Vancouver has been transformed beyond all recognition. The area’s industrial past is long gone and the master-planned residential community known as the River District is rapidly taking shape.

Polygon’s Currents at Water’s Edge is the latest River District project to benefit from the growing number of local amenities and proximity to the waterfront along the Fraser River. The project is a residential development of two buildings with a total of 141 homes. Currents West, the first of these, sold out in just over a month earlier in the summer. Homes at Currents East are on sale now.

“The vision of River District is now becoming a reality,” said Goldie Alam, Polygon’s senior vice-president of marketing. “There’s a store there, a wine store is open, you’ve got the Romer’s burger bar with the riverfront patio, and there’s a bank as well. All the stuff we’ve been talking about for the last few years is starting to come together.”

The homes are right on the water in a terraced building and many of them have spacious patios and decks with views of the river. Alam said one of the key things that is generating interest from buyers is that there’s a large variety of options to choose from – homes have one, two or three bedrooms and range in size from 560 to 1,742 square feet.

 “It’s very centrally located – you’re only a few minutes drive from Metrotown, Richmond or the Canada Line at Marine Gateway,” Alam added. “At the same time, it’s still in Vancouver and it’s important for some people to have that Vancouver address.”

Win Le is one of those people. He has bought a two-bedroom home on the fifth floor and said that the location, the floor plans on offer and the prices were among the biggest draws for him.

“I’ve been thinking about River District for a number of years,” he said. “It’s been very thoughtfully developed and I can see myself living there long term. They’ve really made the most of the natural surroundings, which is important to me.”

Alam said that buyers have included downsizers or people moving up from older condos in other parts of Vancouver.

“As the community has grown, there’s an established neighbourhood of other Polygon homeowners who are enjoying it here already,” she added. “We’ve seen their friends and family looking to buy in this development because they want to live nearby. They may have come to visit in the past and have been to the farmers’ market or had a walk along the river. In that way, they’ve been able to see the potential for this community.”

Stores and amenities that are already open at River District or coming soon to the area include Starbucks, Save on Foods, TD bank, Westminster Savings and Everything Wine. The urban planners involved in the area’s regeneration have also taken care to revitalize the natural environment. These efforts include introducing native plants, creating plenty of green space and reconstructing the foreshore to improve fish habitats.

As for the homes on offer at Currents at Water’s Edge, residents can expect wood-style laminate flooring in living and dining areas, nine-foot ceilings and a choice of two designer colour schemes: Terra and Cielo. There are vertical blinds on sliding doors and horizontal blinds on all windows. All homes have either decks or patios and the development will also include community gardens and a children’s play area.

Kitchens feature square-edge custom cabinetry with polished chrome pulls and soft-close hardware. There are engineered stone countertops and stone tile backsplashes. Special cabinet features in some of the homes include a pantry and Lazy Susan. There are roll-out recycling bins, under-cabinet lighting and pot lights in all kitchens. The stainless-steel appliance packages include Bosch ovens with five gas burners and 24-inch dishwashers and 36-inch fridge freezers that are integrated into the cabinetry.

Bathrooms include spa-style showers with rain shower heads and integrated bench seating. There are polished chrome faucets and engineered stone countertops. Other features include porcelain tile flooring, vanity mirrors and medicine cabinets.

Le said he’s looking forward to making a home at Currents at Water’s Edge – the project is scheduled for completion in the spring of 2020.

“There’s a great community feel to the River District and a certain vibe you don’t get elsewhere,” he said. “But at the same time, it still feels like a part of Vancouver. The location is ideal and the combination of shops, amenities and restaurants is really great.”

“The people at Polygon were very helpful,” Le added. “I never felt pressured to go for a particular unit. It was more about providing all the information I needed to make a decision that would be right for me.”

© 2017 Postmedia Network Inc.

Want a piece of this? $620k to start

SUSAN LAZARUK
The Province

Vancouver House, a twisted building at the north end of the Granville Street Bridge, is still at least a year from being built, and if you want in, be prepared to shell out a minimum of $620,000.

And that’s for a 400-square-foot one-bedroom/flex suite, which works out to $1,550 a square foot. The average cost per square foot of Vancouver condos in August was just over $1,000 a square foot, but $1,250 a square foot in Yaletown, according to realtor Steve Saretzky’s website, the Vancity Condo Guide.

