Home Price Index shows some key trends for Canadian home prices

Steve Randall
Canadian Real Estate Wealth

The latest reading of the Teranet-National Bank National Home Price Index shows some key trends for Canadian home prices.

The index gained just 0.1% in September, half of the 21-year average for the month, continuing the trend of the last few months. Even if it were seasonally adjusted, the index would have gained, as in August.

The Composite 11 index’s growth was stymied by declines for Quebec City (−0.7%), Vancouver (−0.5%) and Victoria (−0.3%) while Edmonton and Halifax were flat.

There were gains for Toronto (0.1%), Hamilton (0.1%), Calgary (0.2%), Winnipeg (0.6%), Ottawa-Gatineau (0.8%), and Montreal (1.0%). Most of these markets have been rising for much of 2019. 

The index is based on percentage increases from a base level of 100 set in June 2005 and the current 227.72 reading means prices are up more than 227% since that date.

Western markets decline The 12-month data shows that, at 0.7%, the index was well-below inflation but gained pace for the second consecutive month.

Western markets are weighing on the 12-month figure with declines for Vancouver (down 7.1% from a year earlier), Edmonton (−3.1%), Calgary (−1.9%) and Victoria (−0.1%). The index for Quebec City was essentially flat from a year earlier.

Meanwhile, there were gains in the 12-month stats for Winnipeg (0.5%), Toronto (4.0%), Hamilton (4.3%), Halifax (5.8%), Montreal (6.3%) and Ottawa-Gatineau (7.1%).

Vancouver improvement Analysis of the results from National Bank’s senior economist Marc Pinsonneault suggests that the declining prices in Vancouver could begin to improve.

“Seasonally adjusted or not, home prices continue to decline in Vancouver. But home sales in Vancouver have recovered strongly since their March trough. Over the period, conditions on the home resale market turned from “favorable to buyers” to “balanced”. This suggests that home price deflation should fade over the next few months in Vancouver,” the report says.

Copyright © 2019 Key Media Pty Ltd

Angular condo adds drama to city skyline

Kevin Griffin
The Vancouver Sun

Vancouver House is more than just another condo highrise, it’s become a building that almost everyone has an opinion about. Some love it for standing out in a sea of rectangular cuboid towers; others hate it as a symbol of the city’s real estate mania.

The first residential move-ins are expected next month, four years after construction began in 2015.

From the start, the 60-storey Vancouver House hasn’t been a typical condo project.

The differences that set it apart include how the unique challenges of the site were solved by a Danish architect and the contradiction between looking unsteady but being built to withstand double the most extreme earthquake predicted for Vancouver.

The site is one of a handful singled out by the City of Vancouver for special treatment. Situated by the southbound Howe Street on-ramp to the Granville Street Bridge, it was designated for a tall, distinct building at a gateway to downtown.

But the parcel of land at 1480 Howe St. had one big drawback: Its rectangular shape was reduced to a triangle because of a 30-metre safety setback from the bridge.

Architect James KM Cheng worked on a design for almost a year-and-a-half for Westbank Corp., the Vancouver-based international property developer behind Vancouver House.

“We were thinking what could be done as a triangle building,” he said. “You need a bigger building to make it financially economical. By the time you finish the elevators and exit stairs, you have nothing left to build condos.”

In Metro, Cheng’s work is a dominant presence. He’s designed as many as 60 highrise condo towers in Vancouver and virtually invented the typical tower and podium design associated with Vancouverism, the contemporary urban design developed in the city that emphasizes public space and walkable neighbourhoods. For Westbank, James KM Cheng Architects had already designed several high-profile towers, including Shangri-La, Fairmont Pacific Rim and the Shaw Tower.

Cheng was struggling with the site when he heard Bjarke Ingels, a rising international architecture star, give a talk at the Urban Land Institute in 2010. Cheng remembered sitting in the audience and thinking: “This is one of the smartest young architects I’ve ever listened to.”

At that time in his career Ingels hadn’t designed a highrise condo tower. That didn’t bother Cheng. He was confident that Ingels would come up with a successful design and help push local architecture beyond the conventions of Vancouverism.

He suggested to Ian Gillespie, president and founder of Westbank, to give Ingels a chance. Gillespie had already met Ingels and was impressed with the Danish architect.

