The Weekly 411:
Today we're covering
๐ญ Canada's Commercial Real Estate Rebounds
๐ Canadian Cities Moving into Buyer's Markets
๐ Mortgage Defaults on the Rise
๐ฒ Cottage Market Struggles to Recover in Ontario
๐ธ Calgary's Luxury Real Estate Booms as Economy Grows
๐ค WTF of The Week
Read Time: 4 minutes
๐ Canada's Commercial Real Estate Rebounds
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Canadian commercial real estate market rebounded in Q2 2024, with transactions surpassing $12 billion, beating the 10-year quarterly average by $2 billion.
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Specialty assets like data centers, hotels, senior and student housing, and farmland are in high demand.
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Multifamily residential is considered the most promising investment. Average national rents reached $2,185 a month in June 2024โ
- Retail vacancy rate fell to a record low of 1.6% last year, while lease rates are expected to increase by 3.1% in 2024
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Industrial vacancy rates doubled to 4.2%, while industrial rent decreased slightly to $15.95 per square footโ
๐ Canadian Cities Moving into Buyer's Markets
- Home inventory levels are surging in Toronto, Vancouver, and the Fraser Valley, indicating a shift towards buyers' markets.
- Sales-to-new-listing ratios are below 40% in all three markets, indicating a buyers' market.
- Experts predict that home-buying activity will pick up in the fall and winter when mortgage holders are up for renewal.
- Demand for housing is still present, driven by population growth and immigration.
- Opportunities exist in new construction, where some buyers may be unable to close or hang on to their purchases.
Why This Matters: Experts say buyers are not taking advantage of the market due to high interest rates and affordability concerns. Interest rates and prices need to decrease further to entice buyers back into the market.
๐ Mortgage Defaults on the Rise
- Canada's banks set aside $4.36B for credit losses in Q2 2024, expecting a wave of mortgage defaults.
- Household debt is near record levels, unemployment rising, and 73% of mortgages are to be renewed by 2026.
- Consumer bankruptcies are up 11%.
- Experts warn of potential recession due to severe household debt burdens and high debt-to-income ratio.
Why This Matters: The rising tide of mortgage defaults and household debt could lead to a "forced selling" scenario, where distressed homeowners flood the market with properties, driving down prices and creating a buyer's market. However, this could also present opportunities for investors to snap up undervalued properties.
๐ Cottage Market Struggles to Recover in Ontario
- Ontario's cottage market remains "very quiet" despite June's interest rate cut, with sales at their lowest point in over a decade.
- Experts predict a double-digit price drop if interest rates don't decrease significantly, with some forecasting a 10% drop.
- Inventory levels are high, with 7 months of inventory in the first quarter of 2024, compared to 3.5 months in 2021.
- Sales are slow, with the luxury market being particularly affected.
- The capital gains tax change has removed investor buyers from the market, contributing to the slow sales.
Why it Matters: Buyers are in a good position to negotiate, with more inventory available and prices potentially dropping. June's 0.25% rate cut had little impact on the market, with experts saying a 2% decrease in interest rates is needed to stimulate activity. The best-case scenario is prices remaining flat, while the worst-case scenario is a 10% price drop.
๐ธ Calgary's Luxury Real Estate Booms as Economy Grows
- Homes selling for over $1 million in Calgary increased by 46% in the first half of 2024, while home sales of $4 million+ grew by 75%.
- Calgary gained 26,662 people from other parts of Canada.
- Toronto lost 93,024 people, Montreal lost 20,624, and Vancouver lost 18,399 to interprovincial migration.
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Western Canada has shown higher real GDP growth since 2000 compared to eastern provinces.โ
๐ค WTF of The Week
Due to immigration, Toronto is by far the fastest-growing city in North America. The top seven fastest-growing cities on the list are all in Canada.
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