Market Updates

General Market Observations

RESIDENTIAL

The market in areas that Red River Group provides valuation services for remains largely stable. While listings and sales activities have been lower in comparison to 2019, there is no indication to date of average home prices decreasing thus far during the COVID-19 health emergency. Numerous economic forecasts have projected the potential for decreased home values this fall, however with Manitoba’s diversified economy and lower consumer debt loads it is unlikely projected average home value decreases for Canada, as a whole, will be as significant in Manitoba. In areas of Saskatchewan where Red River Group provides valuation services it is more difficult to assess the impacts of COVID-19 related economic outcomes due to Saskatchewan’s more focused resource based economy.

COMMERCIAL

Commercial markets largely remain on “pause” as provinces across the country cautiously institute recovery plans. Multi-family projects continue to proceed in numerous market areas that Red River Group provides services to, with no discernible negative market impacts from the COVID-19 health emergency. It is simply too early to determine what, if any, long term market impacts general retail and hospitality related commercial properties will face in the months to come. However it is anticipated that at best, the longer the current pandemic declaration remains in place, general commercial properties will remain flat with increased downward market pressures.

AGRICULTURAL

Agricultural markets remain mostly unchanged in comparison to pre-COVID periods. Supply managed intensive livestock operations appear stable. While there have not been many land transactions in the Red River Group service area, land values appear stable as well. Commodity farm gate pricing will continue to have an impact on agricultural real property values and as such, commodity futures should be monitored when considering the overall stability of agricultural real estate values.

As stated in previous updates, the short-term impact of COVID-19 has resulted in the market essentially being placed on “pause”. We continue to compile market data for clients surrounding these impacts. Market updates are shared via email, on our website, and through webinars (available to clients upon request).

Housing Market

Data comparing the last two weeks of April this year versus last year in all Winnipeg MLS areas indicates that:

• Total listings are down 52% (compared to 50% for the first two weeks of April)
• Total sales are down 33% (compared to 41% for the first two weeks of April)
• Total withdrawals are up 70% (compared to 154% for the first two weeks of April)

Total sales transactions and listings have been significantly impacted in the Winnipeg region since the COVID-19 health emergency declaration in mid-March.  However, the last two weeks of April do indicate some improvement in total sales and withdrawals versus the first two weeks of April.  Data comparing the last two weeks of April this year versus last year indicates that the median sold value for single family detached homes remains stable at $315,000.  Despite the decreased amount of sales for single family homes, decreased listings available on the market it reasonable to assume this stability, for the moment, will continue.

Outside of Winnipeg, as data sets are much smaller, providing a specific analysis is not prudent. However, anecdotal evidence from Red River Group appraisal assignments continues to indicate that trends throughout Manitoba and portions of eastern Saskatchewan are reflective of Winnipeg.

Commercial Market

With continued economic uncertainty created by the COVID-19 pandemic, commercial market activity has been impacted across Canada with a number of businesses still shuttered. Outside the immediate general pause in market activity, it remains difficult to measure the full impact based on the first two months of the COVID-19 health emergency declaration. Early indications however are reflecting that some tenants are facing challenges related to rent payments. The first evidence of this is the limited but permanent closure of some restaurants. It’s possible that these locations were not viable long term pre-COVID-19. Further, as Provinces slowly begin to reduce public health order restrictions, and with significant government business fiscal supports available, it is anticipated that most businesses should re-open by late June. Commercial project activity has seen schedule delays due to on-site COVID-19 protocols and in some cases supply chain impacts. Anecdotal field data does indicate new project activity beyond the summer is challenged due to economic uncertainty and tightening capital financing requirements.

Impacts related to cap rates, sales activities, and general commercial vacancy are currently evolving. However, it is clear that the longer the health emergency remains in place the more challenged general retail and office space will become related to long term structural change in the economy as a whole. Industrial, agro-commercial and institutional properties are more complex in nature related to market value impacts and likely dependent on the depth of economic structural changes which are not clear at this time. The most dramatic impacts at the moment appear to be lodging/hotel properties and to a lesser degree hospitality focused real estate.

