Key Trends in Real Estate Investment in Canada

Real estate investment in Canada is witnessing to a considerable volatility in the demand and supply, leading to investors looking out for the patterns to succeed in the industry.

The patterns of real estate investment in Canada are witnessing a constant shift because of new tax measures introduced by the government, changing employment exposure, growth in the population of working individuals, changes in income, and changes in the other economic drivers.

All these factors are indicating a rise in the housing market in Canadian states, giving a boost to real estate investment in Canada. Investors who are planning to make investments in the real estate industry in Canada are keenly looking out for trends that may affect real estate investment in Canada.

If you are one of those investors, here are some key trends in the real estate industry in Canada that you must know.

You might also like to read Will Toronto real estate collapse soon?

Prices of The Houses Are Declining, And Affordability is Increasing in Western Canada

As per the reports showing the trends in real estate investment in Canada, there has been a rise in the affordability of the households in the western parts of Canada like British Columbia, Alberta, Calgary, etc. This pattern is believed to have arisen from the rising income of the households in Western Canada and the decline in the prices of real estate.

In 2019, the pointer of the affordability measures moved by 0.2% on the positive axis reaching 51.3%. The measures of affordability are measured based on the household income. This indicates that a lower number of incomes corresponds to higher affordability and vice versa.

In Canadian states like Toronto, the pace of market recovery has sped leading to a gradual rise in the prices. On the other hand, states like Ottawa and Montreal are having strict demand and supply condition in the real estate industry. The median real estate prices in Vancouver have also fallen by 5.5% towards the end of the year 2019. This is in contrast with the patterns of real estate state investment in Canada in the year 2018.

Experts in the real estate industry are suggesting a further improvement in the housing affordability rates in Canada as there is no prospective rise coming up in the interest rates of the households. In addition to this, the graph of household income may also see a positive slope.

Looking to dig deeper? Read What’s wrong with Canada real estate?

The Demand For Houses is Increasing in Canadian Cities Like Toronto

The market trends in the real estate industry of Canada are revealing a rise in construction and sales activity, especially in the high-rise areas like Toronto. The sales of the households in Toronto are likely to jump from 79,000 and 86,985 to 83,400 and 92,490 by the onset of the year 2020.

The Toronto Real Estate Board, which looks over the trends in the real estate investment in Canada, suggested that the sales of housing property in Toronto hiked by 22% in 2019 and settled at 7,825 units. All the other housing sectors observed a similar double-digit growth pattern in the number of sales.

However, the sales of detached households in Toronto hiked by 29% which is considerably greater than the sales of other housing properties in Toronto. The sales of the detached housing units increased to 3,618 in the first half of the year 2019 and 6,216 during August 2019.

Also read Real Estate Investment – How to Maximize?

Public Companies Are Disposing of Their Non-core Assets

The stock prices of public real estate assets have been off the track with the net asset values of the underlying real estate portfolios of public companies in the last two years.

To balance these two values, the public companies are disposing of their non-core assets intending to recycle the capital back in their real estate investment in Canada portfolios.

As a result, the real estate industry has strengthened especially in urban areas like Toronto, Vancouver, and Montreal. If we look at the current trends in the real estate market, we can expect a rise in the deal values and trading volumes for real estate investment in Canada, which was recorded to be the highest in 2018.

Institutional Real Estate Investment in Canada is Increasing

The market trends of real investment in Canada are pointing towards a rise in the institutional investments in the real estate industry in the form of pension plans, private equity, and capital funds. The buyers are chasing the cash-generating assets because of a record-breaking decline in the interest rates. Most of these funds offer a scope of long-term real estate investment in Canada, unlike other public company investors.

The recent acquisition of Dream Global driven by Blackstone is a notable document to support this market trend of real estate investment in Canada. The acquisition has eliminated an investment option for the public from the market of Canada.

These trends of institutional real estate investment in Canada are largely echoing in the major sectors like offices, retail, seniors housing, etc. As a result, the capitalization rates are continuously declining in Canada.

The Investment of Pension Funds is Rising in the Real Estate Industry

The pension funds are making direct real estate investments in Canada. This trend is supported by two instances of Canadian real estate assets being invested in by two major companies in Canada. The Investment Management Corporation of Ontario (IMCO) along with Cadillac Fairview has recently invested in the real estate industry in Toronto.

The managing director of IMCO has stated that real estate investments in Canada form an important part of the investment policy of IMCO because it aligns well with the return-on-investment goals of the Ontario Pension Board.

A similar partnership of offices like OPTrust, Great-West Life Real Estate Funec the London Life Real Estate, and I.G. Investment Management Limited has emerged intending to provide plan sustainability and security through the medium of assets that can generate considerable income.

The Current Real Estate Investment in Canada is Intensifying

The current real estate investment in Canada is being intensified by the buyers as they are chasing high-density developments in the region. It is because high-density development determines the course of the public and private real estate market in Canada. The intensification has stretched out of the traditional offices and classes of family assets, and now reaching the senior housing and transit-oriented development assets. In these real estate assets, the developers are investing in preparing public infrastructure as an integral part of urban intensification in Canada.

The market trend of real estate investment intensification in Canada is observed through an example where the Ontario government and Metrolinx paired up with Woodbine Entertainment to develop the GO station at no additional costs to the taxpayers.

The intensification of investments is clearly visible in the core Canadian markets where residential as well as commercial spaces are situated at high-valued locations. However, investors are facing challenging situations in such mixed urban developments. This is because becoming successful in trading in these kinds of assets requires a strong skill set like project management competency to address the various aspects like planning and capital challenges involved in real estate.

The current trends in real estate investment in Canada can be overwhelming because of low interest rates which are encouraging the deal activity. The investors must, however, monitor market trends and their developmental competencies to combat any deviation from the ongoing and predicted trends. They must improve their investment strategies and skill set to stay ahead of the real estate curve in Canadian markets.