The 49-storey building sold out within weeks of marketing years ago.

But some suites are being offered for reassignment online. (Pre-sale condominiums are exempt from a law passed last year to restrict the sale of assignments, to prevent flipping realtors from double-dipping on commission fees.)

The 400-sq.-ft. suite, which also has a 126-sq.-ft. balcony, is on the third floor of the building at 1480 Howe St., in what’s called the “Beach District.”

Another condo — almost 2,100sq. ft., three bedrooms and four bathrooms, on the 36th floor and with a wraparound balcony — recently sold for $3.2 million, or about $1,470 per sq. ft.

Vancouver House, which includes 375 condo suites ranging from studios to four-bedrooms, 105 rental suites, a retail area, a library, fitness centre, 25-metre heated pool on a living roof visible from the Granville Street Bridge and a fleet of BMWs for residents to share, is 151 metres tall.

That makes it the city’s fifth tallest building after Living Shangri-La (201 m), the Trump International Hotel and Tower (188 m), Telus Garden Residential Tower (167 m), and the Private Residences at Hotel Georgia (158 m), according to skyscrapercenter. com.

The building is unique in that it sits on a 6,500-sq.-ft. triangular shaped base and increases in square footage incrementally starting at the 12th storey to end up being double that in size and rectangular-shaped by the top floor, said Carl MacDonald, senior project manager at Bjarke Ingels Group, the Danish architectural firm that designed it.

It is scheduled to be completed by spring of 2019.

The project is to eventually include two other buildings, one on either side of the bridge, housing commercial and office space.

© 2017 Postmedia Network Inc.

Households will feel pain, but Canada seen to be in good shape if recession hits

Garry Marr
The Vancouver Sun

Moody’s Analytics calls it “mortgage meltdown math”, but the subsidiary of the ratings agency paints an ugly picture of what could happen to the Canadian economy if everything goes wrong in the housing market.

A report from Moody’s economist Brendan LaCerda says total outstanding credit to the non-financial sector is well above international averages with the government backing most of Canada’s mortgage insurance.

“Fortunately, the government’s finances appear healthy enough to sustain a large bailout in a severely adverse scenario,” writes LaCerda. “Canadians’ borrowing binge has put the economy in a precarious position.”

The non-financial sector includes households, non-profit institutions serving households and financial corporations excluding banks.

Moody’s says low interest rates have driven the demand for mortgages and homes and caused the increase in residential property prices. That has led to more expensive homes, forcing new home buyers to borrow even more.

“This cycle is inducing fears of a bubble. If a recession were to hit the economy, many households would find themselves with negative equity and reduced incomes, raising the spectre of a swell in non-performing loans as homeowners default,” the report notes.

The problem for the government is that although banks hold the loans, a little over half of all mortgages are insured by the Canada Mortgage and Housing Corp., which is 100 per cent backed by Ottawa. Two private companies, who hold the rest of mortgage default insurance market, are 90 per cent backed by Ottawa.

“Mortgage insurance is required for loans obtained with less than a 20 per cent down payment, which implies that the loans CMHC is insuring have a smaller-than-average equity cushion,” LaCerda states.

The analyst notes that the likelihood of a major downturn in the housing market is low and Moody’s Analytics own forecast shows that housing prices will slightly dip and then level off over the next year. “But supposing such a severely adverse scenario comes to pass, the ability of the government to absorb CMHC’s losses is worth considering.”

The report focuses on the rise of credit in Canada’s non-financial private sector and compares it to the international average. Based on data from the Bank for International Settlements for 42 countries, the average credit outstanding to the non-financial sector was 154 per cent of GDP in the first quarter of 2017, compared to Canada’s 217 per cent.

“Considering only the debt of households and nonprofits as a share of GDP, Canada ranks fifth highest in the world,” writes the economist.

The positives for Canada is it’s in relatively good shape compared to its industrialized peers with a debt-to-GDP ratio of about 79 per cent of GDP in the first quarter of 2017, says Moody’s.

“Even if CMHC realized a total loss on its more than $500 billion of insurance guarantees, which is nonsensical given the collateral value of the underlying homes, and the government completely bailed them out, its debt-to-GDP ratio would rise to about 105 per cent,” writes LaCerda. “Such an increase would raise Canada above the U.S. at 99 per cent but still keep it below many of Europe’s largest economies.”

