Proposed Ontario Bill 66 Gets Squashed

In last week’s blog, we outlined proposed Ontario Bill 66, which had a provision in it which would have given municipalities the power to approve commercial and industrial development in protected green spaces. This would have opened the Greenbelt to potential industrial and commercial development – if local municipalities were to approve, and with subsequent Ministerial approval.

Ontario Green Belt
However, after a wide swathe of negative media coverage, strong opposition to the bill from municipal governments across the province, and angst from important stakeholders, the Ontario government changed its mind. After the Ontario Federation of Agriculture (a group friendly to the governing PC party) voiced its nervousness to the Bill and its ‘unworkability’, it was becoming increasingly clear that opposition went across ideological lines. 
Late last week, the Ontario Government stated it would pull the key Schedule 10 provision of Bill 66 (the bylaw giving municipalities power to bypass the Greenbelt Act) from the law. With this move, the government effectively defanged the bill of its most contentious component and showed a novel capacity to change its mind. The announcement came from Housing and Municipal Affairs Minister Steve Clark, one of the government’s most experienced figures.
With these changes, residents of Ontario can have peace of mind that their protected green spaces will not be chopped up. The government will now likely unveil new measures to spur development and increase the housing supply in the province. Tembo will keep its eye on the provincial government very focused, as many structural changes and policy announcements will be unveiled in the coming months given the concocting of a provincial budget in April. 

What Does Ontario’s Proposed Bill 66 Mean For Its Residents?

In early December of last year, the Ford Government introduced a proposed law titled the Restoring Ontario’s Competitiveness Act. The bill is a comprehensive piece of legislation that alters several existing laws and introduces new ones – referred to as an omnibus bill.

 

Bill 66 is receiving increased attention lately given some of its controversial provisions.

Open For Business Zoning

The Bill introduces a new type of zoning, called OFB ZBL (Open for Business Zoning By-laws). This new zoning type is designed to not have to conform to legal standards set out in a number of major provincial environmental and planning laws, such as the Greenbelt Act, the Great Lakes Protection Act, and the Lake Simcoe Protection Act. The provincial government argues that this provision will provide municipalities with the capacity to quickly approve major industrial and commercial projects to create jobs and tax revenue. 

Critics Fear Environmental Impact And Out Of Control Development If Bill 66 Is Passed

Critics, on the other hand, say that the proposed by-law provisions would create the potential for massive environmental degradation and the transformation of protected green spaces into industrial and commercial areas. Water, soil, and air contamination could increase, and municipalities could embark upon aggressively competitive squabbles with each other to attract revenue generating projects.
Some City bureaucrats around the province claim that Bill 66 will upend traditional provincial planning arrangements and lead to out of control development. Tembo is keeping a close eye on the provincial government’s stated move to spur development and construction. Bill 66 has the capacity to alter land values by introducing industrial projects to areas that are designation for safer development. This could have drastic consequences. 

On 2018’s Final Real Estate Stats

For Tembo’s final blog of 2018, we want to leave you with some interesting GTA statistics. All of our predictions for 2019 were outlined in our final newsletter – many of which are beginning to look on point given big falls in the markets marking the end of 2018.

fireworks

Stress Tests Have Kicked In 

Some 100,000 Canadians have been locked out of the housing market because of federally imposed stress tests. Already stringently cautious banks were made even more particular in approving mortgages because of the impact of the federal government’s stress tests. These tests force families with lower than ideal deposits for home purchases to buy insurance to cover their investment and reduce risks.

Pensions Are Pumping Up Real Estate Holdings

Trusteed pension funds have boosted their holdings in real estate by 2.5% to almost $190 billion as 2018 closed. Despite seeming like a small percentage change, this represents billions in added investment. In our last blog and newsletter, we highlighted the importance of real estate to the nation’s wealth, and this stat shows the reliance on real estate to the nation’s trusteed pension funds. All sectors of the economy are all in on real estate, and expect dividends and returns from a continuously healthy real estate market. 