“If you like it, use it,” Cheng said to Gillespie. “If not, I can still do the building for you.”

When Ingels went back to his office in New York after visiting the Vancouver site, uppermost in his mind was the 30-metre setback from the bridge and not casting a shadow on the park to the west.

He said the usual process with his firm is almost Darwinian: Many options are explored before a final design emerges. That didn’t happen with Vancouver House.

He met with his team on a Sunday. Ingels took a rectangular piece of foam used to make architectural models and drew a line in an arc from a triangle to a rectangle. In a rare event, Ingels cut the foam himself. He was surprised when the crude model stood on its own even though it looked unstable.

“It was literally one of the few times in my career where we had a hole-in-one,” he said. “We just knew that this was the idea.”

Ingels realized the 30-metre setback didn’t extend all the way upward. Once the building cleared the bridge deck by 30 metres, it satisfied the city’s safety requirement. What the expanding tower also did, Cheng said, was give Westbank more valuable real estate at the top, where the views are the best.

By gradually growing the area of each floor rather than abruptly expanding out to the full rectangle once the tower rose above the safety setback, the innovative design created an elegant form. Inside, it created floors that are a different size on each level. Most residential towers have 12 different suite designs; Vancouver House has 220 designs for just under 400 suites.

The distinctive pixelated facade not only makes Vancouver House look contemporary, it also creates deep balconies with overhangs that act as passive cooling to shade suites from the sun.

It was up to structural engineers to translate the unusual geometry into a functional building.

Geoffrey Poh is the project engineer with Glotman Simpson, the Vancouver consulting engineering firm that has a history of working with Westbank. He explained that a typical highrise tower rises straight up with floors on top of vertical columns. The loading, due to gravity, is vertical and downward.

The geometry of Vancouver House, however, means it also has permanent lateral loading, a horizontal force that varies in intensity from floor-to-floor. Engineers compensated for that outward push, which includes taking into account wind and seismic events, by creating a super-rigid core for the elevators and stairs offset from the centre of the building.

A big part of creating that rigid structure included adding a bigger concrete foundation weighing several million kilograms underneath the seven storeys of underground parking. In most high rises, the foundation would extend about three metres around the elevator core. In Vancouver House, the foundation is almost 90 per cent of the area of the top, rectangular floor.

Poh compared the extra weight in the foundation as a way to balance the building — similar to how a big helps to balance the body.

Embedded in the west wall and connected to the foundation are 11 strands of 6.35-centimetre (2.5-inch) rods screwed together in 12.1-metre (40-ft.) lengths. They’re compressed to deal with the tension loads in a way that project architect Vance Harris from DIALOG compared with the taut strings of a violin. The rods are estimated to be about three times stronger than standard rebar of similar size.

On the north side are a series of walking columns of varying widths that are offset rather than on top of one another. They start as a single column that, as Poh said, “branches and grows out like a tree into five separate columns when you get to the roof.”

Glotman Simpson has tested Vancouver House under extreme scenarios using advanced computer simulations. The building withstood double the expected maximum quake.

“This is what I’ve been telling all the tours that visited the site and the design team,” Poh said. “This building is arguably the most robust in Vancouver in an earthquake.”

Vancouver House

• 156.9-metre (515-feet) highrise tower (including parapet), 60 floors above grade.
• Triangular lowest floor of 725 square metres (7,800 square feet) expanding to rectangular top floor of 1,226 sq. m (13,200 sq. ft.)
• 30-metre (98-ft.) safety setback from the Granville Street Bridge on ramp.
• Beneath the seven-storey underground parkade is a 4,000-cubic-metre foundation weighing 9,600 tonnes, the equivalent of about 4,266 Model S Teslas.
• 11 strands of 6.35-centimetre (2.5-inch) diameter, high-strength, vertical, post-tensioned rods stretching 112.7 metre (370 ft.) up the west wall.
• In addition to the main tower, there are two low-rise buildings, angled to allow light to the outdoor room they create under the Granville bridge. They connect to the bridge by pedestrian walkways. A spinning chandelier public art work by Rodney Graham will be installed under the bridge.
• In 2015, Vancouver House won the Future Project of the Year at the World Architectural Festival.

© 2019 Postmedia Network Inc.

