October 29, 2024 • 42 mins
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EPISODE DESCRIPTION
Episode 82: Matt and Taylor are joined by Wendy Waters. Wendy is the Vice President, Research Services & Strategy at GWL Realty Advisors from Vancouver, BC, who has over 20 years of experience in real estate research. At GWLRA, she leads Research Services & Strategy team, which provides strategic analysis on office, industrial, retail and multi-residential portfolio strategy across Canada, focusing on the economic, demographic and social drivers of real estate performance as well as capital flow and market trends that shape returns.
Wendy is also on the management committee for the Urban Land Institute (ULI), Co-Chairs RealPac’s Research Committee, and sits on the Board of Directors of the Urban Development Institute of British Columbia (UDI). Wendy regularly publishes research on LinkedIn, the GWLRA website, and takes part on panels across Canada.
Wendy is here to discuss: → Different real estate asset classes and locations for investing in Canada, pension fund real estate investing strategies, if foreign investors are still investing in Canada. → Immigration and population growth impacting the market and Covid distortion of students, student rentals as an asset class, and why we should be making more purpose built rentals. → If rent control works or if it actually harms the market, if the STR regulations have impacted rent the way the government intended, and if Canada will ever catch up on building housing.
GWL Realty Advisors Website: www.gwlrealtyadvisors.com/research
GWL Realty Advisors Instagram: @gwlra
Wendy Waters's LinkedIn: @WendyWaters
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Welcome back to the Colonial RealEstate Podcast.
(00:01):
I'm your mortgage broker host,Taylor Atkinson.
And I'm your real estate agent I'myour real estate agent host, Matt
Glenn.
What's shaking today, Taylor?
Awesome news this week.
As expected, Bank of Canada cut
its rate by 50 basis point or halfa percent.
What that means if you were in avariable rate or adjustable rate
mortgage is your payment willreduce about $30 per $100,000 of
mortgage amount that you haveborrowed.
If you're on a fixed rate, it doesnot affect you whatsoever.
(00:23):
Yeah.
It does affect in the in the
future though, right?Aren't the bond markets predicting
the future of the interest rates?Yeah.
We're seeing that inverse yieldcurve shrink a little bit.
So we basically want those to becloser together, which means
variables got to either come downmore or fixed has to kind of go
back up.
So if variable keeps downwards and
following fix then you know we'removing in the right direction how
much difference is there betweenvariable and fix now depends if
(00:46):
it's insured not insured rentalwhatever much difference is there
between variable and fix if it'sinsured not insured rental
whatever but we're still seeingabout a percent gap so damn we're
getting we're still seeing about apercent gap so damn we're getting
there though if we see another youknow next rate announcements
december 11th and um you um, youknow, we see another cut then,
then we'll be definitely withinkind of nice to just another to
just cut, cut, cut, cut, cut.
It's kind of setting 2025 up to be
(01:07):
a good year for real estate.
What would you think?
Yeah.
We're finally back in that range
where like people now are startingto have the choice again between
fixed or variable before it wasjust, you were stuck on fixed
because that's all we couldqualify people for with the stress
test.
It's kind of funny when the market
or was going up, everyone wasstuck on variable.
Yeah.
Yeah.
It's not nice of the banks toforce people into these products,
but we're finally It's not nice ofthe banks to force people into
(01:29):
these products, but we're finallygetting back to that neutral zone
where people have some choice,they have more flexibility.
So yeah, we're still not reallyqualifying most people on a
variable just yet, but we'regetting there.
It's kind of funny when you thinkabout this, just totally just
making this up right now.
But if the variable and the fixed
are on the same, it kind of meansthat we're in a pretty balanced
market.
Yeah, and I don't think we ever
sit on that very long.
(01:49):
You know, they kind of swing past
each other.
Fixed is always like the smart
money.
So that's kind of the direction
it's going.
You know, so when fixed starts to
rise again, you would expect thatvariable would swing and start to
follow it.
Well, today's guest we had on was
awesome.
I've been trying to get her on for
quite a while, huge into dataanalytics across Canada as a whole
for real estate.
(02:09):
So Wendy Waters, she has 20 years
experience in real estateresearch, 18 years with GWL,
realtor advisor.
She is also on the management
committee for Urban LandInstitute.
And she's on the board ofdirectors for UDI or Urban
Development Institute.
She just has some amazing
knowledge.
So basically she manages or gives
advice for like Canadian pensionfunds to invest in real estate
(02:31):
across Canada, mostly inmultifamily and commercial space.
So yeah, really, really good show.
I loved it.
it. It was one of those showswhere you and I, well, in this
episode, mostly you just keep onfiring question after question
after question.
And then it's just like, I could
just keep on doing this all day.
So many interesting answers.
(02:51):
Selfishly, I just wanted to belike off air.
Tell me where to put money, Wendy.
Like what should I buy?
Yeah.
I want to do what you're doing.
Yeah.
Being part of her team and seeing,
you know, the macro and microwhere to invest and geographically
and asset classes.
Like I saw her speak at one of the
UDI events in Kelowna and assetclasses.
Like I saw her speak at one of theUDI events in Kelowna actually.
And they are tied into like theprovincial and federal government
(03:14):
in the sense where they givefeedback on, you know, policy
changes and grants and stuff likethat.
So yeah, really, reallyinteresting person and get on
following her on LinkedIn.
Cause she puts out some really
good content there as well.
But yeah, I think you guys are
going to love the show.
That was was a fantastic one.
That was a good one.
This episode, like every episode
is sponsored by Century 21Assurance Realty, best brokerage
(03:34):
in BC, in the interior of BCanyway.
We're in Kelowna, Kamloops,Saminar, Vernon, Castlegar,
heading out further east in theKootenays.
We are everywhere that you need tobuy and sell houses.
So if you're an agent looking tojoin an up and coming brokerage
that's already kind of set up,we're the brokerage for you.
And if you're a buyer or sellerlooking for an agent, call up
Century 21 Assurance Realty.
Also, enjoy the show.
(03:54):
Okay.
Welcome to the show, Wendy Waters.
Thank you so much for joining us.
Thanks for having me.
Looking forward to a great chat.
Yeah.
Well, we'd like to start our show,just you connecting with our
listener, kind of what's yourperfect Friday look like in terms
of productivity, energy, you youknow what do you do at work and
kind of leading into the weekend abit of fun yeah well i guess my
(04:14):
fridays my fridays aren't thatdifferent from other days i
usually get up fairly early around5 15 and i have spin bike at home
to do some spin on the bike and dosome yoga and then i go and have a
cup of tea and go through thebusiness news of the day.
You know, a lot of business newscomes out of the Eastern time
zone.
So check into what's going on by
checking on LinkedIn to see whatthe industry is talking about
(04:36):
today.
If there's things I should be
aware of that may come up.
Also emails, anything that needs
my attention.
So by this time might be 637 here,
but in Toronto, you know, peopleare fully into their workday.
So do a check on that and youthen, try and plan know, my day So
do a workday.
check on that and then, you know,
try and plan my day and plan acommute.
So today I didn't have any callsearly morning.
Sometimes I got to do a call fromhome before I get a chance to
(04:58):
commute.
Sometimes I work from home, but
most of the time I come in and Ijust find it's a lot easier to
focus at the office.
What is the office?
What is your title?What's my title?
So I'm the Vice President ofResearch Services and Strategy at
GWL Realty Advisors.
So we manage pension fund real
estate assets.
We develop, we acquire, we manage
on behalf of pension funds,institutional clients.
And the research we try to makesure our clients are investing in
the right assets in the rightteam, locations over the time
frame that works for as well ashelp them understand some short
term expectations on what theythem, can expect.
(05:20):
So you're basically Yeah.
the brains behind the smart money
telling it what to hey?do, do, Well, not just me by
myself.
I've got a team and then work with
all my colleagues who are a lot ofreally smart people across the
(05:52):
country.
So it's coordinating a lot of
brains is sometimes our job tomake sure that our clients are
getting the real estate they need,the returns they need.
Pension funds use investment realestate to help pay out their unit
holders, so their pensioners.
So it's very important that we
look after, you know, just part oftheir investments.
Yeah, so I love Yeah, so I loveit.
Wendy, what are the right assetsin the right locations?
We look after, we have office,industrial, retail, and rental.
So those are the four that we workinto.
The retail is primarily groceryanchored.
So just needs of life.
We don't have big, super regional
shopping centers.
It's very much needs of life.
The right assets, it's really acombination of what's the best
(06:13):
locations.
And it depends a little bit on the
asset, best locations, good tenantmix.
Right now, a lot of the focus ison what your future revenue stream
can look like.
So, you know, making sure that we
feel like we can grow rents atleast as fast as inflation is
coming at us is a really importantfeature in whatever assets that
we're recommending.
And resiliency of those rents,
because again, pension funds keepthings for a long time.
(06:34):
So you're needing not just, hey,it's full today and the tenants
are paying great money and nextweek there's going to be something
or next year something new isgoing to open down the street and
it's going to take all thetenants.
We have to make sure we guardagainst that.
So barriers to entry is alsoimportant for what's the right
asset.
How's the office space looking
right now?Is that kind of coming back to
(06:55):
life after COVID a bit?Yeah, I think Toronto is really
struggling for reasons thatinvolves a lot of new supply in
Toronto, combined with bigcompanies relocating to take
advantage of new ways that we'reworking, and then congestion and
traffic and problems on that sideof Toronto.
So Toronto's got some struggles,but in the West... I heard they're
getting a new West... I heard newtunnel.
Who knows?The transportation management
plans in Toronto seem to change ona very regular basis, and we'll
leave it at that.
(07:16):
So don't quite know.
I haven't heard the tunnel.
Tunnel might be helpful.
But in the West here, back on theoffice question, Calgary and
Vancouver have had some steadyoffice absorption.
Calgary obviously hasn't had muchnew supply for a while since the
oil crash.
So that office market's had to
remake itself whereas in vancouverthere's more office under lease
today than in 2019 interestingyeah yeah by under lease lease you
(07:38):
know it's just somebody's got atleast they don't have all the
sublease markets so they're usingit we traditionally call it
occupancy but we're not talkingabout bums and seats you know how
many days of the week it's justsomeone's got at least and they
don't have on the subleleasemarket.
So they're using that space insome way.
And COVID helped accelerate achange in how we work in terms of
a lot more mobile technology, alot less paper.
(07:58):
If you're working with a laptopand you don't need two filing
cabinets full of files per person,you don't need nearly as much
space per person as when you havea desktop and a landline and
filing cabinets and bookshelveseverywhere.
So the fact that we're moredigital, mobile, that's creating a
trend of reducing the amount ofspace per person, you know, which
is what we're working through interms of, you know, companies
move, do they need as much space?If they're growing, they do, but
(08:20):
maybe if they're not growing, theymay many not.
Yeah.
Are you still seeing international
money come into Canada with kindof recent policy changes with
capital gains inclusion or justlike the amount of restrictions
that have come out in the pastyear in terms of real estate
assets?Is Canada still an interesting
place to invest for overseasinvestors?
Yeah, I think, well, thedistinction, obviously, there's
some limits on foreign capital atthe residential side, but there's
(08:41):
not on commercial.
So we have seen downtown
Vancouver, some European buyers ofa couple of assets on West Georgia
Street.
