Author: Natalia Cacoeli

Highlights from CMHC’s Latest Rental Market Report:

Highlights from the latest CMHC Rental Market Report

Canada’s rental market has surged in recent years, and the latest Rental Market Report from the Canadian Mortgage and Housing Corporation (CMHC) is further evidence of this. From Toronto to Vancouver, cities across the country are experiencing an outpour of rental demand and decreasing vacancy rates.

Here’s a closer look at what’s happening in rental markets in some of Canada’s largest cities:

Toronto

- Primary rental apartment vacancy rate fell to an impressive 1.7% in 2022, a decrease from 4.4% the previous year. Economic stability and immigration have contributed to a rise in rental demand.

Montreal

- Strong demand in the rental market pushed the vacancy rate down from 3.7% to 2.3%, and rent increases have been significant for those who moved.

Vancouver

- The vacancy rate decreased from 1.2% to 0.9% as a result of higher homeownership costs and migration to the region.

Calgary

- With the economy growing beyond pre-pandemic levels, the rental market tightened to conditions not seen since Alberta’s last economic boom, The overall vacancy rate dropped to 2.7%, the lowest since 2014.

Edmonton

- A strong economic rebound and record migration flows have contributed to rental demand outpacing new rental supply. The vacancy rate dropped from 7.3% to 4.3%.

Ottawa

- Strong demographic and economic conditions have supported rental demand and the vacancy rate dropped from 3.4% to 2.1%.

Victoria

- Record high supply growth and rising demand have accelerated rent increases in the rental market, with the vacancy rate slightly increasing to 1.5%.

Hamilton

- The vacancy rate for purpose-built rental apartments was at its lowest since 2022, at 1.9%, due to more student renters, higher full-time employment and fewer renters transitioning into homeownership.

Halifax

- The vacancy rate remained at a record low of 1% with the number of rental apartment units increasing by 1,348.

So… what does this mean for investors?

With the rental market at an all time high, investing in rental properties has become an increasingly attractive option. The current demand for rentals is at a premium, making this the perfect time to consider this asset type.

A combination of factors, including a growing population, a shift towards urban living, and a decrease in homeownership have set up purpose-built rentals as a strong and stable investment with promising returns as demand continues to rise.

At Cacoeli, we are committed to identify and taking advantage of market conditions to ensure that our investors receive healthy and strong returns. With extensive experience spanning two decades, our team is equipped to identify the right properties and manage them effectively to ensure maximum returns for our investors.

Cacoeli can help you navigate the market. With our proven track record of success, you can trust our team to manage your investment effectively and help you achieve your financial goals.

Don’t miss out on this opportunity to invest in a strong and stable asset type alongside our team!

For the full CMHC Rental Report, visit:

https://www.cmhc-schl.gc.ca/en/professionals/housing-markets-data-and-research/market-reports/rental-market-reports-major-centres

CLOSED: Cacoeli Yonge-Steeles LP

We are pleased to announce the successful close of The Cacoeli Yonge-Steeles LP!

The closing granted our investors average annualized returns of 22% in 1.5 years – well ahead of the projected 3-year timeline. The shorter-than-expected close with such high returns are due to the Cacoeli team’s strategic efforts in land assembly and density increases.

Despite challenges presented by the current financial market, our team was able to navigate through the turbulence and achieve a successful outcome for investors. We are proud to have provided positive outcomes in difficult times, and continue to strive for excellence in all of our future project endeavors.

2022 was a challenging year for many, but we’re proud to have been able to deliver for our investors when it mattered most. We would like to thank our investors for their continued support and trust in our team’s ability to deliver strong returns.

A big shout out to our development manager, Terra Bona Developments, for their hard work and dedication in closing the LP!

For those who are looking for a reliable and profitable investment, we invite you to join us on our next venture and see for yourself the results we can achieve together.

Get in touch to learn about our other investment opportunities.

Learn more about our development manager, here: https://terrabonacanada.com/

Ontario’s New “More Homes Built Faster” Act: Overview

Earlier this week, the Ford government introduced Ontario’s new “More Homes Built Faster” Act. The plan, containing roughly 50 actions, promises to advance the province’s plan to address the housing crisis.