In a scenario where all of CMHC’s insured borrowers made only the five per cent down payment and house prices fall 25 per cent, and all borrowers default, that would mean a 20 per cent loss of its portfolio and $100 billion government bailout. In that case, Canada would still have a lower debt-to-GDP ratio than the U.S.

“Government finances would face additional sources of stress during a severe recession, but the prior considerations do not even include the potential assistance from the Bank of Canada. On the other hand, a bailout for the private mortgage insurance would also be necessary. But their exposure is less than half of CMHC. A bailout of CMHC would be extremely costly and unpopular, but the rise in the government’s debt-to-GDP ratio would not put Canada on the fringe of the world’s economies,” the report concludes.

© 2017 Financial Post

Sohini Bhattacharya
REM

In 2013 Leigh Ann entered a rent-to-own (RTO) program through Clover Properties, an Ontario-based RTO company. She ran a day care from her home but had accumulated too much debt and not enough down payment to qualify for a mortgage.

“Because I was self-employed, the banks had a hard time looking at us. We didn’t have our down payment. We found it difficult to save on our own,” she says while seated on the sun-drenched backyard deck of her new home in Barrie, Ont.

During the standard three-year term of her RTO, Leigh Ann worked hard to improve her debt ratios and saved up a bigger down payment than she expected. The banks qualified her for a mortgage within two years in 2015 – a year ahead of her schedule.

Leigh Ann is one of several homeowners who successfully completed Clover Properties’ RTO program and are part of the company’s 92 per cent success rate. While raising the bar for structuring RTO deals, Clover Properties has helped over 150 credit-challenged families become mortgage-ready and enter homeownership in a real estate climate that is increasingly pricing families and millennials out of the market.

When Rachel and Neil Oliver, owners of Clover Properties, started their RTO business 7 ½ years ago, they had regular nine-to-five jobs and a two-year-old. RTOs presented them with a lucrative way to generate passive cash flow, without the headaches of being landlords. At the time, there were few RTO specialists in Ontario, so the Olivers wanted to plug into those established systems.

They soon noticed gaps in these established systems – gaps that have earned RTOs a dubious reputation.

“We were seeing that people were doing no-money down RTOs, which results in 90 per cent failure,” says Neil. With zero-per-cent down payment from home buyers, investors take on a huge risk. Investors offset those risks by charging home buyers hefty monthly payments. “While that’s doable in month one, by month six, tenant-buyers start to feel the money drain and back away from the deal. That was gap one,” says Neil.

Exorbitantly high home appreciation rates were the second gap that the duo identified. RTO companies were charging eight to 12 per cent, when the market was growing at an average rate of three to five per cent. Homes weren’t catching up to such high rates and tenant-buyers weren’t able to exit RTOs into homeownership. “So, we started tweaking the model at our end,” says Neil.

He also observed that RTO numbers were being driven up by investor greed. “At Clover Properties, we structure RTOs from a realistic, robust and a win-win perspective. The real estate brokers get their commission, the mortgage brokers get their deal, we get paid by the investors, because the investors make their returns. Moreover, the homeowners earn the equity they build on the house. They’re not being charged 12-per-cent appreciation, and they own an asset at the end of the deal,” he says.

Affordability is another gap in the RTO system, says Rachel Oliver. Often prospective homeowners underestimate their debt load in comparison to their combined family income. “They have a hunch and an appetite to buy homes upwards of $500,000, when their household income is $60,000. This is a big miss for real estate agents who don’t necessarily tap into the affordability criteria. The real estate agents we work with steer homebuyers through Neil’s rigorous underwriting process, where he objectively mimics the mortgage rules, identifies their true affordability and relays that information to the real estate agent. This way, the agent isn’t wasting their time showing properties that homebuyers salivate for but can’t afford,” says Rachel.

Janet Esau, a sales rep with Century 21 Leading Edge Realty in Stouffville, Ont., says that with only a few credible RTO companies in Ontario, the industry hasn’t kept up with the viability of RTOs. In part that’s due to scamsters making news in the market, but more so because the brokerages haven’t done their due diligence about the growing need for RTOs, she says.

While homeowners and millennials are becoming more aware about RTO opportunities, real estate agents aren’t following suit. She says the 70,000 Realtors in the province are competing for the same properties in the same market, making the competition fierce, forcing new agents to knock door-to-door and cold call in the hope of making a deal.

