Landlords fear arrival of new policy that could make it harder to raise rents

Frank O’Brien
Western Investor

HQ Commercial has eight rental apartment buildings for sale in Metro Vancouver, and the prices for three of them have been slashed by more than $750,000 in the past four weeks.

The price drops reflect a cooling in what has been a white-hot multi-family market as investors fear tougher rent control regulations from the province and higher lending rates from the Bank of Canada, according to Cynthia Jagger, a multi-family specialist at HQ Commercial, one of the largest apartment building brokers in the province.

“A rental housing task force has made recommendations, but no one knows what the new rules will be,” Jagger said.

Landlords are understandably nervous. The province has already reversed a decision and reduced the maximum allowable rent increase for 2019 from 4.5 per cent to 2.5 per cent. The sudden policy change was the first of an estimated 30 recommendations from the government’s Rental Housing Task Force.

“We recognize supply is key to bringing down rental costs in the long term, but renters have told us they are hurting and need help today,” said Municipal Affairs and Housing Minister Selina Robinson.

A new B.C. rental policy, based on the task force recommendations, could be unveiled within weeks and instituted early next year.

The Urban Development Institute (UDI) has warned that up to 12,000 planned new rental apartments could be delayed or cancelled if the B.C. government imposes further restrictive rental policies.

In a survey of 30 B.C. rental builders, the UDI found that 12,631 rental homes, which are planned for communities across B.C., would be “at significant risk if restrictive policies are imposed.” This represents nearly two-thirds of the 19,972 rental homes now in development, according to the UDI. While some builders said they would still deliver rental homes because they were under construction, they were unequivocal in their opposition to potential vacancy control policies, the UDI found.

A key issue is a task force recommendation that would tie rent controls to a unit, rather than the tenant. Currently, if a tenant leaves, the apartment’s rent can be raised to the current market value, which can represent an increase far above the allowable annual rental increase.

“This would be the single most significant impediment to the construction of rental apartments,” said UDI president and CEO Anne McMullin. “With record-low vacancy rates, British Columbians need new rental homes, but this proposal puts those in jeopardy.”

She said that if rent is tied to the unit, the incentive for owners of older apartment buildings – which make up the bulk of the Metro Vancouver rental inventory – to improve their buildings would be severely compromised.

Copyright © Western Investor

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Mortgage Professionals Canada says feds caused undue pressure

Steve Randall
Canadian Real Estate Wealth

The association that represents more than 11,000 Canadian mortgage professionals says that Ottawa’s policies have harmed the housing market.

In its annual State of the Mortgage Market report, Mortgage Professionals Canada says that the federal government’s efforts to cool rising home prices and demand has created cascading consequences and pressures.

“We are seeing downward trends and/or depressions in areas like the resale market, the outlook on employment in the housing construction sector, and a continued decline in rental vacancy rates,” said Paul Taylor, President and CEO of Mortgage Professionals Canada. “Federal policy changes are disqualifying potential first-time homebuyers and creating immense pressures on the rental market which is in turn driving rental prices higher. It is a spiralling problem.”

Taylor says that MPC continues to support the aim of ensuring that mortgage borrowers are able to make future payments but he says changes to the existing rules should be made.

“Our report illustrates that a more reasonable stress test level and lending restriction reforms are now needed to strike a better balance for borrowers and policymakers, improving housing affordability and Canada’s economy,” he said.

Improper levers The report, available in full at mortgageproscan.ca, highlights that when improper levers are used, the housing market continues to be depressed, leading to wider impacts.

“While the government has been focused on borrowers and interest rates, the reduction of activity in the housing market and extremely low rental vacancy rates will impact not only costs to first-time homebuyers and all renters, but also impact employment and the overall economy,” explained Will Dunning, Chief Economist for Mortgage Professionals Canada and author of the report. “As a result of these policies, the economy will be weaker than it needs to be.”

Copyright © 2019 Key Media Pty Ltd

Haven townhomes showcase ‘modern farmhouse’ design

Simon Briault
The Province

Haven

What: 33 homes with three or four bedrooms

Where: 3331 148^th Street, Surrey

Residence size and prices: 1,447 — 1,616 square feet; Prices for the homes that are still available start in the mid-$600,000 range

Developer: Park Ridge Homes

Sales centre: 3331 148^th Street, Surrey

Hours: noon — 5 p.m., Sat — Thurs

Telephone: 778-537-7787

Park Ridge Homes is a family-owned construction company based in Surrey that’s been around for more than 30 years, and according to manager Brad Hughes, it has an excellent reputation in the industry.