A couple of years back, we had
also the Bentall Center inVancouver going to U.S. capital.
So yeah, this foreign capital isstill interested in Canada in
those commercial spaces,especially if it's a market where
they don't already have anythingthere.
So they don't have to worry abouthaving too much in one market.
It's population growth.
Canada is one of the fastest
(09:02):
growing countries in the world inrecent years.
And population tends to drive realestate demand.
And the more demand there is, themore resiliency of your rent.
So it makes sense that Canada ison the radar screen for
international capital.
As you know, as I'm sure you both
know, like transactions are veryrare right now.
It's still a pretty quietinvestment market, but
international capital with newoffice buildings on Georgia
(09:23):
Street, what I heard, it waspretty much all international that
was interested in it.
I think some are seeing it as an
opportunity to get into theCanadian market where they aren't
having to compete as hard withlocal capital, which matters.
And then not it.
I obviously, REZ has all its
restrictions as well.
I mean, I guess you're getting the
benefit of the currency exchangetoo.
Like if our dollar's down rightnow and to the Euro or US is
(09:47):
higher, you're kind of buying anasset class that you want anyways,
but at a discount on the currency.
Potentially.
Do you see that historically?Like when our dollar's higher, do
we get less investment or is itjust purely based on the asset
class if it makes sense from howthe numbers pencil out?
By and and large, a lot of themajor Canadian assets are owned by
the Canadian pension funds and theCanadian institutions.
So we don't see that.
(10:09):
I don't know if we see enough
international capital coming in tospot the trend.
It's a very good question why youasked.
I'm not sure that we've seen atrend like, you know, in 2007,
when the Canadian dollar is worthmore than the American dollar.
You know, At that time, I thinkeveryone thought real estate was
overpriced anyway, so thereprobably wasn't a reason to come
(10:29):
in.
But yeah, it's a good question.
I don't know if there's enoughdata to say that, but certainly
the Canadian dollar right now inits normal state, probably assets
do feel like a bargain to someorganizations, I'm sure, because
when they look at the pricerelative in their own currency.
Yeah.
I guess maybe to stay on asset
class a little bit beforeswitching to kind of population or
rents.
And I know single family houses,
you know, they're not kind of yourguys' wheelhouse.
Obviously it's a smaller scale,but do you see single family
houses having a longer runway thansome of the other say
(10:50):
purpose-built rentals ordensification of condos or
anything, just purely because thecost to build is so expensive.
We't building them we're tearingthem down we're doing land
assemblies like it just doesn'tseem we're having a lot of starts
on single families comparable toother assets as like a pension
fund would you guys accumulate alot of single family houses or is
that something you'd ever look atat uh it's not something we've
ever done it's hard to get scaleand it's you know single rental,
(11:11):
as you probably know, it's big inthe US, but it tends to be purpose
built, like they're building homesto rent.
They started doing it in 2007, 8and the housing crash when there
was just a lot of homes out therethat needed a buyer and often had
an occupant but needed a buyer.
So we haven't had that kind of a
crash in Canada, like wherethere's just whole suburbs that
you could pick up or at leastneighborhoods within suburbs that
(11:32):
you could pick up.
So it's not something we do.
You know, your question on, youknow, single family homes, like,
you know, I've seen in BC whereright now most municipalities,
like most single family lots, youcould actually put four to six
homes on it if you were to take itdown, which means the land price
is going to get spread among fouror six potential future owners.
So that's obviously a huge upwardpressure on prices.
(11:54):
And if you wanted to have a singlefamily home, now you're going to
have to compete with that.
The land price is somewhat
connected to what you can put onit, not just what's on it today.
So certainly, I think not what wedo in Realty Advisors, but just
looking at the math there, yeah,we're going to probably see those
prices go up, sort of a one-timejump.
And then the price is the price offour or six units.
You know, obviously, we've got anelection going on right now.
(12:16):
One party saying they might dosomething different.
But some municipalities likeVancouver that did this ahead of
time may keep that.
Just with the idea of having that
more gentle density and a few moreoptions for families in terms of
the kind of homes that areavailable to them.
options for families in terms ofthe kind of homes that are
available to them.
the kind of homes that are
available to them.
Yeah.
Are you just seeing like massiveswings in your forecasting with
(12:38):
all the different like rulechanges, provincial, federal?
It seems like we've all been kindof going through a bit of a roller
coaster, but I can imagine fromyour point of view.
The population The populationside, certainly we're trying to
model population in order to thenget to modeling demand and, you
know, and even supply thosechanges happening there.
But yeah, the immigration changes,especially non-permanent residents
some of those policy changesthey're happening rapidly and even
some of the ones related to newsupply of what that could mean so
(13:00):
yeah i would say it's been quitebusy so in less busy times other
organizations also forecast thatwe can look at what they're doing
and right now it's been so fastthat we don't have that we have to
just do we have to really be ontop of it ourselves we We do our
own anyway, but it's interesting.
It's happening to fast.
You know, obviously the provincialelection here in BC is going to be
done in a few weeks, but thefederal politicking until that
(13:21):
happens is going to, I think, keepgoing.
So yeah, it keeps us on our toesfor sure.
And I guess so at a federal that'swhere the immigration policies are
a hundred thousand students comein that but most of those students
are going to leave.
Yeah.
Yeah.
level, changing.
know, year, But I think recentlywe've seen like a huge population
growth.
I'm speaking for Matt and but I,
we think that's obviously impactedthe real estate market.
What's your guys' take on that?Yeah.
Well, what we had was COVIDdistortions.
I mean, there's COVID distortionsaffecting every real estate asset
class.
Yes.
Multi-residential rental is theone we're talking about here.
(13:41):
So the COVID distortions withstudents was that anyone on a
student visa in 2020 was countedas being in the country.
So you arrived, maybe you got itin 2019, you arrived, 2020, you
could have gone home during COVIDand done your schooling remotely.
So you have that group that theway Canada counts them, as long as
you still have a valid studentvisa, they assume you're in
Canada.
And in normal times, that would be
true because you'd be going touniversity and of course you'd be
(14:03):
in Canada.
So we had that group that we think
a lot of them left, but we don'thave any exact numbers because
nobody counted that.
And then during COVID, new people
got admitted to university, butthe universities were online.
So you had the fall of 2020, thefall of 2021, in some provinces,
the fall of at 2022, least you hadan option to be online.
(14:47):
And So you had the fall of the2020, fall of In 2021.
some provinces, the fall of 2022,at least you had an option to be
online.
And so you had between two and
four years worth of students who Ithink all showed up in the fall of
2023, potentially.
Now, some trickled in before that,
you know, some never left and theystayed in Canada because it was a
better place for them to be.
But that's where we had this
double, triple, and in someplaces, maybe even a quadruple
entry of students that wasn't verywell counted.
And that was a huge burden on, youknow, rental housing stocks in a
(15:11):
lot of places.
And in some cases, you also had
the domestic flows of people, youknow, going to some schools in
different cities where, again,they started at home in their own
province, and then they had toshow up in Ontario, or maybe they
had to show up in Kelowna.
And so adding to that, so we had
international, we have potentiallydomestic students that went from
their family home in their ownhome province to needing a rental
apartment in their universitytown.
(15:31):
So with students, yeah, we had aCOVID distortion, which thankfully
is done.
There also was obviously more
students being admitted.
There were some problems with
these public-private partnershipsat certain kind of colleges where
it's not looking likeinternational students were really
getting a good education out ofthis.
So we had obviously some extragroups taking advantage
potentially of this.
But going forward, I think things
are going to normalize.
The provinces are getting to
control where their quota isgoing.
I suspect in British Columbia,it's going to be, you know, the
University of British Columbia,Simon Fraser, UBIC, and by UBC, I
also mean UBCO, like whatever theycontrol, are going to have most of
(15:54):
those spots.
And then over time, students
graduate, they either convert to atemporary worker, you know, they
can convert their status, or theygo home, maybe they might apply to
come back to Canada, or they mightnever want to come back to Canada.
But the number of students willstart to be steady and it's going
to be trending down because thegovernment has reduced the number
that can be here.
(16:14):
But we're already seeing it on a
very slow slope, but it is goingto be just a very slow slope down
of total students.
And that will obviously ease some
pressure in the housing market.
Like that's kind of I think we're
already seeing we're alreadyseeing it.
Yeah, I think I think this fall wealready saw it.
There was just a normal entry ofpeople starting university, coming
for a master's degree.
There was not this triple or
quadruple entry of people.
(16:35):
So we're already seeing it, I
think, as you look at therentals.ca, which is just whatever
happens to be available for leasethat month.
But it's been trending down in alot of the major markets in
Canada, I think Kelowna as well.
The top of the market rents are
not rising as fast or in somecases are coming down in the brand
new product.
So yeah, we're getting a more
(16:56):
normalized population flow now,which is good.
And as that data gets out there, Ithink hopefully maybe political
announcements will slow downbecause everyone can relax a
little bit and just let everythingplay itself out now.
Yeah, I guess selfishly.
So I'm actually looking at a
student housing rental complex asan investment.
Do you guys like that asset classkind of circle back on asset
classes?Or do we see like with these
(17:17):
recent policy changes?Maybe there's more risk associated
to that?Yeah, can you kind of tell us a
little bit or me just should I buyit or not?
it or not?Yeah, so we're obviously not in
that asset class.
We do purpose built rental, we
obviously serve a lot of studentsin our rentals.
So we do track what's happening inthe students.
They do matter and they matter tothe overall market.
But as for the purpose studentrental, it depends on the market,
how much is out there and wherestudents are going.
(17:38):
There's a lot of internationalinterest in student housing in
Canada because Canada is veryundersupplied relative to a lot of
the other, say, European, USmarkets.
There's not very muchpurpose-built student housing in
Canada.
I do not know the Okanagan
situation, but it would notsurprise me at all if it's pretty
much the same, is that there's nota lot there.
University of British Columbiaclaims they're building a lot.
They operate a lot.
Apparently, they're Canada's
largest operator of studenthousing, including some in the
(18:00):
Okanagan.
So I don't know quite what that
supply is relative to demand.
I still think it's pretty small
relative to the total number ofstudents that are out there.
Yeah.
So you said it was not an asset
class we're in.
It's certainly an intriguing asset
class because of just the numberof students that need housing.
And a lot of the universities onlyprovide the housing for first or
first and second year.
So if it was catering to the, you
(18:21):
know, the third year students,fourth year students, it seems
like there's probably somethingthere.
Can I ask why it's not an assetclass you guys hold?
Is it just like internal policyfor pension funds to like, these
are our asset classes or?Not at all.
It's, I think some of our clientsmay with other managers have some,
but first, it's an operatingbusiness as well as a real estate
play.
And obviously, you know,
multi-residential rental issomewhat of an operating business.
(18:42):
And it's one that we understandyou need scale to be in an
operating business because wemanage like we're fully vertically
integrated.
We manage pretty much everything
that we own for our clients.
Yeah.
So we have property management,leasing, everything.
So that's why student housingdoesn't quite work with our model
right now because we don't haveany other ones.
And so you only have one is veryinefficient.