The underlying goal is to construct 1.5 million homes in the next 10 years.

Greater Mix of Housing Types

The measures proposed by the provincial government aim to enable the construction of a greater mix of housing types, while also encouraging the development of alternative housing types. A greater mix of housing types include single family homes, townhomes, and mid-rise apartments in Ontario’s cities, towns and rural communities. Alternative housing types include triplexes and garden suites, which act as a bridge in the gap between single-family homes and high-rise apartments.

Less Red Tape

The Ford government also made a commitment to cutting delays and red tape in the construction of homes by removing exclusionary zoning only permitting a single-detached home per lot. This allows property owners the right to build up to three units without lengthy approval processes and development charges.

Changes to Property Tax Assessment

Furthermore, the province is exploring potential refinements to property tax assessment methodologies with municipal governments. Currently, property tax assessments for affordable rental housing use the same basis as regular market rental properties. Alternatively, the Ford government hopes to refine the method of assessment for providers of affordable housing to better reflect reduced rents received.

To read the full Act, visit: https://www.ontario.ca/page/more-homes-built-faster

Industry Insiders & Economic Analysts Maintain that Canada’s Market Fundamentals Should Reward Investors in the Longer Term

Housing affordability can be defined as the availability of homes to buy and/or rent for all price points. Housing affordability, by this definition, is tighter than ever across Canada. Rising interest rates and sluggish supply chains are posing additional challenges to the construction of new housing at a wide range of prices. CMHC (Canadian Mortgage and Housing Corporation) recently concluded that 3.5 million additional units are needed to meet Canada’s housing demand and relieve the market of soaring prices. This figure is roughly double the current annual housing starts across the country.

Correcting the supply-demand imbalance is the best way to restore housing availability, and the private-sector has a crucial role in filling this gap. As it stands, the private-sector builds 95% of the housing available on the market.

CMHC President & CEO, Romy Bowers, explained that investments in assets tackling housing affordability within the private-sector have great prospects for strong investment returns – particularly when projects are located in density and transit oriented development areas. The strong, continuing demand for housing in proximity to mixed-use, multi-family spaces is flourishing across the country. Bower notes this is especially the case in Montreal, Toronto and Vancouver. Further, Brian Rosen, President & CEO of Colliers Canada, predicts investors will continue to reap strong returns from mixed-use projects that package housing and retail within walkable or easy transit access to workspaces, other services and amenities.

There will be greater interest in “transitioning areas,” which include dead malls and land currently not in a state of highest-and-best-use. Investments in these “transitioning” growth areas will continue to propel forward because there is such a critical, deep need for housing across the country. Rosen suggests a multi-year investment in housing assets in “transitioning” areas will present real growth in returns for investors.

What does this mean for Cacoeli investors?

At Cacoeli, we’ve focused on investing in rental assets in density/transit-oriented growth markets in and around the GTA for nearly two decades. We ensure to steward our investor capital into markets that offer the most potential, and transform that potential into performance. As a result, we’ve had the privilege of sharing above-average returns on our rental real estate investments with our investors for nearly twenty years.

Interested in learning more? Read the full article:

https://www.reminetwork.com/articles/housing-supply-demand-imbalance-set-to-persist/

Multi-Family Rental Investing: Reliability in a Time of Uncertainty

Multi-family rental properties offer a more reliable and profitable investment option versus the common single-family home investment. In this article, we shed light on the pros of multi-family property investments and how they offer a more consistent, reliable and profitable return on investment – particularly in a time of economic uncertainty.

Here are some reasons why:

Stability & Consistency

Markets are unpredictable, and investors seek consistent income. In the case of a single-family home, if a tenant is suddenly unable to pay rent, the responsibility of the mortgage falls back onto the lap of the investor. On the other hand, with a multi-family property, there will always be income. Offering multiple rental units generates several multiples’ worth of additional income. Likewise, the ability to rent out several units also provides investors with multiple opportunities to reduce vacancy rate, allay expenses and offset general risk. Reliable, regular cash flow, appreciation, mortgage pay down, and annual tax advantages make multi-family investing notably less risky.

