Canada's Condominium Magazine
There are plenty of global uncertainties to make investors nervous, from Brexit to Trump, from the refugee crisis in Europe to terrorism. It’s a volatile, unpredictable world out there. But despite the worrying global political and economic uncertainties, Canada’s real estate market has delivered “few surprises.” Investors continue to believe that these same uncertainties, with an assist from the low Canadian dollar, will in fact feed greater demand for Canadian real estate. Canada is seen as a “steady, low-risk place” for investors to put their money. It’s quite possible that the only thing holding back investors, whose eagerness for investing in property abounds, is the lack of suitable properties to invest in. So say the Urban Land Institute and PwC in their Emerging Trends in Real Estate 2017.
No discussion of real estate in Canada, especially in Toronto, can avoid the subject of affordability, a “major point of concern.” As more and more observers are saying these days, housing affordability is a supply issue, and it will only get worse in Toronto over the next five years as immigration keeps demand high. The forecast is for Toronto to receive more than 450,000 international immigrants between now and 2020. This can be seen as an opportunity for the building industry, though the question of available land for development needs to be addressed, the report says.
The residential market generally remains strong, with solid sales volumes and rising prices, buoyed by a strong local economy, steady immigration, and low interest rates. The lack of supply and available land is seen as a key factor contributing to the market’s rapidly rising house prices. Due to the high cost of moving, more homeowners are choosing to stay put and invest in renovations. Many respondents believe that government land use policies are a factor holding back supply.
The emerging trends report also says that “technology disruptors” are becoming increasingly important in the real estate industry. Companies that aren’t up to date in integrating the new technologies risk missing opportunities. Real estate developers must take “significant steps” to adapt to customers’ tech needs, steps like including 3-D conceptualisations right from the planning stages and providing augmented reality tours of condo suites and other types of buildings. This could eventually eliminate the need for physical showrooms. Done well, augmented reality can motivate people to go out and visit locations, the report says.
Technology is “transforming” the residential market in another important way as well. Energy-efficient features that can save consumers money, including green roofs, LED lighting, and Energy Star appliances, are now expected by buyers and renters, the report says. Better waste management and other innovations that result in net zero impact buildings are also demanded by consumers.
The outlook for Toronto in 2017 is generally one of optimism. The economy is healthy and growing, supported by construction, transportation, warehousing, retail, wholesale and manufacturing. A 46 per cent rise in housing starts gave Toronto’s construction industry a fourteen-year-high growth rate, according to Conference Board of Canada statistics cited in the report. GDP growth is forecast to be 2.6 per cent this year and in 2017.
Toronto respondents to a survey about local market conditions rated the city “good” across all categories, which included strength of the local economy, investor demand, capital availability, development opportunities, public-private investment, and the local development community. Toronto’s score of 4.07 was the highest among nine cities surveyed.
Because of a ten-year low in condominium inventory, there will likely be an increase in high-rise, mixed-use, multiresidential projects in 2017. This type of development is considered one of the “best bets” for investors in 2017, along with purpose-built rental buildings, seniors housing and retirement homes, and conventional condominium developments.