Now, you know, if you are anindividual investor, like there's
someone who's got a platform andthey just need some capital in
(19:04):
there where there's a managingpartner who has the expertise, you
know, for an individual likeyourself, that could be, you know,
obviously a very compelling idea.
It's just not typically what we
do.
we Yeah.
Okay.
Good to know.
Obviously purpose-built rentalsare, I mean, they seem huge right
now, at least in Kelowna, likeeverywhere we're driving around,
massive structures going up.
We're looking at probably, you
(19:25):
know, two to 3000 units, you know,that's just me meeting with a few
developers.
Do you guys have data kind of, I
know there's a housing shortage,obviously.
It seems like this is almost likea new asset class that people are
interested in, although this hasbeen going on forever.
And kind of, we saw like probablya bigger build in the seventies
and eighties.
There was a lot of these apartment
buildings and then it took a lull.
Why did it take a lull?
(19:46):
And why is it kind of picking upspeed now with like MLS select and
all these things?So Yeah.
it took a lull and why is it kindof picking up speed now with like
MLS Select and all these things?Yeah, so it took a lull around the
time the Strata Act came in.
So you could build condo and
basically individually sellapartment units as opposed to
having one owner for the entirebuilding.
So that was, you know, the 70sinto the 80s.
(20:07):
Also, there was some differentinvestment programs in the 70s and
80s that contributed to being anincentive to build apartments.
So, yeah, we didn't buildpurpose-built rental really right
through the 90s into late 2000s incross Canada.
It was just a general statement.
So we've had a huge shortage.
There's a huge deficit, especiallyjust that sort of that middle,
like we've got new and then we'vegot really old and we don't have a
(20:29):
lot in between, which is typicallyyou have a nice spectrum of
housing for renters, which we'rekind of missing right now.
So why now?One of the reasons is it's been
really hard the last, say, 18months for condo builders to get
the pre-sales that they need inorder to get their bank financing.
In some markets, there's an easyoption to flip to rental.
You can go back.
There's not a lot of difference
(20:50):
from the city's perspective whichone you're doing.
In some markets, there is.
You know, this is a rental site,
so they look at rental versuscondo.
So that's one reason is condosharder to do.
So they're pivoting.
There's a lot of demonstrated
where the rents can be in our app,which helps with performance.
Whereas for a while, when wedidn't have new purpose built
rental, everyone was looking atCMHC rents, which tend to be older
(21:12):
and it's the in place and themarkets with rent controls
suppress those rents.
And so you say, well, geez, if I
can only rent that unit for $1,500or 250 a foot, I can't afford to
build it.
Then you realize, well, that's
have a well, that's arent-controlled unit.
Now that you can see that othersare able to make it work, it
helped to show that, yes, a groupof renters who are quite happy to
pay for really good quality unitswith a really good experience,
nice amenities.
And so that's been proven out.
And that's also helping toencourage investors to go into
rental.
And some cities have density
bonuses and there's other thingsout there too.
(21:34):
You put a really interesting postout on LinkedIn the other day.
And I think it was per householdnow.
I believe it was specific toVancouver, but per household, the
average of having income over120,000 household, was that
correct?120,000?
Has been increasing substantially.
So there's like a missing asset
class where those higher incomeearners want to rent and that's
not on the market yeah what thepost was it was just looking at
(21:54):
where people who make and i can'tremember which income bracket i
use but 100 was it was justlooking at where people who make
and i can't remember which incomebracket i use but 100 or 150 000
where they were renting i think iput one out on there and a lot of
them are an older product so it'salso a way of saying that there is
demand.
Not all of them are going to want
to pay new product rents, but alot of them will, because we also
see another post I put out onLinkedIn is who rents the new
(22:16):
products.
So we can look at the census gives
us something called five-yearmobility data.
So where were people five yearsago?
Where are they at the day of thecensus?
And if we look at just for peoplewho are living in new rental,
whether it's condo orpurpose-built, the census doesn't
distinguish, but you can see wherethey were.
And over half of them were in themetro area.
And most of those were actually inthe CSD, the actual little city
(22:36):
immediately close to where they'reliving today.
So you can see that higher incomepeople, they move into the new
product.
So if you're building a new
product, it's not just forinternationals or something like
that.
It's actually people local who
choose to move to that new productbecause chances are they had a
home.
They were already living in the
region five years ago.
They had a place they were living.
They're making a choice to moveinto this new product.
It helps show what is also calledfiltering, where they then are
(22:58):
moving out of likely a cheaperunit.
And then somebody who needssomething less expensive, now
that's vacated.
But until you create that room at
the top for the higher incomepeople to move up, you end up
without some product for people,you know, more medium incomes to
rent.
And that's one of the challenges
we've had is it's been nothing.
And then, you know, the middle
income was getting bid up byhigher income earners.
(23:19):
And then the lower, what used tobe maybe typical rental for people
with lower incomes got bid up bythe middle And income.
the middle income was getting bidup by higher income And earners.
then the what lower, used to bemaybe typical rental for people
with lower incomes got bid up bythe middle income.
And the people with very limitedmeans ended up on the street,
which obviously is a real tragedyand a huge problem.
So we need the rental units at thetop to just help move everybody
(23:39):
along.
Ironically, it creates other price
points at the lower price pointsin the spectrum, which is
obviously needed by a certainspectrum of the population.
So basically new product of alltypes helps everybody.
New product helps New producthelps everybody.
Yeah.
And enough new product all in one
area and the rents stop going upin that new product.
You know, supply and demand doeswork when you finally match demand
with a new supply.
It's been hard to do in Canada
because we haven't been buildingenough.
(24:00):
to do in Yeah.
Are we on track or like, what's
your thoughts on that?Like, are we ever going to get
there?Are we just always going to be
behind the eight ball with this?Well, obviously, like if you look
at the, you know, CMHC and there'sdifferent groups that have how
much housing overall Canada needs,because it's not just rental.
There's also obviously thatspectrum of first time buyer
product that's going to pull somepeople out of rental and make room
(24:21):
for other people.
So we need somewhere between three
and five million homes, dependingon what your affordability is and
what you're trying to achieve.
But we need a lot of homes in the
next decade, five years, decade,depending on the study.
Are we going to get there?Probably not all the way.
But I think, you know, the clicheabout, you know, shooting for the
stars and maybe we get to themoon.
You moon.
You know, yeah.
Anything we can we can do, anyhousing that gets added helps.
(24:43):
It creates for somebody.
So anything that unsticks housing
helps make it possible to buildmore housing does help.
And so even like, yeah, new condodesigned for first-time buyers,
that helps rental, that createsrental spaces.
Can we talk a Can we talk a littlebit about rent control?
And I'm thinking of, you know, ifwe're talking about a newer asset
class being built for rental, theymove out of the more affordable,
you know, apartment building tosay this more expensive one that
(25:04):
opens up that affordability.
But that's really the only time a
landlord can kind of capitalize ona fair increase in the market
because otherwise we're capped at,you know, CPI plus government
allowance in BC and Ontario, butwe look next door to Alberta and
they don't have cap on rentalincreases.
Do you know kind of the spread on,like I know rent's been increasing
in BC, but it seems like it'sreally kind of plateaued in
Kelowna at least.
Do you know the true increase on
rent that's been over year overyear?
Because if we're just looking at arent cap, it doesn't really
reflect some of the increases thatwe've seen for renters.
(25:24):
Yeah, because obviously the CMHC,it all gets blended.
Most people don't move in a yearthat are in typical purpose-built
rental housing.
And so you get increases on
anything that turns over and we'veactually had a declining turnover
rate.
So that means it's very hard to
measure how much rents are goingup and it's going to depend on the
neighborhood.
It's going to depend on the
neighborhood.
It's going to depend on the
building.
Obviously, how long the previous
(25:45):
renter had been in there.
There's so many variables.
So do we have an accurate number?I think CMHC rents overall were,
you know, they were up a littlebit more than normal last time.
Of course, it's almost a year old.
The data, I believe, was like 8%
or 9% in some markets.
But rent control has, yeah, it
creates a huge amount ofdistortion because you end up,
people stay in units that theyprobably shouldn't stay in.
Like it doesn't suit them anymore,but they stay because the rents
are cheap.
(26:05):
It doesn't allow other people to
move into those units.
You end up basically with the long
time residents whose incomes havegone up.
They stay in the old units.
And then it forces people who are
starting out their careers to endup in the new units, which costs a
lot more.
So we get a lot of distortions
just in terms of equity andfairness in society from rent
control.
That's kind of what I wanted to
(26:25):
ask.
Do you feel rent control works for
fairness in society from bothsides, from landlords, from
tenants?I'm just thinking Alberta seems to
have some, I don't want to sayaffordable, but price compared to
their BC, system seems to workmuch better and there is no rent
control.
So is that not a proven model?
Yeah.
I mean, it's great to look at the
Calgary data because on the CMHC,when you look at average rents
(26:48):
over time in places like BC andOntario, which have rent controls,
basically rents only go up.
In Calgary and Edmonton, rents go
up and they go down because rentsare always at market.
The CMHC rents and the marketrents are pretty much the same
thing in Calgary and Edmonton.
Whereas in Vancouver, we're always
talking about, well, CMHC rentsmight say a one bedroom is $1,500.
Just try to find a one bedroom for$1,500.
(27:09):
The new rents might be $2,500.
And you don't know where are
rents.
But Calgary, rents go up, rents go
down.
CMHC and market rents are the
same.
And what's really interesting is
when the economy starts to boom,rents go up, developers all go
build rental, probably build alittle more of it that's needed.
But that also works for rentersbecause then it's a boom and bust
(27:30):
market.
And when the economy starts to
contract and people are losingtheir jobs, rents typically go
down because there's a little bitless demand, and so they go down.
And so it works for renters whenyou think about it.
When their incomes are rising,rents go up.
And when their incomes arefalling, rents go down.
So it's a much more balanced andequitable system for everybody.
Now, it's a little tougher.
If you're an you investor, a
little tougher.
know, If you're an you got
(27:50):
investor, to be ready to ride bothof those waves.
But in you do better.
generally, In you do better as
general, an investor because rentscan move to market when the time
is right.
But you can't do it in other
markets.
You have to wait for a resident to
move.
Yeah.
You're on the board of right?UDI, UDI, I am.
Okay.
Yeah.
I actually, I saw you at an event,I think a while ago.
And so it just registered for me.
(28:11):
I know you guys help communicate a
lot, like at a provincial level, alot of this data.
Is this something that's beenbrought up to BC province saying
like, Hey, maybe rent control theway we have it set up isn't the
right thing.
Oh, for sure.
UDI did have a recent letter toRavi Kala on pointing out some,
some challenges also to try andget more rental built because
ultimately urban developmentinstitute is about for UDI did
(28:32):
have a recent letter to Ravi Kalaon pointing out some challenges.
Oh, sure.
Also to try and get more rental
built, because ultimately UrbanDevelopment Institute is about
trying you to, know, it's reallyhome builders and other commercial
builders as well.
But it's about getting buildings
built.
But also Landlord which BC, is the
association for residential rentalproperty owners.
They do some advocacy.
The challenge is once it's there,
(28:53):
it's how do you unwind rentcontrol?
do some The challenge advocacy.
is once it's it's how there, do
you unwind rent control?In it used to be CPI plus which I
think when you started thisconversation, BC, two, we were
talking about, it used to be thatrent guidelines was CPI plus 2%.
