Volume 4| September 2022
In August 2022 there were 11 transaction’s in GTA Apartments, for a value of $178,240,000. This is down approximately 62% in aggregate value compared to August 2021 when there were 29 transactions for a total value of $505,418,500. There were 526 units traded in August 2022 vs 2078 units traded in August 2021.
On September 7, the Bank of Canada (BOC) increased its overnight rate an additional 75 bases points to 3.25%. As Interest rates have moved significantly with the government attempting to control inflation, Cap Rates for investment properties have also been affected (Multi-Family & other asset classes). Traditionally, purchasers for Multi-Family assets have a longer holding period and are securing longer term financing. The buildings with more units typically have a higher turnover ratio, to which investors can purchase at a more aggressive cap rate. Over the next several years the cap rate will increase as units are re-rented at new market rental rates and furthermore stabilized over a period of time.
Why Purchase Multi-Family: Real estate typically provides a higher real rate of interest than do banks because of the risks and costs associated with owning real estate. This spread of cap rates has some cyclicality, but is relatively constant in the long term, reflecting the stable nature of Apartment real estate as factor of production.
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