Facilitates Financing

It is significantly easier to secure one loan for one multi-unit apartment than it is for separate single units. Furthermore, working with one seller and undergoing one inspection is significantly less complicated than managing numerous units across multiple single-family investment properties.

Assistance & Stewardship

Investing in multi-family real estate might sound cost prohibitive, but in reality, these investments are quite attainable and can be relatively hassle-free. With the guidance and assistance of an asset manager, such as Cacoeli, investors can escape cumbersome managerial responsibilities. Multi-unit properties are typically owned by a General Partner (GP), such as Cacoeli. The GP manages all aspects of the investment – from finding the building to maintaining it. Investors can rest assured knowing that a trusted asset manager is stewarding and safeguarding their capital throughout the investment term.

Canada’s Population Could Reach Close to 57M by 2068

The relationship between population and housing is inextricably linked. Population change leads to a changing demand for housing. Population growth, particularly a growth in the number of households, leads to a growth in housing demand. A recent report from Statistics Canada revealed important data on the future of Canada’s population, underscoring the need for more housing and infrastructure projects for the country’s rising population.

Canada’s population is growing faster than other G7 countries:

Canada’s population grew at almost twice the pace of every other G7 country in the last five years. Although growth slowed down with the pandemic, it started to rise again in 2021. By the first quarter of 2022, Canada’s population experienced its highest growth since the 1990’s. In a medium-growth scenario, the data projects that Canada’s population could reach 47.8 million by 2043, and 56.5 million by 2068 in a medium-growth scenario.

What provinces will experience the most growth?

Alberta is expected to have the highest growth in the country. In less than twenty years, its population is expected to increase between 31%-61%. For British Columbia, Ontario and Saskatchewan – population is expected to grow between 11%-40%. Quebec’s population is projected to grow 12%-19%. In the territories, there is an expected population growth around 8%-28%.

On the other hand, Atlantic Canada’s population growth is expected to fall. Newfoundland and Labrador, for example, is the only province forecasted to have negative growth in every statistical scenario.

What does this mean for housing in Canada?

As Canada’s population is expected to become larger and older, experts say this will have huge implications for the country’s housing and health care needs. Mike Moffatt, professor at Western University’s Ivey Business School, says the report illustrates that Canada’s housing supply is “not sufficient to keep up with the growing population.” In order to plan for this level of growth, Canada will have to ensure that homes at all price points are available to accommodate for this speed of growth.

Are provinces and territories prepared for this type of growth?

Given the most extreme housing shortages are most severe in British Columbia and Ontario, Moffatt argued that these provinces are the least prepared to handle the growth. Without clearance and incentivization by policy makers for housing and infrastructure projects, provinces will be unable to accommodate a wide-ranged, rapid, population influx.

Interested in reading the full report?

Access it here:

https://www150.statcan.gc.ca/n1/daily-quotidien/220822/dq220822b-eng.ht

Overview of Rentals.ca Latest Rental Data Report

Rentals.ca released its latest report on the Canadian rental market, covering select areas from January to June of 2022.

We took a look at the detailed, robust report, with a few key take-aways.

Average rents this June are higher than last year:

In comparison to last June, the average rent in Canada is up 9.5%.

Rental prices have experienced 3 straight quarters of annual increases:

Rentals.ca aggregated median rents for all property listings by quarter from Q4-2019 to Q4-2021, to Q2-2022. Median rent for all property types increased by an annual 7%. After seven consecutive quarters of annual declines, rental prices have experienced three straight quarters of annual increases.

Rental apartments best represent the overall conditions of the market:

Rental apartments typically account for about 55% of listings on Rentals.ca, whereas condo apartments for lease make up about 25%. This suggests that rental apartments best represent the overall conditions in the domestic rental market, and act as a good point of reference.