“The stat that we were given was that for every 100 doors you knock, you may get one. That’s not one deal – that’s one response, one person who wants to just talk to you,” says Esau, who specialises in RTOs with Clover Properties. Now into her second year as a real estate agent, she says she recognized the potential of Clover Properties’ “people first, property second” approach and works closely with Neil Oliver to help struggling families own their first homes.

Since January 2017, Esau has earned commissions on 19 closed RTO deals through Clover Properties.

The Olivers’ hand-holding approach to RTOs have it defined down to a science. They’ve literally written the book on the subject, titled Rent to Own Essential Guide for Homebuyers: The Key to a Fresh Start and Richer Future.

“Good Realtors pride themselves on developing relationships with their clients. If you’re a Realtor, focussing on buying and selling, don’t try to do RTOs on the side. Bring in a RTO specialist,” says Neil.

The company is inviting Realtors to leverage from their RTO model, their vetted network of investors and their expertise at no charge. Their pre-screening process ensures that investors and homeowners understand the basics of their RTO process, they say.

© 2017 REM Real Estate Magazine

Ephraim Vecina
REP

A combination of ever-rising land values and high-density zoning in Vancouver’s major corridors will convince more gas companies to sell their fuelling stations in the city, according to a commercial real estate analyst.

“Gas stations are typically located in prime areas on corners of major crossroads, and just the opportunity costs of capital that’s built within those sites, and how it’s been growing over the years — it makes sense to me,” Colliers International manager of market intelligence for Western Canada Curtis Scott told The Province. “From a real estate standpoint, you’re unlocking a lot of capital. It’s a unique opportunity.”

Scott noted that higher-density developments are now moving into major corridors and mass transit lines in the city. He added that mixed-use towers will most likely be erected on many of the former gas station sites.

Earlier this month, Chevron Canada’s announced its intent to sell and close five more gas stations in Vancouver.

“Of those five stations, two have ceased operations, and the deals have completed,” Chevron Canada spokesman Adrien Byrne said. “The other three are under offer, but we anticipate that offer to continue, and then we’ll be ceasing operations … over the next four to six weeks.”

“While our primary business is obviously selling fuel, successful businesses as they are, it makes more sense for these particular properties to divest them for another purpose and redevelopment,” Byrne explained.

Recently, Chevron sold its downtown station at 1698 West Georgia Street, a parcel valued at $32.8 million by B.C. Assessment. Media reports estimated the deal to be as high as $72 million.

Copyright © 2017 Key Media Pty Ltd

Steve Randall
Canadian Real Estate Wealth

There has been a rise in the commercial real estate market in British Columbia over the last few years but it may now have peaked.

A report from Avison Young says that the build-up began in 2012 before accelerating in 2015 and peaking to a record high in the first half of 2017, but is now in decline.

Investment in the first six months of the year hit an unprecedented 109 transactions valued at $5.09 billion; but the report says that several challenges are converging to restrict the market from these levels.

“A lack of demand is not what will impact investment activity in BC commercial real estate. Supply remains the challenge. Increases in the Canadian interest rate environment and the cost of capital as well as changes to federal and provincial taxation policy, combined with greater enforcement of limitations on foreign capital, particularly from China, are what will ultimately lead to a pause in BC,” explained Avison Young Principal Mehdi Shokri.”

Canadian institutional capital surged to 60% of all investment in the BC commercial sector in the first half of 2017.
Although they were involved in just 6% of deals, institutional investors committed $5.09 billion.

Private purchasers were the most dominant buyer group in terms of deals volume (86%) but accounted for just 36% of dollar volume.

Copyright © 2017 Key Media Pty Ltd

Joannah Connolly
REW

The median listing price of a detached home across the entire Greater Vancouver Multiple Listing Service® has breached the $2 million mark, our latest #REWCAP market data analysis has found.

The median price of all 5,786 single-family homes currently listed on the MLS® across the whole region is $2,079,000, as of September 21.

Looking at just Vancouver proper, and that figure goes up to just $2 short of the $3 million mark, of 1,569 houses currently listed.

Greater Vancouver townhomes, duplexes, rowhomes and similar attached properties are at the same median listing price as the previous week, at $938K. But condo listing prices rose another $10K to a median of $688,000 across the whole region.