Global Markets Are Falling Fast

stock market crash

The DOW underwent its worst day of Christmas trading in history, dropping over 600 points (3%). The Fed’s decision to increase rates last week was to blame. In addition Wall Street was spooked by news that U.S. Treasury Secretary Steve Mnuchin made calls to the CEOs of America’s biggest banks without authorization from the President to check on their liquidity. This was viewed by many as an act of panic. The contagion quickly spread around the world, with some international headlines using the term ‘panic selling’, for the first time since 2007.

Toronto Home Prices Up In November

Prices for detached homes rose 3.5% to mark the end of 2018, even as listings and sales dropped slightly. We end 2018 with the average price of a detached home in Toronto now hitting some 788K. While listings declined slightly in November and early December, they were still 12% than in 2017. Home prices are still significantly lower from their summer 2017 record highs. 

October Was A Good Month For GTA Real Estate

Positive numbers marked the overall situation for GTA real estate. Both the detached and semi-detached home and condo markets saw positive figures. Condo prices rose 7.5% and semi-detached home prices were up 6.6%. The average selling price for a home rose past the $700K range where it has languished for roughly to hit $810K, This was the first significant increase in prices in over 3 months. 

The positive sale price increases highlight a recovery that is steadily building momentum. Analysts saw the figures as proof that the perennial forces of supply and demand were returning to their general positions in the GTA market. The supply of homes continues to be a significant factor impacting the market – with recent inventory showing a tightening of listings. The slowdown the market saw exacerbated this issue because many prospective sellers are waiting for prices to increase again before listing their homes.
The condo market continues to show its heft. Impressive price figures and demand has not been shaken by government intervention. Higher interest rates in the medium to long term may damage the health of the condo market but it continues to be seen as a haven for young professionals trying to get into the market affordably. The recovery continues. 

The Fed eases off on its tightening

Federal Reserve Chairman Jerome Powell did not signal another rate hike in its most recent announcement this week. The Board was unanimous in its support for the not raising rates. With the U.S. economy absorbing large stimulus through tax cuts, increased government spending, and still very low rates, economic activity and job growth is on the rise. This has strengthened the Fed’s longstanding argument that rates have to be increased.
Caption: U.S. President Donal Trump shaking hands with Fed Reserve Chairman, Jerome Powell at the White House
The big opponent to higher rates has been Donald Trump. Irritated at the propensity for these rate increases to dampen economic growth, the President has vocally attacked the Federal Reserve. He has argued that all of its actions have been ‘wrong.’ It’s a possibility that the Fed’s decision to hold off on rate increases could have been prompted by this language and a desire to placate the President, especially given the U.S. mid-term elections.
The results of these mid-terms has been mixed for the President. On the one hand, his party gained Senate seats and tightened up its control of the U.S.’s upper house. On the other hand, the Democrats won back control of the House, albeit not with the momentum many in the media had predicted. Many key gubernatorial races were also won by Republicans, particularly in the key states of Ohio and Florida. The next two years will be tumultuous and difficult, and the partisan divisions in America will only increase.

On Toronto City Council

Yesterday, the Ontario Court of Appeal ruled that Bill 5, the Legislation passed by Premier Doug Ford’s government to reduce the size of City Council from a planned 47 seats to 25 is the law of the land.

City hall toronto

Bill 5 was originally struck down by Judge Edward Belobaba who argued it violated voters’ Charter Rights. The Court of Appeal harshly criticized the Judge, effectively arguing he went out of bounds by striking down a perfectly legal and constitutional bill.

So What Impact Does Bill 5 Have On The Toronto Council?

Toronto’s upcoming municipal election will see a completely new Council. For the first time in decades, many incumbent Councillors will be facing off against other incumbents in the now larger wards. This will create genuinely competitive democratic races, as many incumbents in the old smaller wards were able to comfortably stay in office for decades using the advantages of incumbency. These 25 total wards now match the provincial and federal ridings for the first time. A Torontonian will now have 1 MP, 1 MPP, and 1 City Councillor all representing the same territory for the first time.
 Doug Ford
The new Council, with fewer Councillors, will be able to make decisions faster. Decision making will be streamlined by having fewer delegates competing for access to the bureaucracy. Toronto City Council is famous for its dysfunction, entitled politicians, and lack of real change. Journalists, academics, public policy experts, and residents have noted this for decades. A smaller Council will eliminate much of the squabbling and endless flip-flopping on major policy files, especially transit and housing, which is the now status-quo.  