Average rental rates for rental apartments have seen an annual increase of 5%. This stock did not experience the same levels of decline during the pandemic, which is why they have not experienced the same levels of price growth when compared to other rental unit types.

British Columbia & Ontario are the most expensive provinces to rent in:

Average rent data for all property types during the second quarter of 2022 suggest that British Columbia and Ontario had the highest monthly rental rates. This year’s rates were compared to second quarter average rates in 2019, 2020, and 2021. In Ontario, rents increased 18% monthly, and in British Columbia rents increased 25%.

Renters are paying the most for square footage in Vancouver and Toronto:

For all unit sizes, Vancouver and Toronto are paying the highest rents on a per-square-foot basis. The data reports that these cities had the highest average rental rates for apartments, while having the smallest average unit sizes. Many other high ranking cities were municipalities in Ontario.

Higher number of larger units on the market:

The slight decline of average monthly rates in June 2022 is likely due to the changing composition of listings by province. Average unit size for listings across all property types increased in June 2022, suggesting that a higher number of larger units are becoming available and being listed as market demands shift. Tenants are looking to rent larger units as they work and spend more time at home post-pandemic.

Interested in learning more?

Read the full report here:

https://rentals.ca/blog/rentals-ca-august-2022-rent-report

“Strong Mayor” Legislation, Ontario

“Strong Mayor” Legislation Coming to Ontario

The Ontario government is proposing to give mayors of its major cities, such as Toronto and Ottawa, veto powers over bylaws that conflict with building housing. The legislation introduced intends to hand power to cities in the most urgent need of new housing and that are “shovel ready.”

The bill would allow mayors in Toronto and Ottawa to override council approval of bylaws, such as a zoning bylaw amendment. The legislation will also give mayors the responsibility for preparing and tabling the city budget, instead of council, appointing a chief administrative officer, hiring and firing heads of departments (with the exception as the auditor general, police or fire chief). The government’s greater goal is to build 1.5 million homes in 10 years and to build critical infrastructure. It hopes to support efficient local decision-making to speed up development timelines, cut red tape and get housing built faster.

Not all on board:

Although Toronto welcomed the proposal, Ottawa’s government doesn’t entirely support the move. Mayor Jim Watson expressed that more power won’t build more houses. Instead, more money, flexibility in rules, such as inclusionary zoning, which would allow for more construction and greater in certain areas. Furthermore, ending exclusionary zoning would allow for the building of duplexes, triplexes and fourplexes on lots zoned for single-family housing.

Will Premier Ford’s attempt to localize decision-making power facilitate the construction of new housing options for the people of Ontario?

The Ontario Real Estate Association said the strong mayor legislation is a good step, but would like to see it extended to cities beyond Toronto and Ottawa. Overall, Ontario is 1.2 million homes (rented and owned) short of the G7 average, with prices tripling in the last 10 years.

Only time will tell.

Access the full article here:

https://www.cbc.ca/news/canada/toronto/ontario-set-to-introduce-strong-mayor-legislation-to-speed-up-housing-development-1.6546743

Canada’s Housing Market: A Theoretical Paradox?

The Canadian housing market is experiencing the opposite of what is assumed in urban economic theory. This theoretical paradox has causes and consequences. We take a dive into what this means and conclude by providing a potential solution to the paradox.

What does urban economy theory assume?

Urban economic theory assumes housing prices and rents are intrinsically linked. The value of a dwelling is assumed to be the present value of future cash flows (such as rents) generated through propriety. Thus, when rents increase, so should housing prices.

What is the paradox?

Housing prices and sales in Canada are decreasing, while rents are rapidly increasing. The Canadian housing market is experiencing the opposite of what is assumed in urban economic theory.

Take Toronto, Canada’s largest city, as an example. Since 2021, rents for 1-bedroom apartments increased 20%, 2-bedrooms increased by 15.3%, and 3-bedroom units went up by 12.8%. Overall, there has been a 30% decrease in stock availability in the city within a year. This is also taking place beyond major Canadian cities. In Halifax, Nova Scotia, vacancy rents reached less than 1% in 2022. In London, Ontario, rental rates have increased 28.5% in just one year.