Here’s why a downturn’s relationship to investing is complicated

Tom Bradley
The Vancouver Sun

I’ve been doing a lot of client reviews lately and the ‘R’ word has come up in every one. I’m referring to the next recession.

Sometimes it is framed as a question, but often it’s delivered as a statement of fact — i.e. we’re heading into recession. I’m sympathetic to both because the current cycle has been a long one and there are increasing signs of a slowdown.

But whether it’s next week, next year or beyond, we need to remember that a recession’s relationship to investing is a complicated one. Here’s what I mean.

When, not if

First, we will have a recession. Predicting when, however, is difficult, if not impossible.

For instance, I’ve been anticipating a slowdown for a few years, but non-stop stimulation by governments and central banks has kept the economy growing. How long they can keep using one credit card to pay off another is anyone’s guess, but we shouldn’t underestimate their resolve. Even if near-zero interest rates are losing their impact, there’s still room for an increase in government spending.

When asked, I tell clients that we’ll know we’re in recession when it’s almost over.

What about Canada?

The Canadian economy is interesting because we’re experiencing a job boom at a time when many economic indicators are screaming bust. Consumer and business spending are extremely weak. Debt servicing is high, even with low interest rates. And our household savings rate is hovering around two per cent (compared to seven to eight per cent in the U.S.).

But while a made-in-Canada recession may affect your family and lifestyle, it will have limited impact on your portfolio, at least if you’re broadly diversified across industries and geographies.

What happens here will barely be felt by foreign-based and globally focused Canadian companies.

A domestic slowdown’s biggest impact will be felt on the fixed-income side of your portfolio. When growth goes negative, our already low (dare I say, recession-like) interest rates will likely fall further. This will push prices on high-quality bonds higher and help stabilize your overall returns.

Of course, if your portfolio is made up mostly of companies dependent on the Canadian consumer such as banks, REITs, retailers and telecommunications companies, you’ll feel a slowdown more.

I don’t mean to sound cavalier about the Canadian economy, but its mind share will be far greater than its investment impact.

Global proportions

On the other hand, a severe global slowdown (with or without Canada) will move the dial on your portfolio. Corporate profits will decline (into negative territory for some companies) and the associated market psychology will push valuations down. It’s a double whammy — lower multiples on lower earnings.

Before you head for cover, however, consider that the International Monetary Fund (IMF) just lowered its world growth estimate for 2020 to 3.4 per cent and talked of a “synchronized slowdown.” This is the lowest level of GDP growth since 2008 but is nowhere near negative (we’d kill for three per cent growth in North America).

It may be that a synchronized slowdown will trigger a series of rolling recessions. Germany is now flirting with negative growth, the U.K. is going through a self-inflicted slowdown, China is as close as it gets to recession, and yet, the world’s largest economy south of our border, while slowing, is showing no signs of cracking.

Did I say it’s complicated?

Recession proofing

Whether it’s a rolling recession or the big one, we shouldn’t forget that the linkage between the economy and your portfolio is a sloppy one. There should be no expectation of precision, which makes recession proofing tricky. We don’t know when it’s coming, what will be affected the most, and the clincher, how well it was anticipated.

On the latter point, a veteran portfolio manager said to me recently, “This will be the most anticipated downturn in history.” In other words, Canadian investors aren’t the only ones that are worried about the ‘R’ word.

To me, recession proofing means being mentally prepared for it (when, not if), sticking to the plan (you don’t get the up without absorbing some down) and recognizing that downturns cleanse the system of speculation, excess leverage and risky behaviour, all of which curb future returns. And remember, all bull markets are hatched when times are tough.

© 2019 Financial Post, a division of Postmedia Network Inc.

Seniors using reverse mortgage borrowing intensifies

Ephraim Vecina
Mortgage Broker News

Canada’s reverse mortgage balance continues breaking its own records, reaching a new high in July as seniors’ borrowing kept intensifying.

The balance stood at $3.78 billion on that month, having increased by 26.24% annually and 0.98% from June, according to OSFI filings.

While growth in this debt type is decelerating slightly, “it’s still one of the fastest (if not the fastest) segments of credit growth,” according to an analysis by housing information portal Better Dwelling.

However, multiple observers have warned that this trend is unsustainable in the long term.

A significant proportion of Canadians are betting on their residential properties as evergreen investments, but several warning signs of housing’s likelihood of failure as a retirement plan have become apparent.

