MARKET TRENDS: JULY 2022

“Fundamentals in the top asset classes continued to strengthen in Q1 2022 and the sectors most impacted by COVID have also shown signs of recovery, albeit on a more stop-and-go basis. The record-setting pace of real estate investment activity seen over 2021 spilled into the new year, with most markets reporting no signs of a slowdown in the first quarter.” (Paul Morasutti, CBRE)

“While Q1 2022 brought a general sense of cautious optimism that the worst of the pandemic had passed, global geopolitical and financial market uncertainty soon emerged to replace COVID as the primary concerns on the minds of many heading into the spring. The Canadian real estate market appears to be on stable footing at this time, however, investors are monitoring both the conflict overseas and rising bond yields and interest rates intently.” (Paul Morasutti, CBRE)

When the COVID pandemic started in 2020 the bond yields on the main benchmarks used by Canadian banks to determine borrowing rates on commercial financing reduced drastically to such low levels that have never been experienced since WWII. The yields for some time were below 0.70% for 5 years and 0.80% for 10 years.

With inflation rising to levels not experienced in over three decades combined with the invasion of Ukraine by Russia in early 2022 we are now experiencing a rapid rise in the benchmark yields with the 5-year bond yields now over 3.3% with some additional factors now leading to the possibility of even higher rates to come in the next several months.

The Residential Multi-Unit asset class continues to see exceptional levels of investment activity in the 1st quarter of 2022 and looks to benefit from increasing interest rates as some potential buyers of homes and condos are now unable to qualify for mortgages required to purchase their own property. Prices of the Residential Multi-Unit asset class have performed well in the past few years; even under the exceptional circumstances of COVID-induced lockdowns.

ASSET CLASS FEATURE: MULTI-FAMILY RESIDENTIAL

  • Conventional mortgages up to 75% LTV
  • Amortization up to 25 years for conventional mortgages
  • Insured mortgages up to 95% LTV
  • Amortization up to 50 years for insured mortgages
  • Insured mortgages may include a non-residential component
  • Construction Financing is also available for new projects or even renovations
  • Favourable terms are provided for buildings which promote energy efficiency and accessibility.

MULTI-FAMILY CAP RATES

Cap rates for Residential Multi-Units experienced record low levels in every region across the country in the 1st quarter of 2022; including Low Rise of either Class A or B categories.

*Source: CBRE Q1 2022 Report

For a complete list of CAP rates for Residential Multi-Unit across the country or for other asset classes please click here.