PROPERTY
Toronto and Vancouver Explaining the spiralling prices in these two cities, Phil Soper says, “They have the lion’s share of immigration and the lion’s share of current economic growth, thanks to goods and services exports having really picked up with the US recovery. “In addition, Vancouver has oceans and
mountains and Toronto has legislated green belt and the Great Lakes, so these cities, while very large, are physically constrained in terms of their growth. So you’re finding supply shortages and spikes in prices.” Indeed, the rise in Canadian house
prices is continuing to outpace rises in incomes, especially in the high- growth areas of Toronto and Vancouver. According to PwC, one result of this is that more and more people are choosing to rent. In some cases, this is even occurring as a permanent choice, and some retired people are opting to rent a similar property after they sell, rather than buy a smaller home.
PwC noted in a recent report, Emerging Trends in Real Estate:
Canada and the United States 2016, that many of its survey respondents thought that, after years of expansion, the Canadian real-estate market might be due for a breather, and that, because of this, many property owners were entering holding patterns. Many were slowing their acquisitions in Canada, focusing on existing holdings and on opportunities in the US, while landlords were concentrating on bringing in new tenants and extending the leases of existing ones. While respondents were concerned about the impact of the
energy sector on real estate, PwC said that few firms seemed concerned that wider economic factors would cause significant problems for their businesses. The US, meanwhile, is looking much more even.
“Nationwide, we’re seeing around 5 per cent appreciation,” Pandra Richie, president of US-based Long & Foster Corporate Real Estate Services, says. “In some markets, it’s more; we have some markets that are in double-digit appreciation. Some are seeing less than that. But I would say it’s a steady market. “We still have a lot of markets where there’s a shortage
of inventory. If something is priced right and it’s in good condition, it’s selling very quickly.” On the rental side, Sandra Cairns, VP of Dwellworks
Canada, a member of Cartus’s Global Supply Chain Network, says that expecting the Canadian and US markets to mirror each other is a mistake. “Many often fail to see the differences between Canada and
the US because the two countries share various similarities and are in such close proximity to one another. But, in general, the majority of Canadian rental markets are more competitive than most centres in the US. “However, heavily populated metro areas and industry-specific
markets – for example, the technology sector in San Francisco – experience the same low vacancy and high rental rates that are comparable to the higher rents in Toronto and Vancouver.”
Developers are looking to match this trend with purpose-
built rental properties, though PwC notes that some of its interviewees expressed concern that the supply of such units in Toronto might surpass demand. Still, luxury apartments may become increasingly popular with retirees and Baby Boomers. This, of course, is having an impact on expat rentals.
“Often, when expatriates come to Canada on assignment, they have specific types of rental property in mind, particularly executive single-family homes and high-end condo apartments in the most desirable and established neighbourhoods,” Sandra Cairns says. “Naturally, supply and demand dictate rental prices on all
new leases anywhere in Canada. In markets such as Vancouver and Toronto, demand is typically greater than supply. In the most sought-after neighbourhoods, bidding wars and multiple rental offers frequently drive up rents.”
Urban living The trend towards urban densification continues, but the pattern may begin to shift over the longer term. It’s becoming increasingly difficult for developers to build
affordable housing in urban centres, partly because of the very policies designed to promote urban density, according to PwC. Land prices are on the rise, thanks in no small part to green-belt legislation in Ontario and British Columbia. Additionally, long approval processes and high development
charges, with the growing cost of construction, are driving up costs. Some argue that this could lead to changes in urbanisation trends, and the expansion of city transit systems (see rail feature, p14) could make buying affordable houses away from urban cores more viable.
Oil-price collapse Meanwhile, in Alberta, the province worst hit by the oil-price collapse, the outlook is much more subdued on the sales front. “What we saw in the big cities in Alberta in 2015 were stable home prices but significant drops in unit sales,” says
26 | Re:locate | Canada Spring 2016
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