National home sales rise in December

Fergal McAlinden
REBGV

Metro Vancouver industrial market remains tight as 2023 begins

Peter Mitham
Western Investor

No relief in sight as most space spoken for months ahead of completion

Metro Vancouver industrial lease rates broke $20 per square foot over the past year while vacancies cruised historic lows.Colliers International

Metro Vancouver’s industrial vacancy rate ended 2022 unchanged at 0.2 per cent, Colliers International reported this week, despite record volumes of new construction.

Close to 4.4 million square feet were added to the market last year, and a further 6.9 million square feet are under construction.

But most of the space is spoken for, meaning it would take another 6 million square feet delivered to the market to push vacancies above 3 per cent and create a more attractive leasing environment.

“We have had new space brought to market, but it’s not fast enough to meet demand, and we’re in a historically high construction period for industrial,” said Susan Thompson, associate director, research, with Colliers in Vancouver.
Approximately a quarter of the space under construction is smaller, strata-titled units, while 75 per cent is for larger tenants requiring 100,000 square feet and up. But most of it is spoken for, with 60% of the available listings for spaces of less than 20,000 square feet.

This leaves few options for companies looking to expand or locate in the Lower Mainland.

“Most of the time they’re looking at buildings that are being planned for construction, and they’re potentially having to look 12 to 18 months out to get a space that’s appropriate,” Thompson said.

Some relief has come from the fact that demand from e-commerce companies has tapered off in the latter half of 2022 from the peaks seen in 2021, creating more options for fulfilment and distribution tenants. But with additional space hard to come by, she says the outlook for the second half of 2023, when the economy is expected to pick up, is troubling.

While the overall availability rate eased over the past quarter from 0.7 per cent to 1 per cent, it still remains extremely low. Tenants simply don’t have enough options.

“We’re going to continue see record-low vacancy, and we will likely see those rental rates continue to increase,” she said. “We’re the first market in Canada to see average net rents for industrial exceed $20, and they continue to rise. So the question now is, how high can they go?”

The average asking rent for industrial space in Metro Vancouver is currently $21.10 per square foot, up from $20.44 at the end of September.

The only other market that comes close is Victoria, where industrial space averages $18.05 a square foot. A smaller market, it has even less space available to tenants than Vancouver. Vacancies average 0.1 per cent.

The third most expensive industrial market in Canada is Toronto, at $17.09 per square foot. While vacancies are running 0.3 per cent, the scale of the market translates into 2.3 million square feet of opportunities – a volume land-constrained Vancouver can only dream of.

 

© 2023 Western Investor

‘The declines already happened’: Why Royal LePage thinks home prices will flatten out in 2023

Denise Paglinawan
Financial Post

Canadians can expect to see progressively slower price declines as the year goes on

A ‘for sale’ sign is displayed outside a home in Toronto. Photo by Carlos Osorio/Reuters files

Canadian home prices posted their first year-over-year price decline since the the global financial crisis in 2022, and while the slump may continue to start 2023, real estate firm Royal LePage thinks the worst is behind the market.

In the company’s fourth quarter House Price Survey released Jan. 13, the real estate firm said it expects first quarter of 2023 will show the steepest decline in prices at a year-over-year comparison, but that Canadians can expect to see progressively slower price declines as the year goes on.

“The declines already happened. We’ve reached a point where things have flattened out,” Royal LePage chief executive Phil Soper said in an interview. “Home prices will be down from where they were at the beginning of last year but they’re not declining further.”

The big declines happened from April 2022 through the end of last year, Soper said. While prices in some markets, like in Western Canada, are expected to start rising again this year, home prices in the Greater Toronto Area and the lower mainland of British Columbia will “essentially flatten this year,” he added.

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Soper said the current market may be tempting for some buyers because competition is quite low and there isn’t a lot of people looking to buy. The downside, though, is there’s not a lot of homes available for sale either.

With the rise of interest rates expected to slow this year, Soper said he believes consumer confidence will increase and people will start to re-enter the market — which will result in prices climbing again. “Perhaps even uncomfortably quickly,” he said.

The house price survey released by Royal LePage said the fourth quarter of 2022 marked the third consecutive quarterly decline, but the smallest decrease so far. The national aggregate price of a home in Canada decreased 2.3 per cent on a quarterly basis and decreased 2.8 per cent on a yearly basis to $757,100 in the fourth quarter, according to the report. It said this is the first year-over-year decline recorded since the end of 2008 during the global financial crisis.

The report said despite narratives that home prices were crashing in mid-2022, only less than 113,000 resale transactions took place in the months when the highest national benchmark prices were recorded. This represents a mere 0.68 per cent of all residential dwellings in the country, it said.