But in the last, maybe five, fouror five years, in about 2018, it
went back down to CPI only, whichis very low.
(29:14):
And that's the overall CPI.
But a lot of the operating costs
on buildings have been going upmuch faster than CPI.
So faster than inflation.
Incomes, in most cases, a lot of
it going up faster than inflation.
So but rents have been tied
strictly to CPI.
And then there was two years
during COVID when they were frozenat zero.
You know, the landlord BCmembership, which is a lot of
(29:38):
smaller landlords with these olderbuildings, and they've been really
struggling because operating costshave gone up more than inflation.
And their rents, you know, if youlook at a four or five year basis,
have we been even allowed toincrease?
You know, hopefully they've hadsome turnover where they've been
able to get a little bit morerevenue in.
But it's really creating somechallenges in the rental sector.
What's been happening the last fewyears?
Yeah.
Do you still like the B.C. market
(29:58):
because of the tenancy board?You know, the difficulties that we
face in rent control, I guess,just does it come down like to
oversimplify it?Is it supply and demand?
We don't have enough housing.
We still believe in the BC market.
I think our clients I think ourclients do.
We really do like the BC market.
So rent control is moved back up.
We really like having new supplyand, you know, having new purpose
built rental in this market.
That's what we believe in.
(30:19):
We've got development sites.
So we've opened two new buildings
in the Vancouver market sinceCOVID, one on Robson Street and
one just off Lonsdale in NorthVancouver.
And we've got more developmentsites on Robson Street.
We've got another development sitein the Lonsdale area.
And we've also got another one inthe downtown peninsula.
So we do believe in this market.
We really do like that
experiential rental, very wellamenitized, great walkable
locations and high quality.
So we definitely like that.
We still believe in this market.
(30:40):
You know, newer rental, you
obviously can get your rents rightat market when it gets leased out.
So we still believe in thismarket.
I think, you know, buy an olderrental.
There's opportunities andchallenges in that, which every
building you just work through it.
There's definitely opportunities
to invest.
The inequities are more from a
renter perspective.
There's challenges for renters
that I was talking about earlier,but as an investment asset class,
still like BC, still like theasset class nationally.
We have a very large rentaldevelopment pipeline nationally.
So just having some best in classreal estate, we believe in this
market, lots of renters, renterincomes are going up.
(31:03):
They're not buying as often.
The percentage of renters in
Canada is going up.
We do like this asset class
long-term.
It's just, it's the right assets
in the right locations.
And you can say that about every
asset class, but rental inparticular, right assets, right
locations.
Yeah.
I kind of have to ask Yeah.
I kind of have to ask now, like as
a smaller investor, we look atbuildings that have been sold.
Obviously like they're fairlylarge buildings.
Vancouver is a perfect example oflike, wow, that sold at a 2.8 cap.
(31:25):
Who is buying that?And I'm thinking maybe you guys
are buying that.
Maybe you're not.
I'm putting words in your mouth.
But in terms of a cap rate, do you
guys have like, we won't go belowthis kind of cap rate at asset
cash flow or for institutionalpension fund type money?
It's such a long play, mostly onlike appreciation that you guys
are willing to go after those typeof asset classes?
Yeah, I mean, I think cap rate, itcan be a somewhat problematic
(31:48):
measure, because a lot ofbuildings when they trade, when
any building actually trades, butin residential trades in
Vancouver, yeah, the cap ratelooks low, but it's being traded
as a covered land play.
So it's a future development site.
So that could be one reason why acap rate is going to be low.
But with any building right now,it's all about the future revenue
stream.
And so you might go with any
(32:09):
asset, you might see someone buysomething that seems a bit low on
the cap rate, but if rents aresubstantially under market, and
there's an obvious path to getthem there, residential rental is
a little more challenging, but youcould still see a path to get
there.
Some groups do, but other types of
asset classes without rentcontrol, you might say, yeah, when
these leases expire, we're goingto move them back up to market.
So it's all about that futurerevenue stream is really where
pricing is at right now is, youknow, how much are rents at
market?Are they below market?
(32:29):
Are they above market?That would be problematic for a
low cap rate.
But that's what investors are
looking at is that future incomestream and the reliability of that
future income stream.
Okay.
Airbnb legislation, how has itimpacted current rent?
I mean, obviously the window ondata is very small and it probably
isn't even out yet, but has itachieved provincially what they
were trying to achieve by puttingmore units on the market?
(32:51):
Well, one of the of thechallenges, like obviously some
markets like Vancouver have hadAirbnb restrictions for a number
of years.
The province-wide one is more
recent.
We've been talking about how rents
have stabilized.
Some of the rents in the top of
the market have come down a littlebit, especially if you look at
rentals.ca.
I think Kelowna is off like 5% or
6% year on year in rentals.ca,which is whatever's available.
So it's coincided with rentscoming down.
(33:13):
I think it's a stretch to say it'scaused rents to go down because I
think ultimately it's aboutpopulation.
You know, population has beeneasing as well.
We didn't have the triple entry ofstudents and also we didn't get
into, you know, extra entries ofnon-permanent residents, workers
as well in there.
So is it making a difference?
It's obviously in there.
If you add a few hundred formerly
Airbnb units into the rentalsupply, that's going to make a
(33:34):
difference.
But it's hard to say because
there's so many other factors thatare stabilizing rents right now.
New supply, easing demand growth,short-term rentals, it can be
problematic in terms of how acity's planning.
So I do get some of the policyreasons for thinking about
restricting them.
But I think the research is so-so
on what they actually do.
And the problem is that you don't
run a perfect experiment.
You know, rents are coming down
for other reasons, right?know, rents are coming down for
(33:54):
other reasons, right?Yeah, I know.
I know.
I know that was a tough one to
finish on.
It was a tough one.
Yeah, it's a tough one.
It was a tough one.
Yeah, it's a tough one.
And I know Kelowna is a hot-button
issue.
I do know in Kelowna you because,
these rules know, changed afterpeople have made some investment I
feel decisions.
for At the same them.
(34:15):
I do sort time, of feel for thecity the planners, provincial
planners thinking if we're like,building a condo we're thinking
tower, that this is housingtowards our housing needs in And
if Canada.
they're being used as hotel rooms,
you that's, a know, So challenge.
I have sympathy for the quick
change and the retroactive changethat hit cities across the world
that are having to get a handle onwhat to do you know, about, how to
(34:36):
manage this in a way that worksfor everybody.
So I do have sympathy for peoplein Kelowna because I do know that
some buildings really being sortof financed the idea that of a
certain number of units, we'regoing to be Airbnb.
Yeah.
It's a complex issue for sure.
Okay.
Well, we'd love to kind of go into
our wrap-up questions.
If you could buy one property in
the Okanagan in the next 12months, what would it be?
Well, me personally, so thiswouldn't be an investment.
(34:58):
I'd probably get something like aSilver Star because I like to ski
and I like to cross country anddownhill.
So actually I'd probably buy SunPeaks, but if I can't buy Sun
Peaks, then I'd go to Silver Star.
I'm at big White right now.
Yeah, I'm not supporting that BigWhite right now.
But Silver Star has Sovereign Lakeand stuff like that.
Exactly.
It's the better cross-country
(35:18):
trail.
I'm not supporting that Big White
right now.
But Silver Star has Sovereign Lake
and stuff like that.
Exactly.
It's the better cross-countrytrail.
That's why.
I mean, yeah, Big White is lovely
for downhill skiing, but not sogood for Nordic.
So that's why I would have to pickone.
why.
I mean, yeah, Big so In terms of
an investment, can we ask a favorand pick your brain on that?
Or you can just tell me off air soI don't have competition.
(35:38):
Yeah.
Okanagan investment.
I have questions.
I have been to Kelowna for a
while.
Fast growing place.
I think it grew by 4.3% last year,the population.
So population growth drives realestate.
If you want a lower maintenanceone, I take a look at, is there
any small bay industrial thatmakes any sense in terms of its
location and its condition and therenters?
That's probably an asset class I'dtake a look at as a small
(36:00):
investment.
I'm not talking institutional, I'm
talking personally.
What would I look at?
I'd probably take a look at that.
Institutionally, we have three
shopping centers in Kelowna.
So we like that market as a place
for needs of life oriented retail,again, population growing and
people need to shop.
Okay.
I love it.
Thanks.
I love it too.
All right, Wendy, if you could
(36:20):
give your 20 year old self anyadvice, what would it be?
So my 20 year old self was in theearly 1990s and it was a tough
economic time in Canada.
It was a tough time in the world.
The Cold War had collapsed.
No one knew what was happening.
There was a lot of uncertainty.
So I think it would be that all
this confusion, the world turnsaround and goes on a pretty good
run after we get through the realdoldrums of the 1990s, as well as
(36:41):
Canada.
So it'd be to hang in there and
just wait.
Things are going to get a lot
better for other people around theworld, for the economy, for
(37:09):
Canada.
So that's what I would say.
Yeah, that's good advice.
I like that.
What is your favorite charity orhow do you get back?
With all the turmoil in all theturmoil in the world, Doctors
Without Borders, Medecins SansFrontieres, so MSF.
And then locally, I usually get afair amount to the food bank.
And then we have a United Wayprogram through Canada Life to
donate off paychecks.
And I'm fairly generous with that
one and let them decide where it'sneeded in the community.
All right, Wendy, how can Tayloror I or our listener help you?
What can we do for you?What can you do?
I think all the issues you can seewhat I'm posting on LinkedIn.
Get involved.
We need more housing.
So how do you help your neighborsunderstand we need more housing?
That it's going to be good.
More neighbors, diverse neighbors.
It's all good.
And we need immigration.
there's a lot of anti-immigrationstarting to come out.
But actually, if you look atemployment growth over the last, I
(37:30):
think, 20, 30 years, nativeCanadian born people, like the
number of employed Canadian bornpeople has stayed flat.
It's all based on immigration.
So our economic growth, our
employment growth, everything wecan do in healthcare Canada,
everything workers, is coming fromimmigration.
So our economic our growth,employment everything growth, we
can do in Canada, healthcareworkers, everything is coming from
immigration.
So don't be quick to blame
immigration on our housingpolicies.
We need immigration.
(37:50):
Our housing issue is from lack of
supply.
So I would encourage listeners to
keep that in mind.
Interesting.
So you think So you think theimmigration numbers we have right
now, you like them?Are they too high or too low?
Obviously, we talked about some ofthe challenges with non-permanent
residents.
And some of that is right idea not
being executed perfectly well.
So that needs to be fixed.
Obviously, students that are notlearning, that's a problem.
Any non-permanent residents, likeworker that's being exploited,
that's got to be dealt with.
But in terms of the permanent
residents coming into Canada,yeah, somewhere in the 400 to 500,
which is, we're over 40 million inCanada now.
(38:13):
So traditionally around 1% growthfrom immigration has actually been
the norm.
And so a little above that, we
probably need to be there.
If you look at the retirees coming
up, the baby boomers are retiringin a very big way and they're
getting older.
The top end of them are getting
older, going to need a lot morehealthcare at the end of your
life.
You need a lot more healthcare.
