Data questioned
The release of resale data for the nation’s major housing markets gave grounds for another cheer at the rebound markets staged this summer.
But in a recent preview comment regarding the figures, Scotiabank questioned the underlying data.
It pointed to aspects of how sales data is recorded and how it could lead to the same property being registered as sold more than once; on the other hand, some sales may fall through, something the data is never revised to reflect. Scotiabank also pointed to the inclusion of private sales among the MLS data that typically weren’t recorded in the past.
“It is entirely possible that home resales growth is overstated by multiple percentage points,” the report said, while noting that the glitches don’t diminish the basic fact of a recovery in resales.
The rebound veils what Royal LePage called “the housing market correction no one noticed.”
The trajectory of the market is in keeping with Royal LePage’s expectations, said Phil Soper, CEO of Toronto-based Brookfield Real Estate Services (owner of the Royal LePage brand).
He believes any issue with the underlying data is minor.
“It’s certainly not going to skew results by a full percentage point or something,” he said.
He believes the market is entering a period of stability, barring any major shocks – a nice change from the sharp swings following the 2008 financial crisis.
“[The market] had been a bit of a bouncing ball since the 2008-09 recession – and things had bounced back too hard,” he said. “’11 and the first part of ’12 were overheated markets.”
The past summer saw a recovery from the lull that followed spring 2012 but not in prices.
“Prices are still down year over year or, in some neighbourhoods, up slightly,” Soper said.
However, Vancouver – where activity was up as much as 60% in some neighbourhoods in recent months – may be vulnerable to shifts.
“Stable and the real estate market really don’t go hand in hand in much of British Columbia,” he said.
Street level
Benchmark rent for upscale retail space in Vancouver is back at $200 a square foot in the latest survey of global retail rents from Colliers International.
That’s up 33% from last year, and on par with Saint Catherine Street in Montreal – but still well off the $310 rate space on Toronto’s Bloor Street commands.
But with high land costs and the under-retailed nature of Vancouver, shouldn’t lease rates here be higher?
No, explained Jim Smerdon, vice-president and director of retail consulting for Colliers in Vancouver.
On the one hand, rates in the most expensive markets are driven not by local shoppers but by well-heeled tourists.
On the other, downtown shopping complexes dampen rates for street-front retail.
“The lion’s share of the areas on the top of the list, globally, the values are driven by tourism,” Smerdon said.
And when locals want to shop – and there are many millions more of them in Toronto, the country’s top-priced market, than in Vancouver – they flock to the downtown malls where destination retailers have set up shop.
While property taxes and other operating costs boost rents for street-front retailers, upscale retailers often pay as much, if not more, in destinations such as Pacific Centre – venues that don’t exist in New York and other cities.
The lack of mall space forces top-name retailers to compete for turf on the street, pushing up rents for the best locations.
The same would happen in Vancouver, as well as in Montreal and Toronto, without malls.
“If those malls weren’t in existence,” Smerdon said, “all that money would flow to the street front.”
Global player
Vancouver’s industrial sector ranked 30th in a recent Cushman & Wakefield Ltd. survey of international investment markets.
A total of US$579 million was invested in local industrial real estate in the 12 months ended June 30, 2013, up 36% from a year earlier.
While Toronto, Montreal and Calgary made the global rankings for overall investment volumes, Vancouver edged out Calgary for industrial property after Toronto and Montreal.
Industrial property is Canada’s best-performing sector, yielding an average of 5.5%, Cushman & Wakefield reported. •