“About half of one per cent of Canadian homeowners who purchased homes during the final excess of the pandemic in the first quarter of 2022 whose homes are worth less now than what they paid for them,” Soper said.

Home prices have held up remarkably well during the post-pandemic period, he said, adding that the decline in the last quarter of last year was in line with previous forecasts.

“We want to get across that Canada’s housing stock is in good shape. Canadian homeowners are in good shape. And it’s highly unlikely that we’ll see a surge in defaults and foreclosures,” he said.

 

© 2023 Financial Post

Will the Toronto housing market rebound in 2023?

Fergal McAlinden
CMP

Declines in home prices and sales could be set to level off, suggests TRREB analyst

Home sales and prices in Toronto saw a significant decline in 2022 – but there are signs that the trend, which has continued since the early months of last year, could be nearing an end, according to an analyst for the city’s real estate board.

Jason Mercer (pictured), chief market analyst at Toronto Regional Real Estate Board (TRREB), told Canadian Mortgage Professional that while a significant adjustment in sales and home prices had taken place in the housing market between spring and midsummer of last year, data since then suggested that those declines were beginning to flatline.

“As you moved into the late summer, even more so the early fall, we’ve actually seen things start to level off a little bit,” he said. “And both in terms of sales and price, after you adjust for the time of year, we start to see a flatter trend – and that suggests that we may be approaching the bottom of this cycle, and I think that’s what a lot of buyers sitting on the sidelines are looking for.”

In December, analysis from RBC Economics indicated that the marked correction that has gripped Toronto’s housing market was still ongoing – but “may be moderating,” even if the market is expected to remain subdued for some time.

The Bank of Canada’s next decision on its benchmark interest rate, set to take place on January 25, will give borrowers a good indication of how long it might take for home prices to begin rebounding, according to Mercer.

“[Homebuyers are] looking for some sort of indicator that prices have dipped, but that’s starting to flatten out and I think when the Bank of Canada makes their announcement this month, whatever it is, there’ll probably be some forward guidance in there suggesting that this is probably it for interest rate hikes, at least for the foreseeable future,” he said.

“And so a bit of a flatline in terms of pricing, some forward guidance in terms of what we expect on rate increases – that gives people a clearer view of what 2023 and even 2024 will look like from a monthly payment perspective. And then they can start making their decision.”

How big of a problem is the lack of new listings in the Toronto market?

A noted trend has seen new listings remain scant in the Toronto market despite the protracted cooldown, with TRREB revealing that new listings dropped by 8.2% over the course of last year compared with 2021 (from 166,600 to 152,873).

That’s a “major concern,” Mercer said, with little new supply entering the market as immigration looks set to continue climbing in the coming years: 465,000 new permanent residents are expected to arrive in 2023, followed by 485,000 in 2024 and half a million in 2025.

“Looking forward, supply is going to be the major concern, because we’ve heard… from the federal government that we had record immigration into Canada in 2022,” he said. “The GTA [Greater Toronto Area] will continue to be the single greatest beneficiary of that immigration, and then moving into 2023 and 2024, we’re going to set consecutive record years again.

“And so all of these households are going to require a place to live, whether they choose to rent or whether they choose to own and in both cases, we’re extremely strapped for inventory for housing.”

Policy frameworks committed to by the federal, provincial, and municipal governments over the past 18 months or so should eventually see more supply come onto the market, Mercer said, which will be critical for ensuring that federal immigration plans are implemented smoothly.

“Really what we’re looking for in 2023 and 2024 is to see those policy frameworks translate into shovels in the ground because if we don’t, it’s going to be difficult to house all these new families and make no mistake – we need this immigration, we need these new households to see sustained economic development in our region,” he said.

“But if people feel they can’t move here, if companies feel they can’t move here because there’s a lack of housing inventory [and] a lack of affordability as a result, then they’re going to look elsewhere. So there’s a real economic development imperative to this as well.”

 

Copyright © 1996-2023 KM Business Information Canada Ltd.

WonderFi confirms ‘preliminary’ discussions about potential mergers

Stephanie Hughes
Financial Post

One of the potential suitors is Canadian cryptocurrency exchange Coinsquare

The price of bitcoin fell 67 per cent from its November 2021 peak to $25,900 in recent weeks. Photo by Dado Ruvic/Reuters/Illustration/File Photo

Vancouver-based WonderFi Technologies Inc. says it has held merger discussions with various third parties, but that it will not identify them.

BNN Bloomberg reported that one of the potential suitors was Canadian cryptocurrency exchange Coinsquare, a deal that would create a Canadian crypto giant if it were to go through.