A Brief Post-War History Of Real Estate Development

Before 1945 most of the GTA was farmland. Large suburban cities, Mississauga, Vaughan, Maple, Brampton were either small towns, non-existent, or farmland. Toronto was largely relegated to what most now consider the city’s downtown core. Then it was known as Metro. From 1945 to the mid 60s the first true ‘suburbs’ were built. Forest Hill, now Canada’s most affluent neighbourhood tied with Rosedale, was one of them. Government guarantees and mortgage support, along with large scale infrastructure spending facilitated these suburbs.
Downtown Toronto Queen street and spadina 1945
Caption: Major intersection of Queen Street and Spadina Avenue, May 1945. (City of Toronto Archives, TTC Series 71, Item 15135)

The 1950s Real Estate Boom

At the height of the 50s economic boom, the Chair of Metro, effectively the head of Toronto’s development and planning, was Fred Gardiner – the namesake of the famous downtown highway. Gardiner claimed that Toronto was so prosperous and growing so fast that the local government could build whatever it wanted. Gardiner claimed that: “Money is not an issue for us, we have the resources to build whatever we choose.” This strong activist government supported a massive real estate boom. From the 60s to the 80s, much of Scarborough, Etobicoke, and North York were completed. Mississauga began its explosive growth in this period. Over time other suburbs and developments were completed.
Looking southwest from around Jane and Lawrence 1950s
                                   Looking southwest from around Jane and Lawrence 1950s

The 1980s Toronto Real Estate Crash

The late 80s was a time of real estate speculation and overbuilding. This lead to an eventual crash which took 7 years to recover from. From the mid 90s to 2008, the GTA underwent a massive housing and condo boom. This continued after the conclusion of the Great Recession and peaked in the summer of 2017. While significant downturns have occurred, southern Ontario and the GTA have been development and real estate hotspots for almost 80 years running. 
Yonge Street, across from the Eaton Centre and looking north, Toronto, Ontario, Canada
Yonge Street, across from the Eaton Centre and looking north, Toronto, Ontario, Canada (This image is available from the City of Toronto Archives, listed under the archival citation Fonds 124, File 3, Item 130).

Major Toronto Condo Projects For 2018

Toronto’s condo boom continues unabated, the number of construction projects and the lineup of cranes over the skyline continues to grow and impress. In this blog post, Tembo will outline some of the key condo projects that are notable this year.

aqualuna toronto condo

Aqualuna at Bayside is the fourth and last market condominium development proposed for Toronto’s nascent Bayside neighbourhood. The building with peaks of 16 and 15 storeys is designed by Denmark’s 3XN architects for Tridel and Hines.

 

Danish architects 3XN, famous internationally with unconventional and unique designs, have designed interesting twin tower condos on the waterfront called Aqualuna. Additionally, construction of the One tower, Mizrahi’s signature condo megatower at the intersection of Yonge and Bloor, is well underway. This building will have 9 floors of retail space, and several massive luxury condo suites.

 

Mirvish + Gehry project

Mirvish+Gehry is a planned two-tower mixed-use building complex in Toronto, Ontario, Canada. Consisting of two towers, 92 and 82 floors respectively, when completed it will be among the tallest skyscrapers in Toronto and the tallest skyscrapers in Canada.

The Mirvish + Gehry project, an eagerly anticipated collection of massive condos downtown just east of the entertainment district is also underway, with pre-construction planning changes and revisions continuing. Sugar Wharf by Menkes is an assortment of many massive condo projects at Queens Quay East continues, with work ongoing. Massive condo projects are also underway in Peel region (Mississauga and Brampton).
 
Toronto is 16th in the world by the number of towers completed over the height of 150 meters. By North American construction standards, Toronto leads its continental competitors in the number of projects that have been planned. With low rates, a strong economy, and huge demand, Toronto will continue to see projects planned, completed, and underway.

On The Next Mayor Of Toronto

The 2018 Toronto Mayoral election is fully on with the entry of Jennifer Keesmaat into the race.

Toronto’s former Chief City Planner from 2012 to 2017, Keesmaat was well known for her strong voice and outspoken style, unlike other high level public servants. Most expected a quiet, dull race due to the lack of a high profile opponent, with incumbent John Tory set to comfortably win a landslide.