“We are very well known for delivering some of the highest quality of housing in the region, no matter what type it is,” Hughes said.

Park Ridge’s latest offering is a boutique 33-unit townhouse project in South Surrey called Haven.

“The style is modern farmhouse,” Hughes said. “It’s very basic and simple with clean lines. It’s not about fancy, decorative moulding. What you’re looking at is a really well-designed space with some neat features that really catch your attention: stunning lighting, white brick fireplaces with handmade mantles, floating shelves in the kitchen areas with forged brackets

Laura Klaiman, who purchased a three-bedroom home at Haven, has been living in Richmond for many years and said she was attracted to South Surrey by the proximity to nature.

“We looked in Richmond for somewhere new but didn’t really find a lot of a choice – it seemed to be mainly mega homes or apartments,” Klaiman said. “We love the bright, farmhouse style and it’s in a great area with everything we need close by in terms of conveniences and amenities.”

Hughes said the property includes a collection of mature trees and the company was able to save more than half of them in the development of the project. Despite its green, rural feel, Haven is close to main transportation routes for cars and buses as well as being within a few minutes of commercial amenities and neighbourhood schools.

“You’ve got beautiful parks with biking and walking trails, as well as White Rock beach and Crescent Beach and that’s a huge draw,” Hughes said.

Homes at Haven come in two colour schemes: Driftwood and Soft Sand. There are nine-foot ceilings on the main floors, oversized windows, laminate wood floors throughout the living areas and two-inch faux wood blinds throughout.

Kitchens feature stainless steel appliances, including five-burner gas ranges and convection ovens and french door refrigerators with bottom-mount freezer drawers.

There are white, soft-close, Shaker-style cabinets with contrasting matte black hardware, polished quartz countertops and large farmhouse-style, single-bowl sinks.

Sliding barn-style doors lead to luxurious master ensuite bathrooms and there are polished quartz countertops in all bathrooms. Main floor powder rooms feature designer tile and white, Shaker-style, soft-close doors and drawers with matte black hardware.

Haven also includes a two-storey clubhouse designed for indoor and outdoor entertaining. It features a kitchenette, a covered barbecue area, a powder room, games and movie room and large upper deck. There’s dedicated visitor parking on site, hose bibs inside the garages and all homes include rough-in for gas barbecue outlets on patios or decks.

© 2019 Postmedia Network Inc

It has taken sustained stupidity but Canada’s leaders are finally managing to bring down one of the strongest economies in the free world

Frank O’Brien
Western Investor

Less than a decade ago, the Canadian loonie was flying at 91 cents against the U.S. dollar, construction and natural resources were posting the fastest employment growth of any industries in the country and real business investment had soared 14 per cent from a year earlier. Canada was ranked 10th in the world in GDP and the per-capita share of GDP was $47,513. Western Canadian Select oil was selling for US$63.42 per barrel. The federal debt was $563 billion. 

Today the loonie has crashed to around 75 cents against the U.S. greenback, construction spending is tanking with new residential construction seeing the largest decline since 2009, real business investment has stalled, employment in the resource sector has plunged by more than 50,000 workers in the last two years and the percapita share of GDP has fallen to $45,077, ranked 20th in the world. Western Canadian Select is selling for US$33.93 per barrel. The current federal debt has surpassed $1 trillion. 

There is now talk of a recession in Canada and the blame for the projected crash is clearly tied to government policies.

Government tinkering began as a way to cool a hot residential market and it has been wildly successful, which even the Bank of Canada (BOC) noted after housing sales in Vancouver crashed by 40 per cent and national housing starts nosedived.

The BOC’s projection for gross  domestic income growth for 2019 is now 0.9 per cent. This is less than half of the growth in 2018.

“Staff analysis suggests that the combined effect of tighter mortgage guidelines and higher interest rates has been larger than previously estimated,” the BOC noted in a January statement. Oops.

Homebuilders note that the mortgage changes have driven first-time homebuyers out of the market and devastated cities like Calgary and Edmonton, which certainly didn’t need any further brakes on housing sales.

In B.C., Alberta and Saskatchewan, the source of the oil and gas industries that bedrock the Canadian economy, the federal government appears more focused on social issues than flowing resources to market. 

The feds are trying to ram Bill C-69 in place, legislation that would include such highly subjective issues as “social impacts” and “gender implications” as criteria for future resource development. 

