Month: January 2018

24 Jan

Broccolini buys $100M slice of downtown Montreal

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Posted by: Frederic Pichette

Construction and real estate development firm Broccolini has acquired more than 135,000 square feet of property in the heart of Montreal.

Construction and real-estate development firm Broccolini announced Friday it has acquired more than 135,000 square feet of property in the heart of Montreal in a $100-million deal the firm says gives it the largest plot of developable real estate in the downtown area.

“It is exciting, there’s no two ways about it. There’s many things that you can do on that site,” said Roger Plamondon, the president of Real Estate Development and Acquisitions at Broccolini.

The area — covered now by parking lots, framed by Robert-Bourassa Blvd. (formerly University St.) and St-Jacques, Notre-Dame and Gauvin Sts. — is slated for office, residential and commercial development.

“You’ll find all the uses. I don’t think the site will be dedicated to just one use,” Plamondon said.

However, he said it was too early to talk about what any potential development would look like.

“This is Step 1, getting and securing the site. And then Step 2 is to put our collective heads together and put something together, that will be fun,” Plamondon said. “At the end, the market will dictate where everything is going to go.”

He said the company plans to meet with city staff early next week to discuss plans.

Kirkland-based Broccolini already has projects in the area. This month, the company plans to break ground on a 35-storey residential development on the other side of Gauvin St.

Plamondon said high sales of units in that project, 628 Saint-Jacques, reinforced Broccolini’s interest in the neighbouring site.

Farther west, a 50-storey development is planned near the Bell Centre. Broccolini is also owner and builder of the new Radio-Canada complex at René-Lévesque Blvd. and Papineau St. All of these projects are in the Ville-Marie borough.

“We have a track record with the borough. We’ve had excellent co-operation with the borough staff,” he said.

While Plamondon said the high price tag of the land has raised some questions, he expects the transaction to be profitable.

“If you look at the density factor that’s permitted on that site, we can build about 1.5 to 1.6 million square feet of space on that site, so when you factor that back into the equation, the transaction is priced at a very competitive rate in the marketplace and therefore we are very confident that it will be profitable,” Plamondon said.

“We’re very bullish on Montreal,” Plamondon said. “We think Montreal has amazing qualities and attributes to bring to the party.”

With a file from Presse Canadienne

17 Jan

Canada’s six biggest banks accused of rigging rate to boost profits

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Posted by: Frederic Pichette

The proposed class-action dispute, which names six Canadian banks and three foreign lenders, alleges the CDOR violations took place for almost seven years

A Colorado-based pension fund accused Canada’s six biggest banks and three foreign lenders of conspiring to manipulate a Canadian interest rate benchmark to boost “illegitimate profits” on derivatives trades for several years until 2014.

The Fire & Police Pension Association of Colorado alleged in a New York court filing that the banks sought to boost their earnings from derivatives trades by manipulating the Canadian Dealer Offered Rate, or CDOR, a benchmark lending rate. The alleged violations, including conspiracy under the U.S. Sherman Act and manipulation of the Commodity Exchange Act, took place for almost seven years, according to the filing.

The proposed class-action dispute names Toronto-Dominion Bank, Royal Bank of Canada, Bank of Nova Scotia, Bank of Montreal, Canadian Imperial Bank of Commerce and National Bank of Canada, as well as HSBC Holdings Plc, Bank of America Corp. and Deutsche Bank AG. All the banks declined to comment on the matter.

The fund, which manages about US$4.66 billion, claims banks “reduced the amount of interest owed,” resulting in investors paying more or receiving less than the amount generated through trading derivatives based on CDOR. The pension fund said it made US$1.2 billion in CDOR-based derivatives trades over the period.

SUPPRESSED RATES

“Defendants conspired to suppress CDOR by making artificially lower submissions that did not reflect the true rate at which they were lending Canadian dollars in North America,” according to the Jan. 12 filing in U.S. District Court for the Southern District of New York. “Economic analyses show that defendants consistently made CDOR submissions well-below prevailing Canadian dollar money market rates, inexplicably offering to lend for less than what it cost them to borrow funds.”

The banks held on average more than US$1 trillion in CDOR-based swap contracts with U.S. counterparties during the period covered by the class-action suit, according to the filing.

Representatives for the Canadian Bankers Association, the Investment Industry Regulatory Organization of Canada and the Office of the Superintendent of Financial Institutions declined to comment.

CDOR is the interest rate benchmark used to set terms on short-term loans of less than a year. It’s set by Thomson Reuters each day based on submissions from the banks and used to determine rates on bankers’ acceptance contracts.

CANADA RESPONSE

Canadian regulators took steps to prevent any potential manipulation of the rate in the 2014 in the wake of allegations that global banks had rigged the Libor benchmark in the U.S. and Europe.

OSFI, as the bank regulator is known, said in 2014 that it would begin supervising the governance and controls surrounding the banks’ CDOR submission process and outlined expectations for their work, including providing rates in a consistent manner.

