5 Emerging Canadian Real Estate & Rental Trends
Feb 13, 2013
As Europe slides deeper into a recession, and the jobless recovery continues slowly in the US, Canada has emerged remarkably unscathed and economically consistent. A land of a more conservative approach to banking and lending, we have different policies (unlike our neighbours to the south, Canadian mortgage payments are not tax deductible) that have helped insulate our country from the housing collapse seen in the US. In Canada, 81% of our population lives in urban areas, creating some interesting developments in our real estate and rental market. Here are some top emerging real estate and rental trends that will play out over 2013:
1. The Rise of the High Rise
The market has been shifting, particularly in urban centres like Toronto. Ten or so years ago there would have been three low-rise sales for every one high-rise, but today that number has changed. As RealNet’s George Carras said at a recent press conference, “Now it’s three high-rise homes for every one low-rise.” The dearth of land allotted for low-rise buildings has had a direct effect on consumer choice.
As of December 2012, the index price for a new low-rise home jumped by 16% over 2011 levels to a record high of $632,868. Meanwhile the index price for a high-rise housing option remained steady at $436,024, up only 0.4% from 2011. This division in price has helped drive the high-rise market. Mixed use–style properties, combining residential, commercial, and especially retail space, are a trend to watch for across all major urban centres.
2. Local Search – A Game-Changer
There’s a new game in town for real estate and apartment searching. Buyers and renters are now increasingly using mobile browsers, map-based searching, and social media in their search. Consider this: In the US real estate-related searches on Google.com rose 253% over the past four years and 22% on annual basis in the third quarter, according to internal Google data.
Today’s sellers and property managers will need to use web-friendly technology and social media. Sites offering rentals or real estate will need to harness localized data and advanced filtering to allow potential renters and buyers to quickly filter results based on personal preferences like price, number of bedrooms and bathrooms, as well as amenities.
3. The Uncertainty of Debt
A recent PricewaterhouseCoopers report noted that as “homeownership approaches a possible saturation point near 70% and prices in some markets began declining in 2012 as federal regulators applied the brakes and imposed stricter lender guidelines, such as limiting amortizations to 25 years, resulting in increased monthly mortgage payments. Both house hunters and condo speculators have backed off buying sprees, and discretionary sellers decide to pull back.” For multifamily companies, this represents a huge opportunity as renting rather than home ownership may become the “new normal” for many debt-cautious Canadians.
4. The Condo Effect on Apartments
In many major cities like Vancouver, Calgary, Toronto, and Montreal, you can’t throw a stick without hitting a condo project. (Even the Bank of Canada is worried about the condo bubble.) Pierre Bergevin, the CEO of Cushman & Wakefield, recently told reporters that the availability of rental housing has been declining since 2007, but the lack of apartment construction has resulted in the biggest lull since 2000. The multi-residential market is stronger than ever. High occupancy and demand means that landlords can increase rents, and with confident lenders and low cap rates in most markets, apartments will represent a solid investment in 2013.
5. Invest West, Young Man!
While Toronto is traditionally the number-one market to watch, employment prospects in Edmonton, Vancouver and Calgary are driving a huge amount of both real estate investment and rental demand in Canada. Calgary has been on a tear over the last few years, and it was the only major Canadian market to see a year-over-year rise in MLS residential sales in December 2012. The boom in population has put upward pressure on the rental market as well.
What trends are you seeing in the real estate and rental industry? Leave a comment below.
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