Time for your cheat sheet on this week’s most important stories.
Canadian Real Estate
The Canadian insurance industry is discussing a coverage “crisis” coming to condos. Due to rising replacement values, and smaller margins, insurance companies are dropping coverage. This comes while demand for this type of coverage is soaring. The result is condo insurance is going to cost more. A lot more. BC buildings have seen the cost of units rise over 40% in just a few years. All of this can translate into higher maintenance fees. Considering a lot of investors are already negative cap, this is likely to become a negative weight on values.
Low interest rates are good for real estate prices, so negative rates must be great, right? Guess again. Negative rates are often misunderstood as a driver of asset growth, but it’s not the case. Typically they’re only rolled out during the worst economies, and have many negative impacts like a falling loonie. A weaker loonie is likely to contribute to higher cost replacements for insurance, intensifying the condo crisis. Further, mortgage rates are lower than they would be at the current interest rate due to QE. Since they are being moved by a separate mechanism, there’s no guarantee they would fall much lower than today.
A big Swiss bank dropped Canada’s largest city as the world’s biggest bubble, but it’s not seeing things improve. Toronto, which previously topped the UBS Bubble Index, fell to the third spot from number one. This doesn’t mean things have improved in the bank’s opinion. In fact, it was the opposite – it gets a worse score than it previously did. Two other bubbles intensified further though. Despite the lower rank, the bank believes valuations are still stretched. A weaker loonie has also become a deterrent for foreign investment, a previous driver of values.
RLB, a global real estate consultancy, shows Toronto is still the busiest city in North America for construction. The City had 124 high rise cranes active in Q3 2020, up from 121 in the first half of the year. To fully appreciate how much construction it is, you need to realize Seattle is the next city – with a third of activity. Toronto is actually so busy with high rise construction, it’s almost a third of all cranes on the firm’s index.
Toronto Real Estate
Greater Toronto real estate is seeing detached prices climb, while condo apartments fell a little on the month. Detached homes are seeing price growth accelerate across Greater Toronto. Condo apartments are seeing price growth fall, and are now cheaper than the month before. Part of the reason for this trend is detached inventory is very tight, while condo inventory in the city is soaring to levels not seen in years.
Vancouver Real Estate
Greater Vancouver real estate is seeing two distinct markets emerge – a heating up detached, and cooling condo market. Detached homes saw the annual rate of price growth rise very quickly. Condo apartments saw prices fall from the previous month, with growth now stalling. Both segments are still below their all-time highs, reached a couple of years ago.
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