Royal Bank was among 16 global banks sued by the U.S. Federal Deposit Insurance Corp. in 2014 for its role in manipulating the London interbank offered rate from 2007 to 2011. Royal Bank of Canada continues to face litigation risk from Libor-rigging investigations, according to Bloomberg Intelligence.

* The case is Fire & Police Pension Association of Colorado v. Bank of Montreal, 18-cv-00342, U.S. District Court, Southern District of New York (Manhattan)

Bloomberg.com

15 Jan

Bank of Canada: New Mortgage Rules Could Disqualify 10% of Buyers with Big Down Payments

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Posted by: Frederic Pichette

The Canadian federal government is introducing another round of new mortgage rules to help cool markets like Vancouver and Toronto. The new rules could disqualify around 10% of prospective buyers who have down payments of 20% or more, according to the Bank of Canada.

Key Takeaways

  • Bank of Canada is tightening lending regulations
  • New rules could disqualify 10% of prospective buyers with big down payments
  • Those buyers would be subject to passing a mortgage stress test
  • Main threats to Canadian housing are still rising household debt and overheated house prices

Brief

After a strong round of tightening mortgage lending regulations and raising interest rates, the Canadian federal government is introducing another set of regulations that targets buyers with down payments of 20% or more.

The new regulation would require those buyers to pass a stress test, in which they must prove they could still afford their mortgage payments if raised were raised two percentage points. The regulation, which already exists for buyers with down payments of 20% or less, would affect about $15 billion a year in new borrowing.

Although the new changes are not as drastic as previous regulations and rate increases, they could still disqualify up to 12% of borrowers in Canada’s two hottest markets – Vancouver and Toronto. Any dramatic changes to the housing market will likely require a significant rate increase. “The new rule will have some impact, but it is unlikely to derail the housing market on its own. We’ll need higher rates for that,” said Bank of Montreal economist Benjamin Reitzes.

Some are interpreting this latest round of regulations as a sign that Canada’s hottest housing markets still need federal help cooling down. The Bank of Canada, however, recently published its first review in a long time that made some optimistic market predictions. “The Bank of Canada sees things moving in the right direction,” noted Toronto-Dominion Bank economist Brian DePratto.

“Our financial system continues to be resilient, and is being bolstered by stronger growth and job creation, but we need to continue to watch vulnerabilities closely,” added Governor Stephen Poloz in a statement accompanying the bank’s Financial System Review.

Many economists backed up the positive sentiment, saying all the new regulations and change in the past year could curb home sales in 2018. The Canadian Home Builders’ Association expects recent changes to reduce total house transactions by 10 – 15% next year.

9 Jan

‘It’s on fire’: Montreal home sales growth soars past Toronto, Vancouver for first time in 20 years

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Posted by: Frederic Pichette

Montreal was one of Canada’s hottest real estate markets last year as low unemployment and economic growth translated into the area’s best sales growth in a decade.

Total sales in the Greater Montreal Area increased eight per cent to 44,448 on the strength of condominium sales and good overall activity on the Island of Montreal.

Sales growth exceeded 20 per cent in five of the city’s most popular boroughs.

That compared with sales decreases of 18 per cent in the Greater Toronto Area and 10 per cent in Greater Vancouver.

Unlike Toronto and Vancouver, Montreal doesn’t have a foreign buyers tax.

More than 14,000 condos changed hands across the Island of Montreal and nearby communities during the year, marking a 17 per cent increase from 2016.

“It’s on fire,” said Paul Cardinal, manager market analysis for the Quebec Federation of Real Estate Boards.

The overall sales growth far exceeded his expectations. He said the last time growth in Montreal sales outpaced Toronto and Vancouver was in 1998.

Cardinal thought new mortgage rules implemented in the fall of 2016 would impair the number of first-time buyers and reduce the total number of transactions.

But Quebec’s best consumer confidence in 15 years and a high number of permanent residences stimulated demand and compensated for the new rules and higher mortgage rates during the summer.

Transactions of single-family homes rose three per cent to 25,601 while sales of buildings with two to five units increased six per cent to 4,336.

Demand was particularly strong for luxury accommodation. Sales of homes exceeding $1 million rose 20 per cent in Greater Montreal and condos priced above $500,000 were up 42 per cent.

The total value of sales grew 13 per cent to $16.2 billion, about half of which was on the Island of Montreal.

The average price of homes in the Greater Montreal Area increased nearly six per cent to $364,510. That was the largest increase since 2010, with single-family homes sustaining the greater price increases.

Prices rose 6.1 per cent to $467,496 on the Island of Montreal, which includes Canada’s second-largest city and suburbs.

Cardinal said the number of foreign buyers, particularly from China, has grown but remained marginal overall. They were mostly concentrated in wealthier neighbourhoods and the downtown core.