As a tiny group of Indigenous protestors illegally blocked work on a vital multibillion-dollar natural gas export pipeline this January, B.C.’s minister responsible for natural resources showed up at the blockade to offer snacks and his personal support.

It is time our government leaders began supporting the people and the industries that keep the lights on in this country, because times are getting dark indeed. 

© Copyright 2019 Western Investor

Statistics Canada showed 1200 people left BC in Q3 2018

Ephraim Vecina
Canadian Real Estate Wealth

B.C.’s housing markets continue to be national top performers in the most important metrics, but December data from Statistics Canada showed that while the provincial population exceeded 5 million for the first time, the territory also lost about 1,200 people in Q3 2018.

A major contributing factor to the outbound flight is the throng of young professionals leaving for more affordable housing elsewhere in the country, according to Finance Minister Carole James.

Speaking to The Canadian Press, James stressed that “there’s no question that Vancouver is facing a brain drain.”

“Crisis is not too strong a word to describe the challenges we are facing, not just in Vancouver, but other urban settings around our province.”

Vancouver’s prices bear out these observations: The REBGV’s December report showed that the average price of a detached home in the city was at just over $1 million, while attached properties were at $809,700 and apartments at $664,100.

Andy Yan, director of the City Program at Simon Fraser University, said that Vancouver is good at enticing those who are still studying and those who are just starting their careers, but it could certainly do much better in retaining this pool of valuable talent.

Vancouver’s housing costs continue to push millennials towards condos and other modest options, even if these young professionals have relatively higher incomes compared to those working in other provinces.

“In a world like that, the labour pool has options,” Yan said. “It doesn’t become cool when you’re 37 and have a roommate.”

Copyright © 2019 Key Media Pty Ltd

Developers in BC’s Lower Mainland expected to start more condo projects

Josh Sherman
other

Developers in BC’s Lower Mainland are expected to launch more condo projects this year than they did in 2018 despite evaporating demand as the market corrects from previous highs, a new report suggests.

In a 2019 forecast, MLA Advisory, the research department of condo-marketing firm MLA Canada, anticipates developers are going to launch 73 projects across the Greater Vancouver this year, up from the approximately 50 that were brought to market in 2018.

The expected launches for this year encompass a total of 13,975 homes, compared to the 11,584 pre-sale units introduced to the market in 2018.

The numbers only include new concrete developments, which are typically high-rise towers, from Squamish to Abbotsford.

Almost half of all new launches anticipated this year are in the municipalities of Richmond, Coquitlam and Central Surrey. It’s expected to be a quieter for homebuilders in Burnaby, the busiest market for concrete product in recent years.

“As inventory levels rise and projects take longer to sell, we anticipate some of these projects to be delayed due to market conditions,” writes MLA Advisory in the forecast.

Dampening demand is already been apparent when looking at existing condo sales. This past December, sales of existing condo apartments plunged 34 percent to a total of 535 units, according to the Real Estate Board of Greater Vancouver.

Meantime, prices are declining. The benchmark price of a condo apartment was $664,100 last month, down 0.6 percent from November (although that’s still 0.6 percent above December 2017 pricing).

So why are developers launching more and more projects at a time when homebuyers and investors are pulling back?

Speaking to heightened launches late last year, MLA executive director Cameron McNeil told Livabl that home prices were still up considerably from two years ago, which is likely around the time when developers bringing projects to market now purchased their land.

It also takes at least two years for a developer to start selling pre-construction units as they must go through a process that includes municipal approvals, acquiring building permits, and marketing.

“These long timelines commit a developer years ahead of time to move forward with a project and in most cases they can’t afford to just sit and wait and watch, they have to bring it forward and do their best, given the market conditions — within reason,” McNeil explained.

© 2019 BuzzBuzzHome Corp.

Real Estate is a savvy investment for the long term

Penelope Graham
REM

It’s commonly touted that buying a home is the largest financial investment that many Canadians will ever make – and aside from merely providing a roof over one’s head, owning a property offers an effective and safe way to grow your money over a long-term horizon.

That homeownership is a savvy investment choice is certainly a favoured selling point for many agents, and is a generally agreed-upon sentiment among those already in the market. According to a recent survey conducted by Zoocasa.com, 68 per cent of Canadians who’ve owned their home 10 years or longer felt it was a good financial move.

That long-term homeowners have seen exponential growth in their initial investment, especially following the boom times experienced in 2016 and the first half of 2017, is accurate in most of Canada’s major urban centres.