WonderFi confirmed in a Jan. 12 statement that it has held discussions both as a potential acquirer and target.

“The Company acknowledges that it has held preliminary discussions with various third parties with respect to both potential acquisitions and the Company being acquired,” the statement read. “These discussions are preliminary in nature and are ongoing, and no assurance can be given that any agreement or agreements will be reached, or that the terms of a transaction will be agreed upon or that a transaction will be completed.”

Shares of WonderFi surged over 20 per cent following the news on Jan. 12 and topped out at $0.41 the following morning before easing somewhat.

WonderFi, a Kevin O’Leary-backed crypto firm, was on an acquisition spree last year, scooping up other Canadian crypto companies such as Coinberry and Bitbuy Technologies Inc.

But over the past two years, the cryptocurrency sector was hit with its worst downturn since 2018 as the price of bitcoin fell 67 per cent from its November 2021 peak to $25,900 in recent weeks.

The slump worsened amid the fallout of the FTX exchange collapse, which has brought accusation of one of the largest financial frauds in U.S. history against the company’s founder Sam Bankman-Fried. O’Leary told CNBC anchors that FTX had paid him US$15 million to act as a spokesperson though he had lost the funds as crypto prices plummeted.

 

 

© 2023 Financial Post

Tesla cuts vehicle prices in bid to boost flagging demand

Tom Krisher
Financial Post

FILE – A Tesla sedan gets a charge at a Tesla Supercharging station in Cranberry, Pa, Wednesday, Nov. 16, 2022. With its sales slowing and its stock price tumbling, Tesla Inc. slashed prices dramatically Friday on several versions of its electric vehicles, making some of its models eligible for a new federal tax credit that could help spur buyer interest. Photo by Gene J. Puskar /THE ASSOCIATED PRESS

DETROIT (AP) — With its sales slowing and its stock price tumbling, Tesla Inc. slashed prices dramatically Friday on several versions of its electric vehicles, making some of its models eligible for a new federal tax credit that could help spur buyer interest.

The company dropped prices nearly 20% in the United States on some versions of the Model Y SUV, its top seller. That cut will make more versions of the Model Y eligible for a $7,500 electric-vehicle tax credit, which will be available through March. Tesla also reduced the base price of the Model 3, its least expensive model, by about 6%.

Far from pleasing investors, the sharp price cuts sent Tesla shares down nearly 2% in late-afternoon trading Friday. Since the start of last year, the stock has plummeted more than 65%. Many investors fear that Tesla’s sales slowdown will persist and have grown concerned about the erratic behavior of CEO Elon Musk and the distractions caused by his $44 billion purchase of Twitter.

“I think the real driver for all of this is falling demand for Teslas,” said Guidehouse Research e-Mobility analyst Sam Abuelsamid.

 

Based on the current short delivery times for Tesla vehicles that once were months long, Tesla’s once-sizable order backlog may have been depleted, said Scott Case, CEO of Recurrent, who analyzes the new and used EV markets.

Customers either were awaiting this year’s federal tax credits, Case said, or switched to competitors.

“We think it’s now more of a competition thing,” he said.

Unlike many of its rivals, though, Tesla can still make money on EVs for one crucial reason, Case said: The company enjoys high profit margins, thanks to manufacturing and battery efficiencies.

Competitors generally lack Tesla’s economies of scale and other efficiencies and may struggle to match the price cuts. If so, Tesla could manage to keep vehicle sales at sufficient levels.

 

“They can afford to make this cut and not be lighting money on fire,” Case said.

Messages were left Friday seeking a comment from Tesla.

Tesla still faces the threat of intensifying competition from other automakers in the United States and globally for years to come. Last year in the United States, total EV sales soared nearly 65% from 2021. Automakers sold 47 electric vehicle models; only four were Teslas. S&P Global Mobility expects the number of EV models to surge to 159 by 2025.

And as overall EV sales are rising, Tesla’s U.S. market share is falling. From 2018 through 2020, Tesla represented about 80% of the EV market. By 2021, that figure had sunk to 71%, and it’s continued to decline, according to registration data gathered by S&P.

 

Still, Tesla’s U.S. sales rose 40% last year, and S&P expects them to continue to rise as overall electric vehicle sales steadily increase.

Even with U.S. tax credits, EVs remain pricey compared with gas-powered vehicles, largely because of the high cost of batteries. In addition, higher loan rates and more expensive raw materials are keeping costs high for buyers and could limit EV sales, for Tesla as well as its competitors.

Edward Jones analyst Jeff Windau said those factors are reducing demand for all vehicles, not just Teslas.

