Amid turbulent market conditions, multifamily assets have remained an attractive option for investors, with many looking for both value-added properties and new builds to add to their portfolios.
On Wednesday, Toronto hosted the Canadian Apartment Investment Conference, where panels of multifamily industry leaders addressed issues plaguing the apartment sector and where they’re seeing bright spots amidst headwinds.
From the restrictive effects of rent control to recent upticks in buyer activity, here is Green Street News’ roundup of the key takeaways from the event.
Multifamily buyers are hungrier
Buyers have come back in a big way in 2024, gaining substantial ground on last year’s dampened activity. Mark Goodman, founder of Goodman Commercial Real Estate, noted that in the first six months this year, there was a 69% year-over-year increase in sales volume and a 59% year-over-year increase in the number of multifamily trades.
Jandip Deol, a principal with Avison Young’s multifamily team, highlighted a recent Alberta apartment sale his team completed that drew 11 qualified bidders.
“Groups are hungry, and they’re all pens up,” Deol said.
Thierry Samlal, an executive vice president at Montréal-based PMML, agreed that buyers are ready. He anticipates an “extreme quantity” of sales volume that will pull prices up 20% to 25%.
CMHC is being choosy
Though many speakers highlighted the benefits of financing through Canada Mortgage and Housing Corp., they also shone a light on several sore spots.
Lengthy finance processing timelines clogging up the pipeline and changes to qualifications for the MLI Select program were raised a number of times, but CMHC being very selective in terms of in what geographic regions it will provide project financing also was a talking point.
“From personal experience, I have [seen] CMHC denying some tertiary markets,” said Derek Townsend, owner of Citifund. “If CMHC doesn’t have data on a specific city, they’re looking at denying files even when the strength of the borrower is extremely strong [and] the history with CMHC is extremely strong.”
Asked whether CMHC’s risk-averse approach of not wanting to finance in smaller, less established cities is going to affect supply, Paula Gasparro, vice president of real estate finance at CMLS Financial, said “definitely.”
Reliance on immigration-related demand needs to shift
The federal government’s recent restrictions on international students reportedly have already affected student-centric rental markets. With limits now coming to the number of temporary residents allowed into the country, rental housing providers may need to rethink their strategies.
“If your models depend on a rapidly growing population in the short term, at least, I suspect that the politics is going to make that very hard to happen,” said David Coletto, founder and chief executive of Abacus Data.
He noted, however, that immigration likely will come back as supply rebalances.
Rent control: “Public enemy number one”
The oft-discussed issue of rent control once again reared its head, with Sam Kolias, chief executive of Boardwalk REIT, dubbing it “public enemy number one.”
He reiterated that rent control discourages new construction and highlighted provinces without rent control, like Alberta and Saskatchewan, where apartment construction is on the rise.
“One of the best policies to create the most amount of affordable housing is no rent control, and our premiers in both Alberta and Saskatchewan understand the law of supply and demand is not a theory, it’s a law,” Kolias said. “When we create competition, we create the most affordable housing.”
Deregulating rent controls in Ontario and Quebec would encourage a wave of new investment, he said.