However, as the national housing market finished the year on a historical low – sales clocked in 12 per cent below the 10-year average, reports CREA’s December report, with the national home price softening by 4.9 per cent year over year – is investing in real estate still a fail-safe financial option?

To assess whether this is the case, Zoocasa crunched the numbers in three key housing markets, comparing the monthly trajectory of the local average home price to the performance of three popular investments over the course of 2018:

• A high-interest savings account (+1.1 per cent y-o-y)
• The S&P / TSX Composite Index (-11.6 per cent y-o-y)
• The S&P Canada Aggregate Bond Index (+1.5 per cent y-o-y)

The findings reveal that purchasing a home in each market would have yielded a better return than investing in the S&P / TSX Composite Index, which finished a tumultuous year with an 11.6 per cent loss. However, only one market – the Greater Toronto Area – outperformed the bond market, while neither Calgary nor Greater Vancouver had the price growth to challenge even that of a high-interest savings account.

A lot of this variation can be attributed to the unique combination of provincial and federal policies that hit markets last year. While buyers across the country had to grapple with tougher mortgage rules, B.C. markets encountered new anti-speculation and empty-homes taxes, while Alberta remains hard hit by a downturn in the oil patch.

© 2017 REM Real Estate Magazine

Nearly $3 billion of Metro Vancouver purpose-built rental properties exchanged hands last year, finds report

Peter Mitham
Western Investor

The sum represents a 37 per cent increase from last year, even though the number of properties changing hands totalled 155, just five more than in 2017. The average price per suite increased 23 per cent, to $530,401.

“The real story behind the stats is all about the dirt,” Mark Goodman said. “The rarity of land throughout Metro Vancouver, coupled with investment growth in the condo and rental sphere, continues to drive our markets.”

While strong demand for rental accommodation allowed investors to enjoy good cash flow in the past, the motivation today is increasingly about redevelopment opportunities. Supply can’t keep up with demand, and an aging stock suited to redevelopment in rental-friendly municipalities means many properties’ land values have risen – in some cases, Goodman said, “almost beyond recognition.”

Deals in the West End, for example, broke the billion-dollar mark as 21 buildings comprising a total of 1,373 suites sold.

The strong activity put paid to mid-year analyses that saw a slowing market for multi-family properties.

Avison Young, which tracks sales $5 million and greater, felt that political uncertainty in the run-up to last October’s civic elections would combine with government efforts to cool real estate markets and rising interest rates to cool deal activity and pricing.

“The likely pause in the market will allow for potentially better pricing to be achieved on properties than what has been available recently,” Avison Young opined in its mid-year multi-family report. “Purchasers will gain more certainty and a greater understanding of what pricing the market can support.”

While this wasn’t the case in Greater Vancouver, political uncertainty remains.

Goodman reports that some investors are shying from investing in purpose-built rental properties as a result. However, with no new land being created and the development environment still fraught with hurdles and delays, short supplies and strong tenant demand seem poised to buoy opportunities for investors.

Civic support

“City of Vancouver is doing far more than any other city in the region to both protect and increase rental housing, and is a leader nationally in creating new rental housing,” a sunny summer press release from former Vancouver mayor Gregor Robertson stated last June, notwithstanding industry criticisms of the lengthy approval process for projects. “The delivery of new rental housing in the city is at levels not seen in 40 years.”

The press release went on to note proudly that “roughly 50 per cent of all rental housing under construction in Metro Vancouver is within the city of Vancouver” (though many feel Vancouver shouldn’t be shouldering the region’s housing crisis solo).

Year-end Canada Mortgage and Housing Corp. (CMHC) figures bear out some of those claims.

Construction of rental housing in the city reached its highest level in 30 years in 2018, with 3,433 units of market and non-market rental housing started. This represented 53 per cent of the regional total of 6,425 starts. Five years ago, that proportion was 38 per cent.

Total Vancouver rental housing starts between 2014 and 2018 represented 45 per cent of the region’s starts.

Meanwhile, in Kelowna…

Rental construction has also been strong in Kelowna, where Mission Group is set to launch its seventh and final U-series building at the University of British Columbia’s Okanagan campus.

U-Eight, as the building’s known, will offer 90 units to investors. The intention for the units is that they’ll be rented to students seeking accommodation adjacent to campus. The campus itself has just 1,700 student beds for nearly 10,000 students. Completion is set for fall 2020.

The units stand against total rental starts in Kelowna last year of 541, the second-highest tally of rental starts in 30 years, according to CMHC data. Rental starts peaked in 2017, with 1,393 units commenced citywide.

Copyright © Western Investor