He said Montreal is attractive for foreign buyers because the city provides a high quality of life, affordable housing, low pollution and a university system that contributed to it being named last year as the best city in the world for students.

Direct flights to two major Chinese cities have also made it easier for family visits.

Cardinal is forecasting another strong year in 2018 with the number of sales transactions increasing five per cent.

“That would lead us to a new record so we would beat the 2007 mark,” he said.

Average prices are also expected to increase almost five per cent.

Montreal capped a strong year with total sales across Greater Montreal increasing 10 per cent to 2,781 in December. That included a 35 per cent increase in condo sales. Total active listings fell nine per cent from a year ago.

While sales on the Island of Montreal increased 15 per cent, it was outpaced by Laval at 20 per cent and on par with the south shore.

2 Jan

Foreign buyers are small portion of home and condo owners in Canada: CMHC

Latest News

Posted by: Frederic Pichette

Jordan Press, The Canadian Press
Published Tuesday, December 19, 2017 9:23AM EST 
Last Updated Tuesday, December 19, 2017 3:44PM EST

OTTAWA — The country is getting a clearer picture of the level of foreign cash in some of the hottest housing markets, adding more statistical fuel to the debate about how much influence foreign buyers have in driving prices to unimaginable heights and what should be done about it.

The new housing statistics by Canada Mortgage and Housing Corp. and Statistics Canadashows that foreign buyers owned 3.4 per cent of all residential properties in Toronto and 4.8 per cent of residential properties in Vancouver.

For condos, CMHC says foreign buyers owned less than one per cent of the condo stock in 17 metropolitan areas across the country.

RELATED STORIES

The data also show foreign-owned homes are more expensive than those owned by Canadian residents.

Graham Haines, research and policy manager at the Ryerson City Building Institute, said the foreign buyer data hint at larger issues about speculation in the real estate sector, making it the canary in the coal mine of a growing affordability problem.

“Investors in the real estate market are the same no matter where they’re from, whether they’re Canadian or foreign investors,” he said.

“What we’ve seen since 2010 is there is a lot more investment and speculation happening in the real estate market no matter where those people are coming from.”

Which raises the question for policy makers: What to do now?

Experts are split.

Doug Porter, chief economist at BMO Financial Group, said the low proportion of foreign buyers nationally doesn’t mean their influence in the housing market is just as small. Even a small percentage of new buyers in a market that is already stretched can have large ripple effects, he said.

“These numbers, especially in Vancouver, might be a little bit lower than I might have guessed, (but) it’s still a very significant portion and to me this does show how foreign investors are a very big part in driving these markets.”

David Madani, senior Canada economist at Capital Economics, said the data suggest the influence of foreign buyers isn’t the primary driver of housing prices. More pressing is excessive mortgage credit from domestic banks and less-regulated non-bank lenders, as reflected in Canada’s high level of household debt, he said.

A spokeswoman for Finance Minister Bill Morneau said future data releases will drive any future policy decisions.

“We have always stressed the need for reliable data in order to make evidence-based decisions when it comes to protecting what is, for many Canadians, the most important investment they will make,” Chloe Luciani-Girouard said.

The data released was the first in a multi-year effort to create the most comprehensive database of homes and owners. The plan is to have data on some 5,000 municipalities by the end of 2022, with more data on sales and country of origin among other variables.

The next set of information is set to be released next spring.

Tuesday was the first view of the stock of housing in the census metropolitan areas of Toronto and Vancouver, which combined included 45 municipalities, and 15 additional metropolitan areas surveyed by CMHC.

The two agencies found that foreign investors have an appetite for newer model condominium apartments in Toronto and Vancouver.

CMHC survey data showed that non-resident ownership rates hovered at 1.2 per cent in Toronto and Vancouver in buildings built before 1990, but jumped to 4.3 per cent in Vancouver for anything built between 2000 and 2009, and 4.1 per cent in Toronto for anything built since 2010. That means those units may not be available for local residents in need of a home or rental unit, Haines said.

“It seems like a relatively small number, but when we talk about vacancy rate in the rental market, anything below three per cent is a big deal,” he said.

And there are hints foreign buyers are finding new markets in which to invest, particularly Montreal. The CMHC survey found the city’s Nun’s Island had the largest increases in the share of non-resident owners over the last year, climbing from 4.3 per cent in 2016 to 7.6 per cent this year.

CMHC believes that part of the increase in Montreal overall could be related to investors trying to avoid the 15 per cent foreign ownership tax in Toronto and Vancouver. Another explanation could be that new foreign investors see Montreal as an undervalued market ready to take off, Porter said.

Montreal Mayor Valerie Plante is now lobbying the Quebec government for the powers to tax foreign owners similar to Toronto and Vancouver.

“I’m not planning on putting a tax, I’m planning on getting the power from Quebec to create a tax if necessary. This is still in the plan,” she said.

— With files from Morgan Lowrie in Montreal.