As Québec prepares to carefully reopen following the COVID-19 lockdown, it may be time to start thinking about your future multi-residential property investment strategies.
Many of our clients are doing just that with a sense of cautious optimism, which is what prompts my note to you today. First, I’d like you to know that there still remains more financing options available now than you might think. First National has maintained significant liquidity throughout this crisis and continues to commit to and fund multi-residential property mortgages and construction loans. Rates remain attractive.
From an investment perspective, the asset class garnering the most attention is multifamily. True to form, rental apartments are performing better than other property asset classes with minimal cash flow disruption compared to other asset classes such as retail, office and industrial. A quick canvass of our clients shows April rent collection rates averaging over 90% and early feedback is indicating similar numbers for May. This exceeded even the most optimistic expectations and should improve as lockdown restrictions are eased.
In a flight to quality, apartment properties are sought after for buy-and-hold strategies, so we would assume there won’t be significant trading in the near term, although we stand ready to finance purchases.
However, what we are seeing is continued interest in new apartment construction. If this is something you are contemplating, your timing is good for a few reasons:
- There remains a need for rental in our major urban centres particularly affordable units.
- As a result of inflation in recent years and the significant increase in rental rates that has followed, current affordable rents can still provide good cashflow.
- There are major incentives available through CMHC to build affordable rentals here in Québec.
- Those incentives include the ability to finance up to 95% of construction costs, pay dramatically lower insurance premiums and term out the loan without specific lease-up requirements.
First National is a long-time advocate of the apartment sector in Quebec and we’ve devoted thousands of hours to assessing, modelling and delivering different financing strategies. Based on this knowledge, we would welcome the opportunity to talk to you about options such as the CMHC Flex program, the CMHC standard market program and traditional conventional alternatives.
Should you wish to connect and discuss the state of the market, First National’s financing toolkit or share your plans, please contact me or any member of our team. While we continue to work remotely, we are on the job to move you forward.