Welcome to Properties Ontario’s weekly update. Our team goes through numerous articles and create summaries for you! Please do not hesitate to contact me if there are any topics you would like to discuss further or if you have a general question about buying, selling, or leasing residential or commercial space. For current listings in the marketplace, check out our website www.propertiesontario.com
Record Investment in Canadian Commercial Real Estate
Investment in Canadian real estate reached a record figure at the end of the second quarter of 2018. The previous record was set at the end of the first quarter of 2017. There were $16.5 billion in commercial real estate transactions, 38% higher than the previous record of $11.97 billion. If we look at this over an extended period, it is 105% above the 5 year quarterly average. The half year (first and second quarter) total is $26.8 billion, another record for Canada. Choice Properties acquisition of CREIT and Blackstone’s acquisition of PIRET accounted for 45% of the total activity in the market. The average deal was $9.4 million, 67% higher than a year ago. Toronto accounted for more than a third ($5.7 billion) of transactions while Vancouver saw $3.9 billion in sales. Toronto is 82% above its 5 year average awhile Vancouver is 91% above. Other notable cities were Calgary ($2.5 billion), Montreal ($1.7 billion) and Edmonton ($1.5 billion). Industrial investment accounted for 37% of transactions ($6 billion).
Statistics Canada Debt Figures Released
Canada’s balance of outstanding debt is at $2.13 trillion at the end of July. This is $77 billion more when compared to last year or an annual increase of 3.77%. Of this total, outstanding mortgages accounted for $1.52 trillion (3.7% annual increase) while consumer debt amounted to $616 billion (4% annual increase).
Montreal – A Hot Spot of Canada
Greater Montreal Area (GMA) had sales increase for multi-plexes (14%) and condos (12%). Overall 3,224 residential property transactions were done in August 2018 which represents an 8% year over year increase. This is a record for the month of August for Montreal. It is also the 42nd straight month with growth in sales within the GMA. Current inventory is at 20,940, falling 16% from a year earlier. This represents the strength of the market but this is confirmed with the increase of benchmark prices. Multi-plexes increased 10% annually to $515,000 while condos saw a 4% increase to $260,000. Even single family home prices went up by 5% to $330,000.
GTA Detached Market Statistics
- GTA Stats for Detached in August 2018 (August 2017 comparison in brackets)
- Benchmark: $914,900 (-1.94%)
- Median: $836,750 (+2.20%)
- Average: $977,187 (+1.2%)
- Sales: 3,001 (+17.1%)
- New Listings: 6,167 (+8.24%)
- Inventory: 10,563 (+14.62%)
- Sales to New Listings: 48.66% (balanced market, slightly towards buyers)
- Months of Inventory: 3.52 if no new listings came on the market
- Toronto Stats for Detached in August 2018 (August 2017 comparison in brackets)
- Benchmark: $1,100,000 (+0.04%)
- Median: $928,000 (+2.54%)
- Average: $1,244,275 (+4.9%)
- Sales: 619 (+12.3%)
- New Listings: 1,071 (+8.29%)
- Inventory: 1,735 (+9.53%)
- Sales to New Listings: 57.80% (balanced market, more towards sellers)
- Months of Inventory: 2.80 if no new listings came on the market
Microsoft to Invest More in its Canadian Operations
Microsoft will establish its Canadian operations in a new state-of-the-art headquarters at 81 Bay Street by September 2020. The headquarters will be 132,000 square feet spread out over four floors. This will reinforce the city’s reputation as a technology hub and will drive commercial and residential prices higher to the areas close to it. Microsoft is also relocating or expanding its Vancouver, Ottawa, Calgary, and Montreal offices and development labs.
Leading American Mortgage Provider Forecasting Negative Growth
Fannie Mae latest Mortgage Lenders Sentiment Survey shows negative profit margin outlook for the third quarter of 2018. This would mark the 8th consecutive negative outlook. The reason for this is anemic refinance activity and lower purchase mortgage demand from consumers. These factors will fuel the affordability issues especially in hot markets.
Housing Shortage Explained
Richard Lyall from Residential Construction Council of Ontario stated in 2003-04 there were approximately 35,000 single detached homes coming to the market. Now there are just 5,000 units projected for 2019. The development and approval process takes an average of 18 months when it is supposed to be a one month process. The costs developers face during these months are essentially passed onto consumers resulting in lower affordability. It was also mentioned that we need 10,000 more units of all housing types but housing starts fell in Toronto due to fewer condos and single-family homes coming to the market. Affordability is a major issue, but developers are claiming land for large sub-divisions is also limited. Once you include the B-20 regulations, the market will become tighter. For those who believe the single-family market is dead are heeding incorrect advice. The single-family home market represents 50% of total resale activity.
August 2018 Top Five Rents for One Bedroom Units in all of Canada
- Toronto: $1,851 (-0.6% from July)
- Vancouver: $1,839 (+0.3% from July)
- Richmond Hill: $1,736 (+0.9% from July)
- Etobicoke: $1,572 (+6.9% from July)
- Mississauga: $1,477 (+3.0% from July)
Homeownership vs Renting Case Analysis
A study done by Mortgage Professionals Canada found out that homeownership can be less costly than renting if it is analyzed for the same period. Mortgage payments are typically fixed for five years and provide you the ability to increase your equity. Leases are usually set for a year, so cash flow is predictable but after one year they would likely increase. The case studies provided us with the following information:
- Mortgage with 3.25% rate for 10 years is lower than the cost of renting in 98% of cases
- The savings totalled $1,295 per month if owning a home vs renting
- Mortgage with 4.25% rate for 10 years is lower than the cost of renting in 92% of cases
- The savings totalled $1,014 per month if owning a home vs renting
- Mortgage with 5.25% rate for 10 years is lower than the cost of renting in 82% of cases
- The savings totalled $726 per month if owning a home vs renting
It is crucial to note that these savings do not factor in appreciation. The increase in equity can be used to capitalize at the right time or refinance for other expenditures.
Teranet and National Bank Home Price Index (HPI)
National Bank is part of the Big Six banks in Canada and Teranet is a registry giant. Therefore, this index provides actual sales that were closed and title was transferred. It lags realtor’s multiple listing services as those sales are counted at the point of agreement between the buyer and seller. However, it is a more accurate index as it factors in deals that fell through. The Composite 11 (C11) which produces figures based on the 11 largest metropolitans in Canada, showed an annual increase of 1.37% when it is seasonally adjusted. Unadjusted figures were flat. Toronto real estate saw an annual decline of 3.34% but climbed 0.27% monthly. Prices remain 3.75% below the peak obtained in July 2017.