Musk’s provocative behavior on Twitter may also be a factor in lower demand. Since taking over the social media platform in October, Musk has loosened restrictions on hate speech and other questionable conduct.

 

He has repeatedly engaged with figures on the right and far-right and has frequently attacked what he describes as the “woke mind virus”– a pejorative umbrella term for liberal views that Musk asserts are threatening civilization.

Musk’s views are sharply at odds with those of many environmentally conscious Tesla customers who lean Democratic. Survey data from Morning Consult Brand Intelligence shows that in the past year, the number of Americans who view Tesla favorably has dropped. In January of 2022, nearly 43% had a favorable opinion of Tesla, with nearly 15% negative. By this month, those with favorable opinions had dropped to 37%, while the negative views rose to 24%.

Case said he has heard longtime Tesla buyers say during the past six months that they aren’t sure about being seen in a Tesla anymore and that they’d now consider buying an EV from a competitor.

 

With Tesla’s price cuts Friday, its Model Y Performance model, formerly priced at nearly $70,000, now starts at just under $57,000. The starting price of the Model 3, Tesla’s lowest-priced vehicle, was cut to just under $44,000 from $47,000.

The company’s decision to drop the base price of the Model 3, which had already been eligible for the federal tax credit, was a clear sign that demand had weakened, Abuelsamid noted.

Tesla has added two huge factories in Austin, Texas, and Berlin that are running at only a fraction of their output capacities, “which is undoubtedly costing them dearly,” Abuelsamid said.

 

© 2023 Financial Post

Vaughn Palmer: Premier David Eby’s housing announcement a rush job that leaves many questions

Vaughn Palmer
The Vancouver Sun

Opinion: Even government seems unable to say how many units could be acquired under $500M plan that has an overly ambitious timeline

Premier David Eby on the balcony of a suite at the 115 Place Housing Co-operative in Burnaby, following the announcement of rental housing protections, on Thursday, January 12, 2023. Photo by Jason Payne /PNG

VICTORIA — The NDP government is backing non-profit housing societies with a $500-million fund to keep rental properties out of the hands of real estate trusts and other “predatory” investors.

 

“It’s a very exciting day,” Premier David Eby said Thursday and, caught up in the moment, he predicted the fund will protect “thousands” of renters from gouging and worse.

The premier’s enthusiasm was a bit overstated, judging from information in his own news release.

Eby made the announcement at a Burnaby co-op, saying it was typical of the kind of rescue work the fund will be doing.

The 425-unit building was acquired by a non-profit last year with the help of a $132 million grant from B.C. Housing. The provincial share, $310,000 a unit, was a fair price given the housing market in Metro Vancouver.

On that basis, Eby’s half-a-billion-dollar fund would bankroll four similar buildings or about 1,600 units — maybe twice as many if a second source of financing is assumed. Eby said non-profits should be able to attract additional financing from foundations, local government and other sources.

 

But when pressed, he admitted “it’s very hard to put a firm number on how many units we’re going to be able to realize.”

Thus, the premier committed half a billion dollars to a rental housing protection fund without a business plan or an acquisition target that he is prepared to make public.

Eby was asked whether provincial backing might simply plunge non-profits into a bidding war with the real estate investment trusts and others.

Not likely he maintained.

The fund will be managed at arm’s length from government by a Housing Protection Society, made up of the B.C. Non-Profit Housing Association, the Cooperative Housing Federation of B.C. and the Aboriginal Housing Management Association.

“The fund will have safeguards to ensure that government expectations are met around accountability,” said the premier.

 

“It will be part of the structure of the fund that there are fixed grants per unit, that the business case has to make sense and the building needs to be self-sustaining without continued funding. … So that will be a limit on the amount that the society will be able to pay.”

Besides, he predicted, “in many cases we’re going to see sellers preferentially selling to the non-profit sector.”

That’s a big assumption — that property owners won’t sell to the highest bidder simply because the government wants them to favour non-profits.

Eby also discouraged the notion that real estate investment trusts could drive a bidding war.

Earlier he blamed them for a “predatory model that leads to evictions and rent hikes, and can lead to homelessness.”

 

Now he said “real estate investment trusts — they have a business model, too. They see the investment upside and they are working within those constraints as well, so it is not like they are going to pay unlimited amounts.”

Maybe they aren’t so predatory after all?

Another concern raises from the government insistence on one-time funding to acquire rental buildings with no additional financial assistance provided afterward.

“The building needs to be self-sustaining without ongoing funding,” said Eby.

Many purchases will be older rental buildings. The owner may have let the property slide in anticipation of a sale to an investor for redevelopment.