The residential rental market (multi-family) faces some challenges related to tenants’ ability to service rent payments. However, government support programs like CERB continue to assist tenants to largely remain current with rent obligations. Red River Group’s property management division saw a slight increase in tenant requests for rent payment deferrals in April but not as significant as initially anticipated. This trend continued in May, if not improving somewhat, indicating for the moment that rent obligations are largely being met. With Manitoba’s legislated rent control environment for multi-family properties older than 20 years (as of March 7, 2005), a sizable portion of rental units in the Province have “fixed” rents. With this regulated environment it appears unlikely that Manitoba will see the same downward monthly rent pressures that other jurisdictions in Canada are experiencing.

Appraisal assignments for ICI properties will require enhanced analysis to determine any potential market adjustments related to COVID-19. Red River Group has developed a webinar that is available for our clients that provides an overview of valuation in a COVID-19 environment. For those wishing to host this webinar, at no charge, please contact gordon.daman@redrivergroup.ca for more details.

Agricultural Market

While we continue to see the exchange of bare farm land and market values remain stable, there does appear to be a “pause” in sales but not to the extent of other market sectors. The direct impact of the COVID-19 health emergency on the agricultural industry appears to be more focused on supply chain, human resource challenges, processing capacity (due to plant shutdowns), and commodity/farm gate pricing – particularly for the intensive livestock industry. The long term outcome of this in the agricultural market is difficult to assess at this time, however it would appear these impacts will be somewhat lessened by increasing government support programs.While we continue to see the exchange of bare farm land and market values appear to be remaining stable, there are early indications of a “pause” in sales but not to the extent of other market sectors.  The direct impact of the COVID-19 health emergency on the agricultural industry appears to be more focused on supply chain, human resource challenges, processing capacity (due to plant shutdowns), and commodity/farm gate pricing – particularly for the intensive livestock industry.  The long term of this in the agricultural market is difficult to assess at this time, however it would appear these impacts will be somewhat lessened by government support programs.

Approximately six weeks into public health authorities instituting significant efforts to arrest the spread of COVID-19, it is clear real estate markets have been impacted.  The short term impact has resulted in the market essentially being furloughed.  The length of this furlough and the long term impact on market values will be dependent, for obvious reasons, on length of the current COVID-19 health emergency.  In Red River Group’s service area numerous market impacts related to the health emergency are being witnessed – particularly the significant drop in listings and sales.

Housing Market

Data comparing the first two weeks of April this year versus last year in all Winnipeg MLS areas indicates that:

• Total listings are down 50% (compared to 22% at the end of March)
• Total sales are down 41% (compared to 30% at the end of March)
• Total withdrawals are up 154% (compared to 22% at the end of March)

While total sales transactions and listings have been significantly impacted in the Winnipeg region, data comparing the first two weeks of April this year versus last year indicates that the median sold value for single family detached homes remains stable at $320,000 (up 0.3%). The median sold value of all single family homes decreased slightly. Essentially the market appears to be furloughed or on pause. Outside of Winnipeg, as data sets are much smaller, providing a specific analysis is not as easily done. However, anecdotal evidence from Red River Group appraisal assignments would reflect these trends throughout Manitoba and portions of eastern Saskatchewan.

Commercial Market

With the economic uncertainty created by the COVID-19 pandemic, commercial market activity has been impacted across Canada. Outside the immediate general pause in market activity, it remains difficult to measure the full impact based on the first six weeks of the COVID-19 health emergency declaration as businesses continue to address immediate sustainability matters as a result of public health orders. Commercial project activity is increasingly being affected by construction limitations due to COVID-19 protocols and supply chain impacts. While construction remains an essential service in Manitoba, anecdotal field data does indicate new project activity beyond the summer is challenged due to the current economic environment.

Impacts related to cap rates, sales activities, and general commercial vacancy are currently evolving. However, it is clear that the longer the health emergency remains in place the more challenged general retail and office space will become related to long term structural change in the economy as a whole. Industrial, agro-commercial and institutional properties are more complex in nature related to market value impacts and likely dependent on the depth of economic structural changes which are not clear at this time.

