- No dividend payments to Federal government from Canada Mortgage and Housing Corporation during crisis to support Canadian homeowners, multi-unit borrowers and housing providers
- National home sales fell 14.3% on a month-over-month (m-o-m) basis in March…April expected to worsen considerably
- Actual (not seasonally adjusted) activity was up 7.8% year-over-year (y-o-y).
- Newly listed properties dropped 12.5% m-o-m.
- The MLS® Home Price Index advanced 0.8% m-o-m and 6.9% y-o-y.
- Home sales across the GTA fell 69% y-o-y during the first 17 days of April as just 1,654 homes traded hands, according to data released Wednesday morning by the Toronto Regional Real Estate Board (TRREB)
- Values steady compared to the same period last year
- April will see an even steeper fall in sales activity to a small fraction of their normal levels – Capital Economics Senior Canada Economist Stephen Brown
Acquisitions are on hold for most however, well capitalized generational developers will take advantage of the current situation by picking up land at a discount.
A number of project launches have been delayed until the fall or more likely early 2021. Currently marketed projects have seen a complete drop in sales.
Developers are offering incentives to purchase units now for example:
- instead of a 10 day cooling off period is now 100 days
- job protection – if you lose your job then you can void the deal
- price protection – if the developer lowers their pricing in the coming months, you will get that same price.
- Staged deposits are part of any condo purchase – we will continue to monitor developers to see if they are seeing purchasers default on their staged deposits
- Projects that sold in Q3 & Q4 2019 and Q1 2020 have shown minimal default on subsequent deposits
Closings and Registrations
- Some reports show buyers claiming inability to finance their closing due to job loss
- Developers will need to decide if they keep the deposits, renegotiate, or force a closing – long-term reputation risk will need to be taken into account
- Developers will have a tough time registering and closing condos due to the city shut down = strain on cash flow.
Purpose Built Rental (PBR)
- PBR developers do not rely on deposits and creditworthiness of unit purchasers
- PBR developers are largely institutionally backed which have a low cost of capital and can take advantage of their high creditworthiness to gain cheaper construction financing
- Will take advantage of current opportunities to acquire sites from condo developers at a discount
- Current wave of rental projects has commenced in the last 4 – 8 quarters
- Completion 12 to 36 months out which puts most projects past the COVID threat
- Rents will take some time to trend back to where they were but most have built conservative pro-forma and are poised for a healthy rebound.
- Debate continues on future direction of construction costs – up or down
- We are leaning toward cost easing due to delayed projects in residential and commercial
- Economics 101 suggest reduced demand for both labour and raw materials as we expect new construction starts to decrease in the near future therefore making construction tendering more competitive
- Province of Ontario temporarily suspends limitation periods and procedural litigation time periods
- Allows release of holdback payments to contractors and subcontractors to support construction workers and businesses
- Regulation – https://files.ontario.ca/
Development Charges (DC) & Educational Development Charges (EDC)
- DC or EDC by-laws that expired/expire on or after March 17, 2020 will not expire and remain in force until six months after the termination of the emergency – https://www.ola.org/en/
legislative-business/bills/ parliament-42/session-1/bill- 189 Land Use Planning
- Bill 189 – Minister of Municipal Affairs and Housing to make regulations regarding timelines within the planning Act during the period of emergency
- Virtual/electronic public meetings and decision making on planning matters during crisis at municipality’s discretion https://www.ola.
org/en/legislative-business/ bills/parliament-42/session-1/ bill-189
- Allows municipalities to suspend certain planning decision timelines.
We will keep you updated.