Several challenges continue to concern real estate professionals but there is still optimism for the sector in the year ahead.
A new report from PwC Canada and the Urban Land Institute shows that the industry’s concerns include tariffs and interest rates which could further weaken affordability.
For those developers, investors, lenders and other leading experts involved in the residential real estate sector, land supply is the top concern heading into 2019.
“Dealing with the affordability issue is a shared responsibility between government and developers. While government addressed demand by introducing measures like tighter mortgage rules and foreign taxes, they neglected the supply side,” says Frank Magliocco, National Real Estate Leader, PwC Canada. “Reducing regulation and making more land available for development in a timely manner will help address the affordability issue.”
With the proportion of household income needed to service the costs of a single-family home rising to 53.5% in the first quarter of 2018 (and as much as 119.3% in Vancouver), the impact of rising interest rates and tariffs on steel are also large concerns.
For the commercial real estate sector, multi-family remains strong along with industrial, which should benefit from demand for growing facilities for Canada’s burgeoning cannabis sector.
The struggles for retail continue as the sector faces more competition from ecommerce. This sector is being forced to reinvent itself.
Coworking space is driving demand in the office sector and is projected to make up 30% of corporate real estate portfolios by 2030.
There is also growth expected in the seniors sector with the aging population driving demand for this housing type.
Technology continues growth
Despite growth in the PropTech sector, including new lending platforms and digital real estate brokerages, just 10% of executives said they were concerned about the speed of technological change.
According to the report, PropTech is forecasted to add US$5.2 billion in new investment globally across 454 equity deals in 2018, after reaching a record US$3.4 billion in 2017 across 367 deals.
Drones are considered the top tech disruptor for the real estate sector, the poll found, followed by autonomous vehicles, cybersecurity and construction technology.