The residential rental market (multi-family) faces some challenges related to tenants’ ability to service rent payments, however government support programs appear to be assisting tenants to largely remain current with rent obligations. Red River Group’s property management division has seen a slight increase in tenant requests for rent payment deferrals but not as significant as initially anticipated. With Manitoba’s legislated rent control environment for multi-family properties older then 20 years (as of March 7, 2005), a sizable portion of rental units in the Province have “fixed” rents that are unlikely to see the same downward monthly rent pressures other jurisdictions in Canada are experiencing.

Appraisal assignments for ICI properties will require enhanced analysis to determine any potential market adjustments related to COVID-19. Red River Group is currently developing educational tools to provide commercial lenders and owners additional information related to valuation techniques required to arrive at reasonable opinion of values in the anticipated “new normal” economic environment created by the COVID-19 pandemic. This will include webinar sessions to our client base in the near future.

Agricultural Market

While we continue to see the exchange of bare farm land and market values appear to be remaining stable, there are early indications of a “pause” in sales but not to the extent of other market sectors.  The direct impact of the COVID-19 health emergency on the agricultural industry appears to be more focused on supply chain, human resource challenges, processing capacity (due to plant shutdowns), and commodity/farm gate pricing – particularly for the intensive livestock industry.  The long term of this in the agricultural market is difficult to assess at this time, however it would appear these impacts will be somewhat lessened by government support programs.

Red River Group continues to closely monitor the impact COVID-19 is having on real estate markets in the locations we provide valuation and property management services. Approximately one month into public health authorities instituting significant efforts to arrest the spread of COVID-19 it is clear real estate markets have been impacted.

The short term impact has a resulted in the market essentially being furloughed. The length of this furlough and the long term impact on market values will be dependent, for obvious reasons, on the length of the current COVID-19 health emergency. In Red River Group’s service area, various immediate outcomes related to the health emergency are being witnessed.

Housing Market

Data comparing the last week of March this year to last year in all Winnipeg MLS areas indicates that:

• Total listings are down 22%
• Total sales are down 30%
• Total withdrawals are up 22%

While total sales transactions and listings have been negatively impacted in the Winnipeg region, data comparing the last two weeks of March this year to last year indicates that the median sold value remains stable at $315,000. Essentially the market appears to be furloughed or on pause. Outside of Winnipeg, as data sets are much smaller, providing a specific analysis is not possible. However, anecdotal evidence from Red River Group appraisal assignments would reflect these trends throughout Manitoba and portions of eastern Saskatchewan.

Commercial Market

With the economic uncertainty created by the COVID-19 pandemic, commercial activity has been impacted across Canada. It is simply too early to measure impacts, outside the immediate general pause in market activity, as businesses attempt to address immediate sustainability matters. New project activity is increasingly being affected by construction limitations across the country. To date in Manitoba, construction remains an essential service. However impacts related to social distancing and material supply chains are slowing project completion timelines. Should COVID-19 health emergency restrictions related to construction increase in Manitoba, commercial activity will be further impacted and/or potentially furloughed in the province.

The meaning of these impacts related to cap rates, sales activities and general commercial vacancies are unknown. However it is clear that the longer the health emergency remains in place the more challenged general retail and office space will become related to the long term structural change in the economy as a whole. Post COVID-19 it is not clear how the rapid adoption of virtual workplaces over the past month will impact previous business models, but it appears a paradigm shift in the commercial market is likely. How this will impact pre-COVID-19 market values remains unknown.

The residential rental market (multi-family) will face challenges related to shortfalls in tenant rent payments, however it is anticipated that government support programs will assist tenants in the challenges they are facing that are clearly outside their control. Red River Group’s property management division has seen a slight increase in rent shortfalls, from the typical 1% – 2% range to 4% – 6% in early April. In most cases these will be managed once the federal CERB program is fully in place. The current suspension of evictions in many provinces, including Manitoba, is not intended to be a rent holiday for tenants and at this point the shortfalls in rent collection that owners face today are likely to be addressed in the future.

Agricultural Market

While we continue to see the exchange of bare farm land and market values appear to be remaining stable, there are early indications of a “pause” in sales but not to the extent of other market sectors. The direct impact of the COVID-19 health emergency on the agricultural industry appears to be more focused on supply chain and human resource challenges. How this bares out long term in the agricultural market is difficult to assess at this time.