Eby himself acknowledged cases where “an older rental building needs significant capital repairs and the non-profit may come to the conclusion that it needs to be redeveloped, that there can be new rental units built and there can be a larger building built on the site.”

 

Would that not entail rent increases to pay for the renovations, same as if a private owner were doing the work?

Eby insisted that the main purpose of the fund is to keep rental housing “permanently affordable (and) one of those key expectations is that tenants are protected.”

Hard to square with his insistence that there will be no followup funding to help with maintenance and upkeep.

Returning to the theme of the bidding war, the premier was asked why didn’t B.C. follow the lead of Quebec and legislate a right of first refusal for non-profits.

“It is something we are actively looking at,” said Eby. But the proposed change will not be ready to introduce “in the upcoming legislature session.”

Missing legislation, guesswork on the housing targets, wishful thinking on the bidding war … it all left the impression of a rush job.

 

So it was, judging from the last sentence of the media release: “The fund will be financed before the March 31 end of the financial year.”

The March 31 cutoff ensures that the $500 million will be provided from the estimated $6 billion surplus for the current financial year.

Eby says it also “means that the purchase of rental buildings could start as soon as the next 60 to 90 days.”

He may be getting ahead of himself.

Just getting the housing protection society running with the right staffing and guidelines will be enough of a challenge in the next few months.

I expect it will take longer before the society is ready to begin buying up buildings.

 

© 2023 Vancouver Sun

Banking giant reveals new Canada chief

Fergal McAlinden
CMP

The executive has been tapped to replace a company veteran Canadian Imperial Bank of Canada (CIBC) has announced the appointment of Jon Hountalas as its new head of Canadian banking, replacing 14-year company veteran Laura Dottori-Attanasio.
The management change will see Hountalas, who already runs CIBC’s commercial banking and wealth management divisions, take over its personal and business banking operation in Canada. He joined the company in 2010 from HSBC and has served in his current role since 2017.
Dottori-Attanasio is set to retire on February 1, according to CIBC, with the executive having overseen a raft of changes including the recovery of the bank’s domestic mortgage business and its purchase of the Costco credit card business from Capital One.
Previously viewed as a leading contender to eventually take up the reins as CEO at CIBC, Dottori-Attanasio is moving to a non-bank institution, a source familiar with the matter told The Globe and Mail.
CIBC’s current CEO Victor Dodig said in a statement that Dottori-Attanasio’s term had seen “tremendous progress” in the personal and business banking division, with the executive leaving a “lasting legacy” in the financial services industry.
Hountalas, meanwhile, was credited by Dodig as an “exceptional leader” with a strong client focus, industry experience, and ability to build high-performing teams.

Copyright © 1996-2023 KM Business Information Canada Ltd.

Robson Street 0.37-acre development site sold for $63 million

Western Investor Staff
Western Investor

Destined for higher-density redevelopment, the Robson Professional Building site in Vancouver sold for more than $12 million over assessed value.

Fraser Elliott, Vancouver, for Western Investor

 

Property: Office building

Location: 1525 Robson Street, Vancouver

Size of property: 27,485 square feet

Land size: 16,338 square feet

Land size in acres: 0.375 acres

BC Assessment value: $50.92 million

Listing price: $65 million

Sale price: $63 million

Date of sale: January 10, 2023

Brokerage: Fraser Elliott, Vancouver

Broker: Fraser Ellliott (and team).

 

© 2023 Western Investor

Greystone sells two multifamily properties in Omaha

Candyd Mendoza
CMP

Investment firm sees significant gains from the transaction

Greystone Housing Impact Investors, formerly America First Multifamily Investors, has announced closing the sale of two multifamily properties located in Omaha, Nebr.

The company has sold two 294-unit market rate properties – Vantage at Stone Creek and Vantage at Coventry. The move is part of Greystone’s business strategy of acquiring mortgage revenue bonds and using the interest earned on these bonds to provide financing for the construction of affordable multifamily, seniors and student housing properties.

Greystone’s contributed equity in Vantage at Stone Creek totaled $7.1 million during construction and $8.1 million in equity for Vantage at Coventry before the settlement of final proceeds and expenses. As a result of the sales, Greystone redeemed $244,000 in investment income from each property. The firm received net cash of approximately $27.7 million, including the return of its contributed equity.

“The successful sales of Vantage at Stone Creek and Vantage at Coventry demonstrates our development partner’s continuing ability to deliver significant gains in diverse markets,” said Greystone CEO Kenneth Rogozinski. “We continue to evaluate opportunities in this asset class for both the reinvestment of our previously deployed capital and an expansion of the strategy.”

 

Copyright © 1996-2023 KM Business Information Canada Ltd.