What is causing the paradox?

A few key contributing factors can be identified as causing the paradox:

Hikes in Interest Rates: rising rates have increased mortgage rates, causing hesitation and postponement of ownership by aspiring homeowners, resulting in longer than expected stays as renters.

Resumption of Economic Activities: the pandemic forced individuals to isolate at home, but re-openings are causing increased migration back into the city, especially for workplaces.

Students: with higher learning institutions open for on-campus learning, students are flocking back into the city, with heightened demand for student rentals beginning in May 2022.

Immigration: the anticipated arrival of new immigrants as a result of border reopening’s and international turmoil will put increased pressure on the rental market, as this group generally relies on rental housing upon arrival.

Its Consequence?

Although unintentional, the consequence of this paradox is increased pressure on an already tight rental market. With future homeowner postponing purchase decisions, the turnover rate of higher-earning individuals in rental housing is lessening. This group, unwilling to purchase with current interest rates, is now in direct competition with students and immigrants, who oftentimes don’t have alternative housing options within the small pool of expensive Canadian real estate.

The Solution:

Government action at the federal, provincial and local government levels is required, and is key in solving the riddle in Canada’s current rental market. The basis of a solution is through government intervention to incentivize the construction of new purpose-built rental housing. Only through additional measures taken by regulatory bodies, such as lowering development costs and/or offering interest-free loans, will much needed purpose-built rental supply be generated to meet the demand.

Interested in learning more?

Access the Financial Post article here: https://financialpost.com/real-estate/mortgages/prices-are-falling-but-rents-are-rising-in-canadas-paradoxical-housing-market?utm_source=Twitter&utm_medium=organic&utm_campaign=FP_promo#Echobox=1659531563-13

Generation Rent?

Finder’s “Generation Rent” survey suggests that Canada’s rental market will flourish in 2022

A new survey conducted by the financial research firm Finder, known as “Generation Rent,” revealed that a majority of Canadians 18 or older are opting out of homeownership. In a similar survey conducted in 2019, Finder reported that a significant number of Canadians reported no interest in owning a home. Two years later, the survey suggests a sentiment increase of 60%.

Why are Canadians Opting-Out of Homeownership?

The spike in interest rates together with lack of affordable supply are causing more and more Canadians, especially younger generations, to consider renting as a long-term housing solution.

What the Survey Reveals:

The recent survey focused on Canadians with home-buying intentions. The results revealed that only 1 in 10 Canadians remain optimistic about becoming a first-time home buyer within the next 5 years against the backdrop of interest rate hikes. On the other hand, 29% expressed that “renting forever” is a far more realistic option, with 16% of Canadians stating they were no longer interested in ownership, and another 13% expecting to rent for the rest of their lives.

Ramona King, senior finance editor at Finder.com, said “for many, the erosion of housing affordability combined with rising mortgage costs, means the barriers to homeownership appear almost insurmountable – and it’s turning a generation of Canadians into forever renters.”

What this means for Cacoeli:

Multi-family rental housing projects have been, and continue to be, our real estate investment strategy. For over two decades, Cacoeli has focused solely on rental properties in Ontario’s strongest primary and secondary markets. To date, we own and operate over 250 square feet of GTA rental real estate. Our experience has granted the opportunity to familiarize ourselves with the most valuable GTA market trends, planning departments, and local trades personnelle.

Finder’s survey suggests demand for Cacoeli’s asset type is only growing. Cacoeli already has a foot in the door to Ontario’s rental market industry, and we will use this to our advantage in the pursuit of further rental real estate investment projects.

Are you an ultra high networth individual, institutional and/or family office investor looking to tap into Ontario’s growing rental market?

Cacoeli’s Multi-Residential Opportunity Fund is a great opportunity to do so. Made up of 4 properties located in Ontario’s hot-markets, Toronto, Kitchener and St.Catharines, the fund expects to generate a target net IRR of 18% within a 4 year investment term.

Get in touch with one of our team members to find out more!