“More and more Canadians are retiring with a mortgage, which 30 years ago would have been unheard of. People are retiring with debt, with a mortgage, simply because they just didn’t plan well,” Carte Wealth Management’s Jacqueline Porter told the Toronto Star earlier this year.

“I have conversations with clients all the time. Freedom 55 is out the window.”

A crucial mistake that many employees and professionals commit is operating under the notion that economic and housing growth will be permanent, Porter added.

“You can’t look at the last 40 years and think that’s what’s going to happen the next 40 years, especially as people continue to use their home as a piggy bank.”

Copyright © 2019 Key Media

Voting with the hopes that those amendments will be drastically changed is wishful thinking

Kimberly Greene
Mortgage Broker News

Early voting has already begun across the country and no doubt voters are looking out for their best interests when making their choices.

Fresh in the minds of some would-be homeowners and mortgage professionals alike are the proposed amendments to B-20 regulations, particularly the stress testing component. One lending executive, however, says that voting with the hopes that those amendments will be drastically changed is wishful thinking.

Politicians are powerful, but there are limits to what they can and can’t do, says Nick Kyprianou, president and CEO of River Rock Mortgage Investment Corporation.

“Don’t forget, politicians don’t have the power to make changes with the financial institutions that people think,” Kyprianou said. “OSFI runs itself. They’re not a political entity. So the politicians can say ‘we want you do this, we want you to do that,’ but at the end of the day, [OSFI is] mandated to make sure financial institutions are strong.”

The Office of the Superintendent of Financial Institutions (OSFI) is part of the government, but it is an independent agency that is responsible for regulating federally registered banks and insurers, trust and loan companies, as well as private pension plans subject to federal oversight. Their stated goal is to contribute to the “safety and soundness” of the financial system in Canada.

Nowhere in their mandate mentions anything about consumers, Kyprianou points out, and there’s certainly nothing about affordability.

“The politicians can say, we’re going to get rid of B-20—they’re not going to. They might get a 30 year am[ortization] through, and all that will do is make the market busier,” he said. “Politicians focus on consumers and taxpayers. OSFI focuses on neither of those two things.”

Of course the argument is that OSFI’s concern with what’s best for the financial institutions has pushed all would-be buyers down a step on the housing market ladder, having a negative effect on affordability as well as the rental market. The question isn’t whether or not the regulations need to be changed—but whether or not we’re putting too much faith in politicians to change them.

The idea that a politician will be able to force the independent body to change their tune in order to make housing more accessible for Canadians is far-fetched at best, Kyprianou said.

“If people are thinking that B-20 and stress testing and all that’s going to be eliminated, they’re kidding themselves. And if I was a mortgage broker, I don’t know why I would be pushing for that in the first place,” he said. “The best thing that ever happened to mortgage brokers is B-20. If everybody could just go to the bank, then why wouldn’t you go direct? By introducing B-20, more people don’t qualify, or more people are anxious or stressed, they go to a mortgage professional and they make everything nice and smooth for them. I don’t know why you would be fighting something that’s giving you more business. That never made any sense to me.”

The other side of that argument is that brokers would be doing even more business if borrowers were more easily able to qualify for a home loan, and working more with straightforward, traditional products.

Everyone agrees that there will always be people who don’t qualify for a mortgage; Kyprianou puts this somewhere around 20%, based on what he’s seen in his 30 years in the business. Regardless of how the rules change, that number will still remain pretty much the same because there will still be a group of people that can’t prove their income, or have soft credit or poor credit.

Copyright © 2019 Key Media

Trust in FinTech securing person data a concern

Steve Randall
REP

FinTech services are gradually finding new customers in Canada but have two important barriers to overcome.

As challengers work hard to disrupt payments solutions and other traditional financial transactions including mortgages, a new survey from EY shows that there has been a 32% rise in the use of FinTech in Canada over the past two years with most Canadians using at least one for payments and money transfer.

“FinTech adoption has evolved significantly in Canada over the past two years alongside the evolution of customer priorities and the rise of money transfers and payments,” says Ron Stokes, EY Canada FinTech Leader. “FinTechs are no longer seen as just disrupters to the traditional financial services industry — they’re sophisticated competitors, ready to meet the changing expectations and needs of customers.”