There were two headline new listings to come on the market that same week. The priciest was a 10,000-plus-square-foot, 2016-completed contemporary mansion up at UBC, with views to die for and a price to match. It was listed on September 12 at a jaw-dropping $26,980,000.

The only penthouse in One Wall Centre in downtown Vancouver was also listed last week. The 47th-floor, near-5,000-square-foot, super-prime condo takes up two levels of this iconic building, and has a grand spiral staircase, as well as 360-degree views of the Lower Mainland, mountains and ocean. It was listed for $12,888,000 (note the use of lucky number 8), also on September 12.

The rising real estate prices come despite an apparent slight slow-down in the market the week of September 11-17.

After a flurry of 1,319 new home listings following the Labour Day weekend, new listings arriving on the Greater Vancouver Multiple Listing Service® last week (September 11-17) slowed somewhat, although at a still-strong 1,265 new properties.

However, despite fewer new listings, last week saw a rise in total listings, to 9,531 homes from 9,370 the week before – which can only mean that sales slowed down.

What’s more, there were 412 price drops the week of September 11-17 – considerably higher than the 330 of the previous week, and the highest in many weeks. This figure also indicates a slightly more sluggish market.

© 2017 REW.ca

Mike Bricknell
other

Buckle in, borrowers: turbulent policy changes are on the way, and they’ll make it even tougher to qualify for a mortgage.

The Office of the Superintendent of Financial Institutions (OSFI), has been warning since December 2015 that it will tighten practices for lenders, focusing on “strengthening capital requirements” for underwriting and insuring mortgages. Dubbed B-20 and B-21 respectively, these new rules will force lenders to be more prudent with their qualification processes, and will require them to shoulder more risk in the case of defaulting mortgages.

They’re also an attempt to reign in out-of-control prices in Canada’s largest housing markets, which have fueled risky borrowing behavior.

There was an open call for public consultation on the changes, which gave Canadian mortgage and financial professionals the chance to voice their opinion, in July. However, OSFI is now moving forward with official new guidelines, the full extent of which will be revealed in October.

What Will the B-20 and B-21 Rule Changes Include?

There are a few proposed changes on the table for the October draft guideline; lenders will need to revisit their risk appetite statement, adjust their underwriting, acquisition and risk management practices, and require tougher income verification, among other changes.

New measures are anticipated to include:

• A stress test for all uninsured mortgages (those with 20 per cent or more paid on a down payment or refinance). This follows similar stress test rules introduced last October for high-ratio (insured) mortgages.
• Requiring that Loan-to-Value (LTV) measurements remain dynamic and adjust for local market conditions where they are used as a risk control, such as for qualifying borrowers. This means those looking to buy in especially high-valued markets may need to pay a larger down payment.
• Expressly prohibiting co-lending arrangements that are designed, or appear to be designed, to circumvent regulatory requirements.

How Much Higher Will Mortgage Rates Be?

To “stress test” uninsured mortgage borrowers, OSFI is proposing tacking 2 per cent onto whatever rate they’re applying for. For example, if your mortgage broker offers you a two-year fixed term with an interest rate of 2.79 per cent, you’d actually need to qualify at 4.79 per cent.

However, some fine tuning of this principle is expected, as it may prove too effective at knocking uninsured borrowers out of the market. Consider if you’ve qualified for today’s three-year fixed rate of 3.05 percent. Having to qualify instead at 5.05 per cent – which is actually higher than the rate used to qualify insured mortgages – would absolutely reduce the number of low-ratio borrowers who could swing financing.

The Impact on Mortgage Holders

This has posed a lot of questions for how affordability may change for existing borrowers. Those currently within a mortgage term and coming up to a refinance or renewal will now have to tolerate a rate that’s 2 per cent higher. If those borrowers have made a down payment on the smaller side – as in, they’re very close to their 80-per-cent equity threshold – they may not be able to bear such a substantial rate hike. This would also be problematic for young couples seeking their first homes, who traditionally make smaller down payments when breaking into the market.

The Impact on Affordability

The latest August numbers from the Toronto Real Estate Board reveal the average cost across all home types (including detached and condos) was $732,292. Assuming you make a 20-per-cent down payment on your home purchase of $146,459, you’d be left with a mortgage balance of $585,833.

