apartment lending

Investor interest in rental properties remains high

Thursday, May 23, 2019

Altus Group released its latest Housing Report highlighting recent sales activity across Canada. The insights garnered from the range of proprietary data produced by Altus indicate that investor interest in rental properties remained high in 2018.

Covering the range of housing sectors for major markets across Canada, purpose-built rental properties emerged as a compelling investment sought for its steady returns. Almost 1,100 rental apartment buildings comprised of over 40,000 suites were sold in the markets tracked by Altus Group, for a total purchase price of over $8.4 billion (27% higher than in 2017).

The average per suite price was $350,000 in Vancouver and $285,000 in the GTA. And while higher prevailing rent levels played a role in the higher unit prices in these markets, according to Altus, that is only part of the story – lower cap rates suggest buyers were willing to accept relatively lower initial income to acquire properties in these prime rental markets. Transaction cap rates were lower in most markets in 2018 compared to 2017, the exceptions being Calgary and the GTA. Prices per suite increased the most in Edmonton, Ottawa and Montreal.

Other highlights from the report:

  • Sales of new condominium apartments totaled just over 48,500 units in 2018, down 21% from the almost 62,000 sales in 2017. The GTA accounted for almost half of sales in the markets covered. New condo apartment sales climbed for the third year in a row in Montreal, to the highest level yet recorded.
  • 1 in 5 recent homebuyers were self-employed, with a higher proportion in the new home market.
  • About 4% of Canadian homeowners aged 50 years or older indicated they were planning to buy a residential property in the next year. However, just 2% went on to do that.
  • Detached homes accounted for about 7 in 10 freehold sales in Calgary, with front drive homes more prevalent than laned product.
  • The total number of residential units in applications submitted last year was down slightly from 2017 for both Vancouver and Toronto, with Toronto following a much sharper drop in 2017.
  • More than half of developer respondents in each major region cited project cost escalation as being among their biggest challenges, with trade and labour shortages also cited as a concern for many developers, particularly in Ontario and Quebec.

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