(38:34):
So I think the yeah, permanentyes.
residence, Obviously making surewe're especially inviting people
that have skills that we need,whether to grow in construction,
you know, construction trades tohelp grow our housing because we
don't have enough people to buildthe housing, but also where we
have big gaps in our needs andhealthcare would be one of them.
So, you know, as long as there'ssome management of inviting people
(38:54):
in who we really need to help usout in Canada.
in a a lot Awesome.
I like that.
If people do not follow you onLinkedIn, definitely recommend it.
You put out some awesome content.
So I appreciate that.
Well, thank you so much forjoining us today.
And yeah, sorry, we were justpeppering you with questions.
We could have done four episodeswith you, but yeah.
Thanks a a lot.
Okay.
Thank you.
Thanks so much.
Appreciate it.
so much.
Appreciate
Welcome back to the Colonial RealEstate Podcast.
(00:01):
I'm your mortgage broker host,Taylor Atkinson.
And I'm your real estate agent I'myour real estate agent host, Matt
Glenn.
What's shaking today, Taylor?
Awesome news this week.
As expected, Bank of Canada cut
its rate by 50 basis point or halfa percent.
What that means if you were in avariable rate or adjustable rate
mortgage is your payment willreduce about $30 per $100,000 of
mortgage amount that you haveborrowed.
If you're on a fixed rate, it doesnot affect you whatsoever.
(00:23):
Yeah.
It does affect in the in the
future though, right?Aren't the bond markets predicting
the future of the interest rates?Yeah.
We're seeing that inverse yieldcurve shrink a little bit.
So we basically want those to becloser together, which means
variables got to either come downmore or fixed has to kind of go
back up.
So if variable keeps downwards and
following fix then you know we'removing in the right direction how
much difference is there betweenvariable and fix now depends if
(00:46):
it's insured not insured rentalwhatever much difference is there
between variable and fix if it'sinsured not insured rental
whatever but we're still seeingabout a percent gap so damn we're
getting we're still seeing about apercent gap so damn we're getting
there though if we see another youknow next rate announcements
december 11th and um you um, youknow, we see another cut then,
then we'll be definitely withinkind of nice to just another to
just cut, cut, cut, cut, cut.
It's kind of setting 2025 up to be
(01:07):
a good year for real estate.
What would you think?
Yeah.
We're finally back in that range
where like people now are startingto have the choice again between
fixed or variable before it wasjust, you were stuck on fixed
because that's all we couldqualify people for with the stress
test.
It's kind of funny when the market
or was going up, everyone wasstuck on variable.
Yeah.
Yeah.
It's not nice of the banks toforce people into these products,
but we're finally It's not nice ofthe banks to force people into
(01:29):
these products, but we're finallygetting back to that neutral zone
where people have some choice,they have more flexibility.
So yeah, we're still not reallyqualifying most people on a
variable just yet, but we'regetting there.
It's kind of funny when you thinkabout this, just totally just
making this up right now.
But if the variable and the fixed
are on the same, it kind of meansthat we're in a pretty balanced
market.
Yeah, and I don't think we ever
sit on that very long.
(01:49):
You know, they kind of swing past
each other.
Fixed is always like the smart
money.
So that's kind of the direction
it's going.
You know, so when fixed starts to
rise again, you would expect thatvariable would swing and start to
follow it.
Well, today's guest we had on was
awesome.
I've been trying to get her on for
quite a while, huge into dataanalytics across Canada as a whole
for real estate.
(02:09):
So Wendy Waters, she has 20 years
experience in real estateresearch, 18 years with GWL,
realtor advisor.
She is also on the management
committee for Urban LandInstitute.
And she's on the board ofdirectors for UDI or Urban
Development Institute.
She just has some amazing
knowledge.
So basically she manages or gives
advice for like Canadian pensionfunds to invest in real estate
(02:31):
across Canada, mostly inmultifamily and commercial space.
So yeah, really, really good show.
I loved it.
it. It was one of those showswhere you and I, well, in this
episode, mostly you just keep onfiring question after question
after question.
And then it's just like, I could
just keep on doing this all day.
So many interesting answers.
(02:51):
Selfishly, I just wanted to belike off air.
Tell me where to put money, Wendy.
Like what should I buy?
Yeah.
I want to do what you're doing.
Yeah.
Being part of her team and seeing,
you know, the macro and microwhere to invest and geographically
and asset classes.
Like I saw her speak at one of the
UDI events in Kelowna and assetclasses.
Like I saw her speak at one of theUDI events in Kelowna actually.
And they are tied into like theprovincial and federal government
(03:14):
in the sense where they givefeedback on, you know, policy
changes and grants and stuff likethat.
So yeah, really, reallyinteresting person and get on
following her on LinkedIn.
Cause she puts out some really
good content there as well.
But yeah, I think you guys are
going to love the show.
That was was a fantastic one.
That was a good one.
This episode, like every episode
is sponsored by Century 21Assurance Realty, best brokerage
(03:34):
in BC, in the interior of BCanyway.
We're in Kelowna, Kamloops,Saminar, Vernon, Castlegar,
heading out further east in theKootenays.
We are everywhere that you need tobuy and sell houses.
So if you're an agent looking tojoin an up and coming brokerage
that's already kind of set up,we're the brokerage for you.
And if you're a buyer or sellerlooking for an agent, call up
Century 21 Assurance Realty.
Also, enjoy the show.
(03:54):
Okay.
Welcome to the show, Wendy Waters.
Thank you so much for joining us.
Thanks for having me.
Looking forward to a great chat.
Yeah.
Well, we'd like to start our show,just you connecting with our
listener, kind of what's yourperfect Friday look like in terms
of productivity, energy, you youknow what do you do at work and
kind of leading into the weekend abit of fun yeah well i guess my
(04:14):
fridays my fridays aren't thatdifferent from other days i
usually get up fairly early around5 15 and i have spin bike at home
to do some spin on the bike and dosome yoga and then i go and have a
cup of tea and go through thebusiness news of the day.
You know, a lot of business newscomes out of the Eastern time
zone.
So check into what's going on by
checking on LinkedIn to see whatthe industry is talking about
(04:36):
today.
If there's things I should be
aware of that may come up.
Also emails, anything that needs
my attention.
So by this time might be 637 here,
but in Toronto, you know, peopleare fully into their workday.
So do a check on that and youthen, try and plan know, my day So
do a workday.
check on that and then, you know,
try and plan my day and plan acommute.
So today I didn't have any callsearly morning.
Sometimes I got to do a call fromhome before I get a chance to
(04:58):
commute.
Sometimes I work from home, but
most of the time I come in and Ijust find it's a lot easier to
focus at the office.
What is the office?
What is your title?What's my title?
So I'm the Vice President ofResearch Services and Strategy at
GWL Realty Advisors.
So we manage pension fund real
estate assets.
We develop, we acquire, we manage
on behalf of pension funds,institutional clients.
And the research we try to makesure our clients are investing in
the right assets in the rightteam, locations over the time
frame that works for as well ashelp them understand some short
term expectations on what theythem, can expect.
(05:20):
So you're basically Yeah.
the brains behind the smart money
telling it what to hey?do, do, Well, not just me by
myself.
I've got a team and then work with
all my colleagues who are a lot ofreally smart people across the
(05:52):
country.
So it's coordinating a lot of
brains is sometimes our job tomake sure that our clients are
getting the real estate they need,the returns they need.
Pension funds use investment realestate to help pay out their unit
holders, so their pensioners.
So it's very important that we
look after, you know, just part oftheir investments.
Yeah, so I love Yeah, so I loveit.
Wendy, what are the right assetsin the right locations?
We look after, we have office,industrial, retail, and rental.
So those are the four that we workinto.
The retail is primarily groceryanchored.
So just needs of life.
We don't have big, super regional
shopping centers.
It's very much needs of life.
The right assets, it's really acombination of what's the best
(06:13):
locations.
And it depends a little bit on the
asset, best locations, good tenantmix.
Right now, a lot of the focus ison what your future revenue stream
can look like.
So, you know, making sure that we
feel like we can grow rents atleast as fast as inflation is
coming at us is a really importantfeature in whatever assets that
we're recommending.
And resiliency of those rents,
because again, pension funds keepthings for a long time.
(06:34):
So you're needing not just, hey,it's full today and the tenants
are paying great money and nextweek there's going to be something
or next year something new isgoing to open down the street and
it's going to take all thetenants.
We have to make sure we guardagainst that.
So barriers to entry is alsoimportant for what's the right
asset.
How's the office space looking
right now?Is that kind of coming back to
(06:55):
life after COVID a bit?Yeah, I think Toronto is really
struggling for reasons thatinvolves a lot of new supply in
Toronto, combined with bigcompanies relocating to take
advantage of new ways that we'reworking, and then congestion and
traffic and problems on that sideof Toronto.
So Toronto's got some struggles,but in the West... I heard they're
getting a new West... I heard newtunnel.
Who knows?The transportation management
plans in Toronto seem to change ona very regular basis, and we'll
leave it at that.
(07:16):
So don't quite know.
I haven't heard the tunnel.
Tunnel might be helpful.
But in the West here, back on theoffice question, Calgary and
Vancouver have had some steadyoffice absorption.
Calgary obviously hasn't had muchnew supply for a while since the
oil crash.
So that office market's had to
remake itself whereas in vancouverthere's more office under lease
today than in 2019 interestingyeah yeah by under lease lease you
(07:38):
know it's just somebody's got atleast they don't have all the
sublease markets so they're usingit we traditionally call it
occupancy but we're not talkingabout bums and seats you know how
many days of the week it's justsomeone's got at least and they
don't have on the subleleasemarket.
So they're using that space insome way.
And COVID helped accelerate achange in how we work in terms of
a lot more mobile technology, alot less paper.
(07:58):
If you're working with a laptopand you don't need two filing
cabinets full of files per person,you don't need nearly as much
space per person as when you havea desktop and a landline and
filing cabinets and bookshelveseverywhere.
So the fact that we're moredigital, mobile, that's creating a
trend of reducing the amount ofspace per person, you know, which
is what we're working through interms of, you know, companies
move, do they need as much space?If they're growing, they do, but
(08:20):
maybe if they're not growing, theymay many not.
Yeah.
Are you still seeing international
money come into Canada with kindof recent policy changes with
capital gains inclusion or justlike the amount of restrictions
that have come out in the pastyear in terms of real estate
assets?Is Canada still an interesting
place to invest for overseasinvestors?
Yeah, I think, well, thedistinction, obviously, there's
some limits on foreign capital atthe residential side, but there's
(08:41):
not on commercial.
So we have seen downtown
Vancouver, some European buyers ofa couple of assets on West Georgia
Street.
A couple of years back, we had
also the Bentall Center inVancouver going to U.S. capital.
So yeah, this foreign capital isstill interested in Canada in
those commercial spaces,especially if it's a market where
they don't already have anythingthere.
So they don't have to worry abouthaving too much in one market.
It's population growth.
Canada is one of the fastest
(09:02):
growing countries in the world inrecent years.
And population tends to drive realestate demand.
And the more demand there is, themore resiliency of your rent.
So it makes sense that Canada ison the radar screen for
international capital.
As you know, as I'm sure you both
know, like transactions are veryrare right now.
It's still a pretty quietinvestment market, but
international capital with newoffice buildings on Georgia
(09:23):
Street, what I heard, it waspretty much all international that
was interested in it.
