By: Stéphanie Lincourt, CPA, CA, Vice President, Audit, Richter
The real estate market has grown substantially in recent years, but we could well see significant changes in the sector in 2017. Speakers at the Toronto Real Estate Forum in November 2016 explained what they expected for the future of the Canadian real estate market. Here are five real estate trends to watch for in 2017:
1 – A resurgence of rental housing
One of the most significant trends in the market is the uptick in the residential rental sector. That marks quite a change in Canada, because condominiums have dominated the field in recent years. But a clear trend is emerging: consumers are now looking for luxury rental accommodations. Instead of owning condos, which require maintenance and participatory administration, consumers are more and more opting for high-end apartments that come with an entire range of turnkey services.
There are few turnovers in the high-end residential rental sector. This is a high-stakes market where the players are jockeying for position, and that should increase the value of large apartment buildings.
2 – The Trump effect
Will the election of Donald Trump have a positive or negative effect on Canadian real estate? We can reasonably expect it to be positive on two fronts. First, for Canadian companies in the construction sector, potential protectionist measures could mean a reduction of the American presence in Mexico, which could open doors to Canadian engineering firms and construction companies.
Second, the election of Donald Trump could mean more immigration to Canada, which in turn could lead to greater demand for apartments here—good news for real estate investors!
3 – Too much construction?
Is there too much construction on the Canadian market? A stroll through the endless cranes in Toronto’s downtown seems to indicate that the market has reached saturation point. What should be done? Define your target clientele and market very specifically and invest in areas that will maximize the potential of your investments in the target sectors. Even in very competitive markets like Vancouver or Toronto, some shopping centres succeed by seizing clearly defined opportunities.
4 – Montréal is on the rise
The Montréal market is still relatively unknown to foreign and Canadian real estate investors, but that could change in 2017. This market is still affordable and is growing steadily. The more difficult circumstances in other large Canadian markets may well lead to greater investments in Quebec’s metropolis in 2017.
5 – Interest rates: going up in the south, stable in the north
Interest rates are of course a key factor in real estate market movement. Two different trends may emerge in 2017. According to our most recent survey of bank forecasts: foreign exchange and interest rates, rates should go up in the United States and remain stable in Canada. All the major Canadian banks are predicting that the overnight rate will stay at 0.50% in Canada in 2017, while the U.S. federal funds rate will go up. According to Scotiabank, U.S. federal funds could go as high as 1.50% in December 2017, after posting 0.41% in December 2016.
Other factors need to be watched too, such as the change in the retail trade sector, which is crucial for commercial real estate. Stay tuned. We are in for some surprises in 2017!
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About Richter : Founded in Montreal in 1926, Richter is a licensed public accounting firm that provides assurance, tax and wealth management services, as well as financial advisory services in the areas of organizational restructuring and insolvency, business valuation, corporate finance, litigation support, and forensic accounting. Our commitment to excellence, our in-depth understanding of financial issues and our practical problem-solving methods have positioned us as one of the most important independent accounting, organizational advisory and consulting firms in the country. Richter has offices in both Toronto and Montreal. Follow us on LinkedIn, Facebook, and Twitter.