Global investors sensing opportunity in Canada’s housing shortage

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Canada’s housing shortage is starting to attract the attention of global investors, who will likely favor Canadian multifamily properties in 2024, a major real estate investment management firm says.

Colliers’ 2024 Global Investment Outlook Report predicts that international investors will recognize an opportunity as Canada’s high immigration increases demand for housing and exacerbates the imbalance between available housing and the needs of the growing population.

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Statistics Canada reports that from 2016 to 2021, Canada’s population growth almost doubled that of the second fastest-growing G7 countries, the United Kingdom and the United States, and was almost five times higher than that of France and Germany.

Earlier this month, the federal government said it would stick to its goal of welcoming 485,000 permanent residents in 2024 and move toward an ultimate goal of 500,000 by 2025.

The Colliers report identifies Calgary, Vancouver and Toronto as Canada’s top investment cities and finds that while overall rents have failed to keep up with rising market prices, there remains significant value and potential for investors in apartments and condominiums that have none Subject to rent control.

“Despite low tenant turnover dragging out this mark-to-market realization, the multifamily sector remains extremely attractive to investors,” the report said.

Adam Jacobs, senior national director of research at Colliers, said investors are starting to turn away from traditional assets like office space.

“If you’re an investor, you look and say, ‘Maybe even a reasonably wealthy person can’t afford a house,'” he said. “In terms of supply and demand alone, apartments here seem to be quite an attractive investment. There have been so many ups and downs for offices, which are perhaps the more traditional institutional ownership, but people are showing a lot more interest in apartments. Investors think, ‘This has to be guaranteed.'”

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Population growth and high immigration rates mean the next few years are likely to be “safe,” he added.

Although global interest in the multifamily housing market is growing, Jacobs said many incumbents, including key players in the Canadian institutional sector, have remained on the sidelines for an extended period of time.

However, that is starting to change.

“We are starting to field calls from clients who want to be notified when distressed assets come onto the market,” said Lucas Atkins, president of capital markets at Colliers.

“There is research that says there is actually a lot of money that can be invested in real estate. “The problem is simply the inability to agree on the price and the stalemate around it,” Jacobs added.

The realization that high interest rates are here to stay for some time, as evidenced by statements from the U.S. Federal Reserve and the Bank of Canada, should give Canadian investors the reassurance they need to come off the sidelines.

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“If that’s the case, we need to make some adjustments and start doing some business again rather than just waiting for the rate cut,” Jacobs said.

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