I think some are seeing it as an
opportunity to get into theCanadian market where they aren't
having to compete as hard withlocal capital, which matters.
And then not it.
I obviously, REZ has all its
restrictions as well.
I mean, I guess you're getting the
benefit of the currency exchangetoo.
Like if our dollar's down rightnow and to the Euro or US is
(09:47):
higher, you're kind of buying anasset class that you want anyways,
but at a discount on the currency.
Potentially.
Do you see that historically?Like when our dollar's higher, do
we get less investment or is itjust purely based on the asset
class if it makes sense from howthe numbers pencil out?
By and and large, a lot of themajor Canadian assets are owned by
the Canadian pension funds and theCanadian institutions.
So we don't see that.
(10:09):
I don't know if we see enough
international capital coming in tospot the trend.
It's a very good question why youasked.
I'm not sure that we've seen atrend like, you know, in 2007,
when the Canadian dollar is worthmore than the American dollar.
You know, At that time, I thinkeveryone thought real estate was
overpriced anyway, so thereprobably wasn't a reason to come
(10:29):
in.
But yeah, it's a good question.
I don't know if there's enoughdata to say that, but certainly
the Canadian dollar right now inits normal state, probably assets
do feel like a bargain to someorganizations, I'm sure, because
when they look at the pricerelative in their own currency.
Yeah.
I guess maybe to stay on asset
class a little bit beforeswitching to kind of population or
rents.
And I know single family houses,
you know, they're not kind of yourguys' wheelhouse.
Obviously it's a smaller scale,but do you see single family
houses having a longer runway thansome of the other say
(10:50):
purpose-built rentals ordensification of condos or
anything, just purely because thecost to build is so expensive.
We't building them we're tearingthem down we're doing land
assemblies like it just doesn'tseem we're having a lot of starts
on single families comparable toother assets as like a pension
fund would you guys accumulate alot of single family houses or is
that something you'd ever look atat uh it's not something we've
ever done it's hard to get scaleand it's you know single rental,
(11:11):
as you probably know, it's big inthe US, but it tends to be purpose
built, like they're building homesto rent.
They started doing it in 2007, 8and the housing crash when there
was just a lot of homes out therethat needed a buyer and often had
an occupant but needed a buyer.
So we haven't had that kind of a
crash in Canada, like wherethere's just whole suburbs that
you could pick up or at leastneighborhoods within suburbs that
(11:32):
you could pick up.
So it's not something we do.
You know, your question on, youknow, single family homes, like,
you know, I've seen in BC whereright now most municipalities,
like most single family lots, youcould actually put four to six
homes on it if you were to take itdown, which means the land price
is going to get spread among fouror six potential future owners.
So that's obviously a huge upwardpressure on prices.
(11:54):
And if you wanted to have a singlefamily home, now you're going to
have to compete with that.
The land price is somewhat
connected to what you can put onit, not just what's on it today.
So certainly, I think not what wedo in Realty Advisors, but just
looking at the math there, yeah,we're going to probably see those
prices go up, sort of a one-timejump.
And then the price is the price offour or six units.
You know, obviously, we've got anelection going on right now.
(12:16):
One party saying they might dosomething different.
But some municipalities likeVancouver that did this ahead of
time may keep that.
Just with the idea of having that
more gentle density and a few moreoptions for families in terms of
the kind of homes that areavailable to them.
options for families in terms ofthe kind of homes that are
available to them.
the kind of homes that are
available to them.
Yeah.
Are you just seeing like massiveswings in your forecasting with
(12:38):
all the different like rulechanges, provincial, federal?
It seems like we've all been kindof going through a bit of a roller
coaster, but I can imagine fromyour point of view.
The population The populationside, certainly we're trying to
model population in order to thenget to modeling demand and, you
know, and even supply thosechanges happening there.
But yeah, the immigration changes,especially non-permanent residents
some of those policy changesthey're happening rapidly and even
some of the ones related to newsupply of what that could mean so
(13:00):
yeah i would say it's been quitebusy so in less busy times other
organizations also forecast thatwe can look at what they're doing
and right now it's been so fastthat we don't have that we have to
just do we have to really be ontop of it ourselves we We do our
own anyway, but it's interesting.
It's happening to fast.
You know, obviously the provincialelection here in BC is going to be
done in a few weeks, but thefederal politicking until that
(13:21):
happens is going to, I think, keepgoing.
So yeah, it keeps us on our toesfor sure.
And I guess so at a federal that'swhere the immigration policies are
a hundred thousand students comein that but most of those students
are going to leave.
Yeah.
Yeah.
level, changing.
know, year, But I think recentlywe've seen like a huge population
growth.
I'm speaking for Matt and but I,
we think that's obviously impactedthe real estate market.
What's your guys' take on that?Yeah.
Well, what we had was COVIDdistortions.
I mean, there's COVID distortionsaffecting every real estate asset
class.
Yes.
Multi-residential rental is theone we're talking about here.
(13:41):
So the COVID distortions withstudents was that anyone on a
student visa in 2020 was countedas being in the country.
So you arrived, maybe you got itin 2019, you arrived, 2020, you
could have gone home during COVIDand done your schooling remotely.
So you have that group that theway Canada counts them, as long as
you still have a valid studentvisa, they assume you're in
Canada.
And in normal times, that would be
true because you'd be going touniversity and of course you'd be
(14:03):
in Canada.
So we had that group that we think
a lot of them left, but we don'thave any exact numbers because
nobody counted that.
And then during COVID, new people
got admitted to university, butthe universities were online.
So you had the fall of 2020, thefall of 2021, in some provinces,
the fall of at 2022, least you hadan option to be online.
(14:47):
And So you had the fall of the2020, fall of In 2021.
some provinces, the fall of 2022,at least you had an option to be
online.
And so you had between two and
four years worth of students who Ithink all showed up in the fall of
2023, potentially.
Now, some trickled in before that,
you know, some never left and theystayed in Canada because it was a
better place for them to be.
But that's where we had this
double, triple, and in someplaces, maybe even a quadruple
entry of students that wasn't verywell counted.
And that was a huge burden on, youknow, rental housing stocks in a
(15:11):
lot of places.
And in some cases, you also had
the domestic flows of people, youknow, going to some schools in
different cities where, again,they started at home in their own
province, and then they had toshow up in Ontario, or maybe they
had to show up in Kelowna.
And so adding to that, so we had
international, we have potentiallydomestic students that went from
their family home in their ownhome province to needing a rental
apartment in their universitytown.
(15:31):
So with students, yeah, we had aCOVID distortion, which thankfully
is done.
There also was obviously more
students being admitted.
There were some problems with
these public-private partnershipsat certain kind of colleges where
it's not looking likeinternational students were really
getting a good education out ofthis.
So we had obviously some extragroups taking advantage
potentially of this.
But going forward, I think things
are going to normalize.
The provinces are getting to
control where their quota isgoing.
I suspect in British Columbia,it's going to be, you know, the
University of British Columbia,Simon Fraser, UBIC, and by UBC, I
also mean UBCO, like whatever theycontrol, are going to have most of
(15:54):
those spots.
And then over time, students
graduate, they either convert to atemporary worker, you know, they
can convert their status, or theygo home, maybe they might apply to
come back to Canada, or they mightnever want to come back to Canada.
But the number of students willstart to be steady and it's going
to be trending down because thegovernment has reduced the number
that can be here.
(16:14):
But we're already seeing it on a
very slow slope, but it is goingto be just a very slow slope down
of total students.
And that will obviously ease some
pressure in the housing market.
Like that's kind of I think we're
already seeing we're alreadyseeing it.
Yeah, I think I think this fall wealready saw it.
There was just a normal entry ofpeople starting university, coming
for a master's degree.
There was not this triple or
quadruple entry of people.
(16:35):
So we're already seeing it, I
think, as you look at therentals.ca, which is just whatever
happens to be available for leasethat month.
But it's been trending down in alot of the major markets in
Canada, I think Kelowna as well.
The top of the market rents are
not rising as fast or in somecases are coming down in the brand
new product.
So yeah, we're getting a more
(16:56):
normalized population flow now,which is good.
And as that data gets out there, Ithink hopefully maybe political
announcements will slow downbecause everyone can relax a
little bit and just let everythingplay itself out now.
Yeah, I guess selfishly.
So I'm actually looking at a
student housing rental complex asan investment.
Do you guys like that asset classkind of circle back on asset
classes?Or do we see like with these
(17:17):
recent policy changes?Maybe there's more risk associated
to that?Yeah, can you kind of tell us a
little bit or me just should I buyit or not?
it or not?Yeah, so we're obviously not in
that asset class.
We do purpose built rental, we
obviously serve a lot of studentsin our rentals.
So we do track what's happening inthe students.
They do matter and they matter tothe overall market.
But as for the purpose studentrental, it depends on the market,
how much is out there and wherestudents are going.
(17:38):
There's a lot of internationalinterest in student housing in
Canada because Canada is veryundersupplied relative to a lot of
the other, say, European, USmarkets.
There's not very muchpurpose-built student housing in
Canada.
I do not know the Okanagan
situation, but it would notsurprise me at all if it's pretty
much the same, is that there's nota lot there.
University of British Columbiaclaims they're building a lot.
They operate a lot.
Apparently, they're Canada's
largest operator of studenthousing, including some in the
(18:00):
Okanagan.
So I don't know quite what that
supply is relative to demand.
I still think it's pretty small
relative to the total number ofstudents that are out there.
Yeah.
So you said it was not an asset
class we're in.
It's certainly an intriguing asset
class because of just the numberof students that need housing.
And a lot of the universities onlyprovide the housing for first or
first and second year.
So if it was catering to the, you
(18:21):
know, the third year students,fourth year students, it seems
like there's probably somethingthere.
Can I ask why it's not an assetclass you guys hold?
Is it just like internal policyfor pension funds to like, these
are our asset classes or?Not at all.
It's, I think some of our clientsmay with other managers have some,
but first, it's an operatingbusiness as well as a real estate
play.
And obviously, you know,
multi-residential rental issomewhat of an operating business.
(18:42):
And it's one that we understandyou need scale to be in an
operating business because wemanage like we're fully vertically
integrated.
We manage pretty much everything
that we own for our clients.
Yeah.
So we have property management,leasing, everything.
So that's why student housingdoesn't quite work with our model
right now because we don't haveany other ones.
And so you only have one is veryinefficient.
Now, you know, if you are anindividual investor, like there's
someone who's got a platform andthey just need some capital in
(19:04):
there where there's a managingpartner who has the expertise, you
know, for an individual likeyourself, that could be, you know,
obviously a very compelling idea.
It's just not typically what we
do.
we Yeah.
Okay.
Good to know.
Obviously purpose-built rentalsare, I mean, they seem huge right
now, at least in Kelowna, likeeverywhere we're driving around,
massive structures going up.
We're looking at probably, you
(19:25):
know, two to 3000 units, you know,that's just me meeting with a few
developers.
Do you guys have data kind of, I
know there's a housing shortage,obviously.
It seems like this is almost likea new asset class that people are
interested in, although this hasbeen going on forever.
And kind of, we saw like probablya bigger build in the seventies
and eighties.
