The Weekly 411

TLDR:

🤑 Tarion to Pay Out $90 Million for Lost Homebuyers' Deposits

😣 Rent-to-Own and Co-Ownership Gains Popularity for Canadians Unable to Afford Homes

🌇 2024 Marks Record Low for GTA High-Rise Condo Launches

📈 Canada's Economy Grows 1%

📉 OMERS Reports $1.5 Billion Real Estate Loss

🤑 Tarion to Pay Out $90 Million for Lost Homebuyers' Deposits

• Tarion, Ontario's home warranty provider, expects to pay out $90 million in 2024 to cover deposits lost due to builder failures.

• The claims are expected for deposits from homebuyers who purchased homes or condos from builders that either projects

• Despite the huge increase, Tarion says it will be able to cover valid claims and pay the deposit claims under the warranty program.

• Homeowners in Ontario receive protection worth up to $60,000 for homes sold below $600,000 and 10% of the sales price to a maximum of $100,000 for homes sold above $600,000.

Why This Matters: Developers are abandoning projects or filing for bankruptcy due to high-interest rates and rising construction costs. Builders must provide a warranty on all new homes built in Ontario, and if they fail to deliver a home to the purchaser and can't refund the purchaser, a deposit claim can be made by the purchaser. 

😣 Rent-to-Own and Co-Ownership Gains Popularity for Canadians Unable to Afford Homes

• Alternative avenues for homeownership include rent-to-own and co-ownership models.

• Over the next 5 years, alternative paths to homeownership are expected to increase by 8 to 10% in the Greater Toronto Area (GTA).

• 13% of current or prospective homeowners have already purchased a home using alternative methods, while 32 percent are actively exploring these avenues

Why it Matters: Alternative paths to homeownership are particularly popular in areas experiencing significant influxes of newcomers. The increasing interest in alternative methods of homeownership reflects people's determination to achieve their dreams of homeownership in the face of affordability challenges.

🌇 2024 Marks Record Low for GTA High-Rise Condo Launches

• The Greater Toronto Area (GTA) has experienced a record-setting absence of high-rise condo launches in 2024.

• No other year on record has gone this far into February without a high-rise launch.

• New condo apartment sales in October were down 29% from the 10-year average, resulting in 16,362 units of unsold inventory. By December, new condo apartment sales plummeted 66% from the 10-year average.

• Low- and mid-rise pre-construction homes have had more success, prompting a few new projects to come onto the market this year.

Why This Matters: This highlights the current supply shortage of high-rise condos in the Greater Toronto Area (GTA), which could affect real estate investors and home buyers looking for desirable living spaces or investment opportunities. With no new high-rise builds launched in 2024, the limited availability of these properties is creating scarcity in the market.

📈 Canada's Economy Grows 1%

• Preliminary data shows that Canada's economy expanded by 0.4% in January.

• The Canadian economy grew at a 1% annualized pace in the fourth quarter, surpassing expectations and the Bank of Canada's forecast of zero growth.

• Strong oil exports and reduced imports fueled Canada's economic growth in the fourth quarter.

• Economists widely expect the Bank of Canada to hold policy rates steady at 5% for a fifth straight meeting, with the next rate decision scheduled for March 6.

Why This Matters: The economy's upward trend signals potential benefits for Canadian real estate investors. Improved economic performance may boost consumer confidence and demand for real estate, potentially increasing property values. This positive economic outlook could prompt earlier-than-expected interest rate cuts by the Bank of Canada

📉 OMERS Reports $1.5 Billion Real Estate Loss

• The office sector, which accounts for 21% of OMERS' real estate portfolio, faced challenges as negative market sentiment impacted valuations despite low vacancy rates.

• The loss was primarily due to the impact of interest rates on property portfolio valuations, resulting in a net investment loss of $1.5 billion in real estate investments for the year.

• The underperformance in real estate and private equity, with returns dropping from 13.7% to 3.9%

• OMERS' real estate investments decreased from CAD 21.2 billion in 2022 to CAD 19.4 billion by the end of 2023