It’s all about trust However, FinTechs operating in Canada lag their global peers in adoption rates with awareness one of the challenges for the challengers.

But a bigger issue is trust.

In EY’s 2017 survey, trust was the least cited reason for respondents not using a FinTech; in 2019 it is one of the most cited.

“Both adopters and non-adopters worry about the security of their personal data online and demonstrate greater trust in traditional institutions and providers who offer face-to-face interactions,” says Stokes.

Not that trust can’t be gained, but it is likely to mean partnering with incumbent financial institutions.

“Even though non-financial services companies have led the way in deploying new technologies to deliver innovative services while raising the bar on consumer expectations, they do not yet have the full confidence of consumers when it comes to providing financial services on their own,” says Stokes. “Our findings show that there is a trust gap that can create opportunities for both incumbent financial institutions and their FinTech competitors.”

Copyright © 2019 Key Media Pty Ltd

Bouyant economic conditions boosting Toronto condo sales

Steve Randall
REP

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.

Copyright © 2019 Key Media Pty Ltd

The Heights on Austin to comprise two 25-storey towers

Simon Briault
The Province

The Heights on Austin

What: East tower: 177 homes (now selling); West tower: 167 homes; 344 one- to three-bedroom homes in total

Where: 1045 Austin Avenue (east tower) and 505 Nelson Street (west tower), Coquitlam

Residence size and prices: East tower: 481 to 1,734 square feet and priced from $441,900

Developer: Beedie Living

Sales centre: 1032 Austin Ave, Coquitlam

Hours: noon — 5 p.m., Sat — Thurs

Telephone: 604-492-2882

Big changes are coming to the Austin Heights neighbourhood of Coquitlam. In recent weeks, one of Western Canada’s oldest Safeway stores was reopened on Austin Avenue after a rebuild by Beedie Living. On either side of the new 65,000-square-foot grocery store, the same developer has just broken ground on the first of two 25-storey residential towers that will be part of a major revitalization of the area.

The new development is appropriately named The Heights on Austin. But buyers of the homes won’t necessarily have to choose a plan at the top of one of these buildings to enjoy spectacular views, according to Beedie’s director of marketing and strategy, Sunny Hahm.

“Even when you’re only on the third level, you’ll already have incredible southward views of Surrey, the Port Mann Bridge and the Fraser River,” Hahm said. “Typically, you’d have to purchase something on the tenth floor or above to get any type of view.”

The east tower will be completed first and have 177 homes (out of a total of 344 for the whole project), including five three-bedroom townhomes. The west tower will include additional retail space and commercial office space.

“The accessibility that the Austin Heights area provides to the rest of Metro Vancouver is a one of the key reasons why real estate in this neighbourhood holds its value so well,” Hahm added. “You’re still very much part of a residential community, but you’re also only a five-minute drive away from any one of three SkyTrain stations… In terms of driving, you can get to anywhere in Metro Vancouver within about half an hour.”

That’s assuming you need to leave the neighbourhood, of course. The brochure for Austin Heights lists no fewer than 60 educational institutions, restaurants, shopping outlets and activities in the neighbourhood. In addition, there are 750 acres of green space within four kilometres of the site.

“Just behind our site, Ridgeway Avenue has been designated by the City of Coquitlam to be a new pedestrian area with an incredible new streetscape,” Hahm said. “It will be a beautiful promenade with cafes, restaurants and public art installations – a fully walkable neighbourhood right on your doorstep.”

Inside the homes, kitchens will feature premium Fisher & Paykel integrated appliance packages, including fridges with bottom freezers, stainless steel gas cooktops electric convection ovens. There are white upper Shaker cabinets with wood-grain lower cabinets, soft-close cabinet hardware with polished chrome pulls, LED under-cabinet lighting and quartz countertops and backsplashes.

Bathrooms will have custom mirrors and medicine cabinets, matte porcelain floor tiles, quartz countertops and undermount sinks. There are porcelain bevelled subway tiles with niches, polished chrome Grohe shower systems and adjustable shower wands in ensuites. Main bathrooms feature luxurious soaker tubs.

There are multiple plans to choose from at The Heights on Austin. East tower homes have one to three bedrooms, range from 481 to 1,734 square feet and are priced from $441,900.

© 2019 Postmedia Network Inc.