There was a lot of these apartment
buildings and then it took a lull.
Why did it take a lull?
(19:46):
And why is it kind of picking upspeed now with like MLS select and
all these things?So Yeah.
it took a lull and why is it kindof picking up speed now with like
MLS Select and all these things?Yeah, so it took a lull around the
time the Strata Act came in.
So you could build condo and
basically individually sellapartment units as opposed to
having one owner for the entirebuilding.
So that was, you know, the 70sinto the 80s.
(20:07):
Also, there was some differentinvestment programs in the 70s and
80s that contributed to being anincentive to build apartments.
So, yeah, we didn't buildpurpose-built rental really right
through the 90s into late 2000s incross Canada.
It was just a general statement.
So we've had a huge shortage.
There's a huge deficit, especiallyjust that sort of that middle,
like we've got new and then we'vegot really old and we don't have a
(20:29):
lot in between, which is typicallyyou have a nice spectrum of
housing for renters, which we'rekind of missing right now.
So why now?One of the reasons is it's been
really hard the last, say, 18months for condo builders to get
the pre-sales that they need inorder to get their bank financing.
In some markets, there's an easyoption to flip to rental.
You can go back.
There's not a lot of difference
(20:50):
from the city's perspective whichone you're doing.
In some markets, there is.
You know, this is a rental site,
so they look at rental versuscondo.
So that's one reason is condosharder to do.
So they're pivoting.
There's a lot of demonstrated
where the rents can be in our app,which helps with performance.
Whereas for a while, when wedidn't have new purpose built
rental, everyone was looking atCMHC rents, which tend to be older
(21:12):
and it's the in place and themarkets with rent controls
suppress those rents.
And so you say, well, geez, if I
can only rent that unit for $1,500or 250 a foot, I can't afford to
build it.
Then you realize, well, that's
have a well, that's arent-controlled unit.
Now that you can see that othersare able to make it work, it
helped to show that, yes, a groupof renters who are quite happy to
pay for really good quality unitswith a really good experience,
nice amenities.
And so that's been proven out.
And that's also helping toencourage investors to go into
rental.
And some cities have density
bonuses and there's other thingsout there too.
(21:34):
You put a really interesting postout on LinkedIn the other day.
And I think it was per householdnow.
I believe it was specific toVancouver, but per household, the
average of having income over120,000 household, was that
correct?120,000?
Has been increasing substantially.
So there's like a missing asset
class where those higher incomeearners want to rent and that's
not on the market yeah what thepost was it was just looking at
(21:54):
where people who make and i can'tremember which income bracket i
use but 100 was it was justlooking at where people who make
and i can't remember which incomebracket i use but 100 or 150 000
where they were renting i think iput one out on there and a lot of
them are an older product so it'salso a way of saying that there is
demand.
Not all of them are going to want
to pay new product rents, but alot of them will, because we also
see another post I put out onLinkedIn is who rents the new
(22:16):
products.
So we can look at the census gives
us something called five-yearmobility data.
So where were people five yearsago?
Where are they at the day of thecensus?
And if we look at just for peoplewho are living in new rental,
whether it's condo orpurpose-built, the census doesn't
distinguish, but you can see wherethey were.
And over half of them were in themetro area.
And most of those were actually inthe CSD, the actual little city
(22:36):
immediately close to where they'reliving today.
So you can see that higher incomepeople, they move into the new
product.
So if you're building a new
product, it's not just forinternationals or something like
that.
It's actually people local who
choose to move to that new productbecause chances are they had a
home.
They were already living in the
region five years ago.
They had a place they were living.
They're making a choice to moveinto this new product.
It helps show what is also calledfiltering, where they then are
(22:58):
moving out of likely a cheaperunit.
And then somebody who needssomething less expensive, now
that's vacated.
But until you create that room at
the top for the higher incomepeople to move up, you end up
without some product for people,you know, more medium incomes to
rent.
And that's one of the challenges
we've had is it's been nothing.
And then, you know, the middle
income was getting bid up byhigher income earners.
(23:19):
And then the lower, what used tobe maybe typical rental for people
with lower incomes got bid up bythe middle And income.
the middle income was getting bidup by higher income And earners.
then the what lower, used to bemaybe typical rental for people
with lower incomes got bid up bythe middle income.
And the people with very limitedmeans ended up on the street,
which obviously is a real tragedyand a huge problem.
So we need the rental units at thetop to just help move everybody
(23:39):
along.
Ironically, it creates other price
points at the lower price pointsin the spectrum, which is
obviously needed by a certainspectrum of the population.
So basically new product of alltypes helps everybody.
New product helps New producthelps everybody.
Yeah.
And enough new product all in one
area and the rents stop going upin that new product.
You know, supply and demand doeswork when you finally match demand
with a new supply.
It's been hard to do in Canada
because we haven't been buildingenough.
(24:00):
to do in Yeah.
Are we on track or like, what's
your thoughts on that?Like, are we ever going to get
there?Are we just always going to be
behind the eight ball with this?Well, obviously, like if you look
at the, you know, CMHC and there'sdifferent groups that have how
much housing overall Canada needs,because it's not just rental.
There's also obviously thatspectrum of first time buyer
product that's going to pull somepeople out of rental and make room
(24:21):
for other people.
So we need somewhere between three
and five million homes, dependingon what your affordability is and
what you're trying to achieve.
But we need a lot of homes in the
next decade, five years, decade,depending on the study.
Are we going to get there?Probably not all the way.
But I think, you know, the clicheabout, you know, shooting for the
stars and maybe we get to themoon.
You moon.
You know, yeah.
Anything we can we can do, anyhousing that gets added helps.
(24:43):
It creates for somebody.
So anything that unsticks housing
helps make it possible to buildmore housing does help.
And so even like, yeah, new condodesigned for first-time buyers,
that helps rental, that createsrental spaces.
Can we talk a Can we talk a littlebit about rent control?
And I'm thinking of, you know, ifwe're talking about a newer asset
class being built for rental, theymove out of the more affordable,
you know, apartment building tosay this more expensive one that
(25:04):
opens up that affordability.
But that's really the only time a
landlord can kind of capitalize ona fair increase in the market
because otherwise we're capped at,you know, CPI plus government
allowance in BC and Ontario, butwe look next door to Alberta and
they don't have cap on rentalincreases.
Do you know kind of the spread on,like I know rent's been increasing
in BC, but it seems like it'sreally kind of plateaued in
Kelowna at least.
Do you know the true increase on
rent that's been over year overyear?
Because if we're just looking at arent cap, it doesn't really
reflect some of the increases thatwe've seen for renters.
(25:24):
Yeah, because obviously the CMHC,it all gets blended.
Most people don't move in a yearthat are in typical purpose-built
rental housing.
And so you get increases on
anything that turns over and we'veactually had a declining turnover
rate.
So that means it's very hard to
measure how much rents are goingup and it's going to depend on the
neighborhood.
It's going to depend on the
neighborhood.
It's going to depend on the
building.
Obviously, how long the previous
(25:45):
renter had been in there.
There's so many variables.
So do we have an accurate number?I think CMHC rents overall were,
you know, they were up a littlebit more than normal last time.
Of course, it's almost a year old.
The data, I believe, was like 8%
or 9% in some markets.
But rent control has, yeah, it
creates a huge amount ofdistortion because you end up,
people stay in units that theyprobably shouldn't stay in.
Like it doesn't suit them anymore,but they stay because the rents
are cheap.
(26:05):
It doesn't allow other people to
move into those units.
You end up basically with the long
time residents whose incomes havegone up.
They stay in the old units.
And then it forces people who are
starting out their careers to endup in the new units, which costs a
lot more.
So we get a lot of distortions
just in terms of equity andfairness in society from rent
control.
That's kind of what I wanted to
(26:25):
ask.
Do you feel rent control works for
fairness in society from bothsides, from landlords, from
tenants?I'm just thinking Alberta seems to
have some, I don't want to sayaffordable, but price compared to
their BC, system seems to workmuch better and there is no rent
control.
So is that not a proven model?
Yeah.
I mean, it's great to look at the
Calgary data because on the CMHC,when you look at average rents
(26:48):
over time in places like BC andOntario, which have rent controls,
basically rents only go up.
In Calgary and Edmonton, rents go
up and they go down because rentsare always at market.
The CMHC rents and the marketrents are pretty much the same
thing in Calgary and Edmonton.
Whereas in Vancouver, we're always
talking about, well, CMHC rentsmight say a one bedroom is $1,500.
Just try to find a one bedroom for$1,500.
(27:09):
The new rents might be $2,500.
And you don't know where are
rents.
But Calgary, rents go up, rents go
down.
CMHC and market rents are the
same.
And what's really interesting is
when the economy starts to boom,rents go up, developers all go
build rental, probably build alittle more of it that's needed.
But that also works for rentersbecause then it's a boom and bust
(27:30):
market.
And when the economy starts to
contract and people are losingtheir jobs, rents typically go
down because there's a little bitless demand, and so they go down.
And so it works for renters whenyou think about it.
When their incomes are rising,rents go up.
And when their incomes arefalling, rents go down.
So it's a much more balanced andequitable system for everybody.
Now, it's a little tougher.
If you're an you investor, a
little tougher.
know, If you're an you got
(27:50):
investor, to be ready to ride bothof those waves.
But in you do better.
generally, In you do better as
general, an investor because rentscan move to market when the time
is right.
But you can't do it in other
markets.
You have to wait for a resident to
move.
Yeah.
You're on the board of right?UDI, UDI, I am.
Okay.
Yeah.
I actually, I saw you at an event,I think a while ago.
And so it just registered for me.
(28:11):
I know you guys help communicate a
lot, like at a provincial level, alot of this data.
Is this something that's beenbrought up to BC province saying
like, Hey, maybe rent control theway we have it set up isn't the
right thing.
Oh, for sure.
UDI did have a recent letter toRavi Kala on pointing out some,
some challenges also to try andget more rental built because
ultimately urban developmentinstitute is about for UDI did
(28:32):
have a recent letter to Ravi Kalaon pointing out some challenges.
Oh, sure.
Also to try and get more rental
built, because ultimately UrbanDevelopment Institute is about
trying you to, know, it's reallyhome builders and other commercial
builders as well.
But it's about getting buildings
built.
But also Landlord which BC, is the
association for residential rentalproperty owners.
They do some advocacy.
The challenge is once it's there,
(28:53):
it's how do you unwind rentcontrol?
do some The challenge advocacy.
is once it's it's how there, do
you unwind rent control?In it used to be CPI plus which I
think when you started thisconversation, BC, two, we were
talking about, it used to be thatrent guidelines was CPI plus 2%.
But in the last, maybe five, fouror five years, in about 2018, it
went back down to CPI only, whichis very low.
(29:14):
And that's the overall CPI.
But a lot of the operating costs
on buildings have been going upmuch faster than CPI.
So faster than inflation.
Incomes, in most cases, a lot of
it going up faster than inflation.
So but rents have been tied
strictly to CPI.
And then there was two years
during COVID when they were frozenat zero.
You know, the landlord BCmembership, which is a lot of
(29:38):
smaller landlords with these olderbuildings, and they've been really
struggling because operating costshave gone up more than inflation.
And their rents, you know, if youlook at a four or five year basis,
have we been even allowed toincrease?