To qualify for a home purchase of this size with an uninsured mortgage at today’s five-year fixed rate of 3.24 per cent, you’d need a household income of $109,000. That jumps to $125,000 if you instead need to qualify at the Bank of Canada qualifying rate of 4.84 per cent (a 13-per-cent increase).

Now, if the proposal to add an additional two per cent is confirmed, your rate would go from 3.24 to 5.24 per cent. That means requiring a $129,000 (a 16-per-cent increase).

Most buyers, and especially first timers, will not have an extra $20,000 in income, nor will they be able to pull together an even higher down payment on short notice.

Understanding LTV Rules

Paying 20 per cent up front and mortgaging the remaining 80 per cent is also referred to as an 80-per-cent loan-to-value (LTV). The “loan” refers to the mortgage or line of credit on the home while the “value” refers to the market value of the home.

Under the new proposal, OSFI wants lenders to mitigate their risk based on both the borrower’s LTV, and the particular location of the property they want to purchase. This means, if you’re looking to buy in an area that’s considered particularly hot, you may need to make a larger down payment if your home is on the higher end of the price spectrum.

This can also affect you if you already live in said hot market and are looking to refinance. If your finances can handle it, it’s a great idea to exercise your mortgage pre-payment options before your current term renews as it will put you in a better position for qualifying under the proposed rule changes.

Co-Lending Arrangements a Thing of the Past

Lastly, OSFI is targeting the practice of co-lending – a crackdown that could have profound implications for borrowers who need an extra financial hand. Also referred to as “bundled loans”, these combine a first mortgage, which does not exceed an 80-per-cent LTV, with a second mortgage (usually in the range of 75 – 80 per cent). It may even include a third mortgage with less than 75-per-cent LTV. Under the new guidelines, these loans would be restricted altogether.

Borrowers who are impacted often have unforeseen personal matters, for example an elderly parent who needs help, marital splits, an ill loved one, kids going off to school, or other situations that would require this type of loan. For those who don’t fit within the “Big Bank” criteria, it can be very difficult to obtain this kind of financing, and so bundled loans have been a great asset. Restricting this type of loan will reduce these borrowers’ options, sending them instead to the dark “private” loan market, where super-high rates and fees are the norm. In these situations, repayments tend to be interest-only, and can make it even more difficult for those in challenging financial situations to dig themselves back out.

OSFI’s concern is that co-lending arrangements effectively help borrowers who don’t qualify skirt mainstream mortgage rules by piggybacking on other borrowers.

These upcoming changes, while well-intentioned, will put even greater pressure on borrowers, whose finances are already squeezed by unaffordable housing (and are still absorbing the last round of changes). As house prices aren’t truly decreasing, borrowers will have to become more crafty in order to obtain their down payment amounts and mortgage loans. That could ultimately lead to buyers walking away from purchases, and depressing market sales further in the foreseeable future.

© 2015-2016 Zoocasa Realty Inc

The opportunities in private equity investments

Canadian Real Estate Wealth

With performance in the Canadian stock market being so closely linked to the unpredictable energy sector, it is little wonder that domestic investors are seeking out alternative investment opportunities.  With the low return landscape expected to run for some time in the public market, investors are scrambling to every corner of the market in an attempt to generate yield.

Although real estate-based investments have become increasingly popular in recent times, most investors don’t have the time (or inclination) to own and manage a portfolio of properties. It’s for that reason that more Canadian investors are placing their funds into real estate investment trusts (REITs). But what should an investor consider when identifying a REIT in which to invest.

“One of the things we advise investors to think about is whether they would be best suited to a private or public REIT opportunity,” says Jason Roque, CEO at Equiton. “With a public REIT, you are tied to the emotions of the stock market, but a private REIT is able to better reflect the reality of the real estate marketplace, which is obviously very strong in Canada. Private REITs also tend to provide potentially better risk-adjusted returns over the long-term.”

Roque also advises potential investors to research the REIT’s management team. Management experience is critically important and, just like in any company, a REIT is only as good as the people running the business. 

Governance is another important factor that savvy investors should look into before they make a commitment. “You should take the time to find out what kind of investor protection the fund has,” Roque says. “For example, our REIT has a board of directors and trustees, the majority of whom are independent. They are there to represent the investors outside of the management team; they give investors the peace of mind that their best interests are being taken care of.”

Copyright © 2017 Key Media Pty Ltd