The year ahead is set to be a broadly positive one for the Canadian real estate industry but there is some concern about government policy changes, housing affordability and technology disruption.
A new report from PwC Canada and the Urban Land Institute shows that developers, investors, lenders and other leading experts are cautiously optimistic about 2020.
They see the best bets for next year in “beds and sheds” – mid-priced apartments, transit-orientated development, and warehousing and fulfillment centres.
For the residential sector, respondents noted the rise of alternative lenders in response to the mortgage stress test, leading to higher risk for both the market and consumers.
"There is a better way to achieve a responsible use of land that addresses affordability concerns, and it's not from current attempts, like the stress test, to temper demand," says Richard Joy, Executive Director, Urban Land Institute (ULI) Toronto. "We need innovative solutions for supply constraints and city building issues. I expect the real estate industry will be waiting to see how future developments will be impacted after Canadians go to the polls in October."
Respondents are also concerned about supply for the residential sector and cited construction costs and the approval process among the issues for 2020. They want government to do more.
"Governments must recognize that increased supply can help address the affordability issue and be willing to embrace innovative ways of unlocking a supply-constrained market," says Frank Magliocco, National Real Estate Leader, PwC Canada.
For the commercial sector, the shift in both working and shopping trends are changing real estate requirements but there is opportunity among the disruption.
"The rise of e-commerce doesn't necessarily mean the end of the brick-and-mortar presence, and in fact retail remains an important solution to last-mile delivery," adds Magliocco. As online shopping continues to grow in Canada, the need for dedicated space for deliveries, including cold storage for food deliveries, is an emerging trend in the multifamily residential sector.
Overall, the top five markets to watch in 2020 are: Vancouver, Toronto, Montreal, Ottawa and Halifax.
Proptech investment record
The report forecasts that investment in property technology – including that which is focused on lending and construction – will soar to a record high of $6.3 billion by the end of 2019.
"Digitization, including the rising use of the Internet of Things-enabled sensors in buildings has created an added layer of vulnerability for many real estate players," adds Magliocco.
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