You know, hopefully they've hadsome turnover where they've been
able to get a little bit morerevenue in.
But it's really creating somechallenges in the rental sector.
What's been happening the last fewyears?
Yeah.
Do you still like the B.C. market
(29:58):
because of the tenancy board?You know, the difficulties that we
face in rent control, I guess,just does it come down like to
oversimplify it?Is it supply and demand?
We don't have enough housing.
We still believe in the BC market.
I think our clients I think ourclients do.
We really do like the BC market.
So rent control is moved back up.
We really like having new supplyand, you know, having new purpose
built rental in this market.
That's what we believe in.
(30:19):
We've got development sites.
So we've opened two new buildings
in the Vancouver market sinceCOVID, one on Robson Street and
one just off Lonsdale in NorthVancouver.
And we've got more developmentsites on Robson Street.
We've got another development sitein the Lonsdale area.
And we've also got another one inthe downtown peninsula.
So we do believe in this market.
We really do like that
experiential rental, very wellamenitized, great walkable
locations and high quality.
So we definitely like that.
We still believe in this market.
(30:40):
You know, newer rental, you
obviously can get your rents rightat market when it gets leased out.
So we still believe in thismarket.
I think, you know, buy an olderrental.
There's opportunities andchallenges in that, which every
building you just work through it.
There's definitely opportunities
to invest.
The inequities are more from a
renter perspective.
There's challenges for renters
that I was talking about earlier,but as an investment asset class,
still like BC, still like theasset class nationally.
We have a very large rentaldevelopment pipeline nationally.
So just having some best in classreal estate, we believe in this
market, lots of renters, renterincomes are going up.
(31:03):
They're not buying as often.
The percentage of renters in
Canada is going up.
We do like this asset class
long-term.
It's just, it's the right assets
in the right locations.
And you can say that about every
asset class, but rental inparticular, right assets, right
locations.
Yeah.
I kind of have to ask Yeah.
I kind of have to ask now, like as
a smaller investor, we look atbuildings that have been sold.
Obviously like they're fairlylarge buildings.
Vancouver is a perfect example oflike, wow, that sold at a 2.8 cap.
(31:25):
Who is buying that?And I'm thinking maybe you guys
are buying that.
Maybe you're not.
I'm putting words in your mouth.
But in terms of a cap rate, do you
guys have like, we won't go belowthis kind of cap rate at asset
cash flow or for institutionalpension fund type money?
It's such a long play, mostly onlike appreciation that you guys
are willing to go after those typeof asset classes?
Yeah, I mean, I think cap rate, itcan be a somewhat problematic
(31:48):
measure, because a lot ofbuildings when they trade, when
any building actually trades, butin residential trades in
Vancouver, yeah, the cap ratelooks low, but it's being traded
as a covered land play.
So it's a future development site.
So that could be one reason why acap rate is going to be low.
But with any building right now,it's all about the future revenue
stream.
And so you might go with any
(32:09):
asset, you might see someone buysomething that seems a bit low on
the cap rate, but if rents aresubstantially under market, and
there's an obvious path to getthem there, residential rental is
a little more challenging, but youcould still see a path to get
there.
Some groups do, but other types of
asset classes without rentcontrol, you might say, yeah, when
these leases expire, we're goingto move them back up to market.
So it's all about that futurerevenue stream is really where
pricing is at right now is, youknow, how much are rents at
market?Are they below market?
(32:29):
Are they above market?That would be problematic for a
low cap rate.
But that's what investors are
looking at is that future incomestream and the reliability of that
future income stream.
Okay.
Airbnb legislation, how has itimpacted current rent?
I mean, obviously the window ondata is very small and it probably
isn't even out yet, but has itachieved provincially what they
were trying to achieve by puttingmore units on the market?
(32:51):
Well, one of the of thechallenges, like obviously some
markets like Vancouver have hadAirbnb restrictions for a number
of years.
The province-wide one is more
recent.
We've been talking about how rents
have stabilized.
Some of the rents in the top of
the market have come down a littlebit, especially if you look at
rentals.ca.
I think Kelowna is off like 5% or
6% year on year in rentals.ca,which is whatever's available.
So it's coincided with rentscoming down.
(33:13):
I think it's a stretch to say it'scaused rents to go down because I
think ultimately it's aboutpopulation.
You know, population has beeneasing as well.
We didn't have the triple entry ofstudents and also we didn't get
into, you know, extra entries ofnon-permanent residents, workers
as well in there.
So is it making a difference?
It's obviously in there.
If you add a few hundred formerly
Airbnb units into the rentalsupply, that's going to make a
(33:34):
difference.
But it's hard to say because
there's so many other factors thatare stabilizing rents right now.
New supply, easing demand growth,short-term rentals, it can be
problematic in terms of how acity's planning.
So I do get some of the policyreasons for thinking about
restricting them.
But I think the research is so-so
on what they actually do.
And the problem is that you don't
run a perfect experiment.
You know, rents are coming down
for other reasons, right?know, rents are coming down for
(33:54):
other reasons, right?Yeah, I know.
I know.
I know that was a tough one to
finish on.
It was a tough one.
Yeah, it's a tough one.
It was a tough one.
Yeah, it's a tough one.
And I know Kelowna is a hot-button
issue.
I do know in Kelowna you because,
these rules know, changed afterpeople have made some investment I
feel decisions.
for At the same them.
(34:15):
I do sort time, of feel for thecity the planners, provincial
planners thinking if we're like,building a condo we're thinking
tower, that this is housingtowards our housing needs in And
if Canada.
they're being used as hotel rooms,
you that's, a know, So challenge.
I have sympathy for the quick
change and the retroactive changethat hit cities across the world
that are having to get a handle onwhat to do you know, about, how to
(34:36):
manage this in a way that worksfor everybody.
So I do have sympathy for peoplein Kelowna because I do know that
some buildings really being sortof financed the idea that of a
certain number of units, we'regoing to be Airbnb.
Yeah.
It's a complex issue for sure.
Okay.
Well, we'd love to kind of go into
our wrap-up questions.
If you could buy one property in
the Okanagan in the next 12months, what would it be?
Well, me personally, so thiswouldn't be an investment.
(34:58):
I'd probably get something like aSilver Star because I like to ski
and I like to cross country anddownhill.
So actually I'd probably buy SunPeaks, but if I can't buy Sun
Peaks, then I'd go to Silver Star.
I'm at big White right now.
Yeah, I'm not supporting that BigWhite right now.
But Silver Star has Sovereign Lakeand stuff like that.
Exactly.
It's the better cross-country
(35:18):
trail.
I'm not supporting that Big White
right now.
But Silver Star has Sovereign Lake
and stuff like that.
Exactly.
It's the better cross-countrytrail.
That's why.
I mean, yeah, Big White is lovely
for downhill skiing, but not sogood for Nordic.
So that's why I would have to pickone.
why.
I mean, yeah, Big so In terms of
an investment, can we ask a favorand pick your brain on that?
Or you can just tell me off air soI don't have competition.
(35:38):
Yeah.
Okanagan investment.
I have questions.
I have been to Kelowna for a
while.
Fast growing place.
I think it grew by 4.3% last year,the population.
So population growth drives realestate.
If you want a lower maintenanceone, I take a look at, is there
any small bay industrial thatmakes any sense in terms of its
location and its condition and therenters?
That's probably an asset class I'dtake a look at as a small
(36:00):
investment.
I'm not talking institutional, I'm
talking personally.
What would I look at?
I'd probably take a look at that.
Institutionally, we have three
shopping centers in Kelowna.
So we like that market as a place
for needs of life oriented retail,again, population growing and
people need to shop.
Okay.
I love it.
Thanks.
I love it too.
All right, Wendy, if you could
(36:20):
give your 20 year old self anyadvice, what would it be?
So my 20 year old self was in theearly 1990s and it was a tough
economic time in Canada.
It was a tough time in the world.
The Cold War had collapsed.
No one knew what was happening.
There was a lot of uncertainty.
So I think it would be that all
this confusion, the world turnsaround and goes on a pretty good
run after we get through the realdoldrums of the 1990s, as well as
(36:41):
Canada.
So it'd be to hang in there and
just wait.
Things are going to get a lot
better for other people around theworld, for the economy, for
(37:09):
Canada.
So that's what I would say.
Yeah, that's good advice.
I like that.
What is your favorite charity orhow do you get back?
With all the turmoil in all theturmoil in the world, Doctors
Without Borders, Medecins SansFrontieres, so MSF.
And then locally, I usually get afair amount to the food bank.
And then we have a United Wayprogram through Canada Life to
donate off paychecks.
And I'm fairly generous with that
one and let them decide where it'sneeded in the community.
All right, Wendy, how can Tayloror I or our listener help you?
What can we do for you?What can you do?
I think all the issues you can seewhat I'm posting on LinkedIn.
Get involved.
We need more housing.
So how do you help your neighborsunderstand we need more housing?
That it's going to be good.
More neighbors, diverse neighbors.
It's all good.
And we need immigration.
there's a lot of anti-immigrationstarting to come out.
But actually, if you look atemployment growth over the last, I
(37:30):
think, 20, 30 years, nativeCanadian born people, like the
number of employed Canadian bornpeople has stayed flat.
It's all based on immigration.
So our economic growth, our
employment growth, everything wecan do in healthcare Canada,
everything workers, is coming fromimmigration.
So our economic our growth,employment everything growth, we
can do in Canada, healthcareworkers, everything is coming from
immigration.
So don't be quick to blame
immigration on our housingpolicies.
We need immigration.
(37:50):
Our housing issue is from lack of
supply.
So I would encourage listeners to
keep that in mind.
Interesting.
So you think So you think theimmigration numbers we have right
now, you like them?Are they too high or too low?
Obviously, we talked about some ofthe challenges with non-permanent
residents.
And some of that is right idea not
being executed perfectly well.
So that needs to be fixed.
Obviously, students that are notlearning, that's a problem.
Any non-permanent residents, likeworker that's being exploited,
that's got to be dealt with.
But in terms of the permanent
residents coming into Canada,yeah, somewhere in the 400 to 500,
which is, we're over 40 million inCanada now.
(38:13):
So traditionally around 1% growthfrom immigration has actually been
the norm.
And so a little above that, we
probably need to be there.
If you look at the retirees coming
up, the baby boomers are retiringin a very big way and they're
getting older.
The top end of them are getting
older, going to need a lot morehealthcare at the end of your
life.
You need a lot more healthcare.
(38:34):
So I think the yeah, permanentyes.
residence, Obviously making surewe're especially inviting people
that have skills that we need,whether to grow in construction,
you know, construction trades tohelp grow our housing because we
don't have enough people to buildthe housing, but also where we
have big gaps in our needs andhealthcare would be one of them.
So, you know, as long as there'ssome management of inviting people
(38:54):
in who we really need to help usout in Canada.
in a a lot Awesome.
I like that.
If people do not follow you onLinkedIn, definitely recommend it.
You put out some awesome content.
So I appreciate that.
Well, thank you so much forjoining us today.
And yeah, sorry, we were justpeppering you with questions.
We could have done four episodeswith you, but yeah.
Thanks a a lot.
Okay.
Thank you.
Thanks so much.
Appreciate it.
so much.
Appreciate
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