Keesmaat’s “City Building Vision” Agenda

Keesmaat is positioning herself on the left of the political spectrum, in opposition to Tory’s centrist and slightly right-leaning agenda. She is campaigning on an ambitious, positive, expansive ‘city building vision’ agenda with new spending and a bigger role for municipal government. Her first major announcement was a pledge to build 100,000 affordable housing units over 10 years. In response Tory argued that over 20,000 units are under construction now, and that Keesmaat’s office failed to approve a single unit of affordable housing.

Keesmaat Pledges More Affordable Housing

A Keesmaat administration would likely increase spending on affordable housing, shift property taxes up above inflation (Tory has never increased them beyond inflation), and would emphasize enhanced densification, pro-cycling policies, and public transit. Keesmaat’s emphasis on affordable housing will make real estate a crucial and dominant issue in the race, which will good for observers and the housing minded. Although Tory is expected to hold on to power, many high-profile Mayoral incumbents have recently lost re-election; Denis Coderre, former Mayor of Montreal being one of them. An interesting and passionate election is incoming.

June Was Good to Toronto Real Estate

Sales had their best month in over 14 years as growth hit 18% from June 2017 figures.

Toronto Real Estate Update
Prices rose almost 3%, with the average home now exceeding $800,000. Listings also declined, tightening supply and beginning a trend which will benefit sellers in the long term. Overall, numbers in all respects were positive for both buyers and sellers.

Sellers Are Feeling The Pinch

The very strong data comes at an important time when market watchers and participants could use good news after a very tumultuous period. Real estate is under huge pressure from multiple fronts. New insurance rules, extreme conservatism among banks, a higher interest rate environment, and lack of supply hurt buyers. Sellers are feeling the pinch from government intervention which was designed to deflate sky high prices, and which worked. 

Toronto Condo Market Continues To Soar

The condo market continues to do very well, with prices up over 7.5% on average in the city of Toronto. In all, these positive numbers and the move to a healthier market overall is a strong signal which sheds a light on how resilient the GTA real estate market is. Many experts believe these numbers point to a broader, positive long term trend which will hold for the rest of year as long as macroeconomic indicators remain in decent shape. 
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What A New Conservative Government of Ontario Means For Real Estate

Doug Ford’s Progressive Conservative Party won a decisive majority government last week

doug ford

Doug Ford Hands Liberal Party It’s Worst Loss In Years

Doug Ford’s Progressive Conservative Party won a decisive majority government last week, winning 76 out of 124 seats in the Legislature and ending 15 years of Liberal rule. Kathleen Wynne’s governing party lost 48 seats and official party status in the Legislature. It was the worst loss for a governing party in Ontario history and the first time the Liberals ever lost official party status. The last time the Government of Ontario changed was in 2003, Doug Ford’s win is the fifth time this has happened since the end of WW2. With the election over, the challenge of governing will now fall to Premier Ford and those close to him. This blog will analyze the effects of a PC majority government on real estate.

Market, Not Public Forces, Will Prevail

The PCs did not release a fully costed platform with significant detail but consistently voiced a preference to letting the free market sort out housing shortages and real estate matters. Unlike the Liberals and the NDP, the PCs did not show much interest in investing considerable public money into building affordable housing units.

The PC platform states that a PC government will maintain the rent control provisions the Liberal government has introduced. The PCs also mention stimulating the market to increase the supply of affordable housing across the GTA. The Greenbelt is also to be preserved in its entirety.

The PCs are likely to reduce regulation and red tape, simplify permitting for housing construction for developers, and promote both urban densification and suburban sprawl. Taxes on business and developers and trades will fall. Developers and construction companies have generally amicable relations with the PCs and Liberal parties. Former Ontario PC leader Tim Hudak is now the President and CEO of the OREA, the Ontario Real Estate Association.

Throughout the campaign, Doug Ford voiced his desire to scrap the foreign buyer tax and not to introduce a broad Speculation Tax the NDP outlined in their agenda. The new Premier and Government will face many challenges, but the demand for housing and high prices will likely see them introduce a comprehensive agenda to spur market forces.