Oxford Properties Group’s plans for rental apartment towers at Yorkdale Shopping Centre, Canada’s most productive mall by sales per square foot, are still in an early stage, President Michael Turner said. But construction has begun at the Square One Mall in nearby Mississauga, he said, and municipal authorities are evaluating a proposal for Scarborough Town Centre in Toronto’s east end.

“We’re starting to go vertical,” Turner said Tuesday in an interview at Bloomberg’s New York headquarters. “I can assure you that what you see today is not what they’re going to look like over the coming decade or two.”

Intense competition from e-commerce retailers and the loss of business caused by pandemic shutdowns have pushed several North American mall operators into bankruptcy. The erosion of the traditional shopping mall business has spurred more operators to add housing to their properties, tapping into a sector of the real estate market that has outperformed retail.

The idea has been seized on by mall titans including Simon Property Group Inc. and Canada’s Brookfield Asset Management Inc., with two primary motives: squeezing more value from the properties and bringing prospective retail customers closer to the action.

But getting municipal boards to approve the rezoning necessary to build housing has been a slow process in Canada, Turner said.

“I used to not appreciate why things went slow until I started to work for a developer,” Turner said, lamenting the “hundreds of meetings” with municipal officials and citizens and the “multiple times that you have to redo plans on the same site.”

The Bank of Canada struck a positive tone on Canada’s economic recovery from the COVID-19 pandemic in its most recent interest rate announcement, with Governor Tiff Macklem forecasting an “increasingly healthy economy” despite the lingering threat of inflation.

Speaking with reporters at the release of the Bank’s October Monetary Policy Report, Macklem said that while he expected inflation to continue rising – to around 5% at the end of the year, up from its current level of about 4.5% – he anticipated that would return to the 2% mark by the end of 2022.

“I’m struck by how much progress our economy has made since the start of the crisis,” he said. “We’ve come a long way and our forecast is for an increasingly healthy economy, even if these complications are going to be with us for a while longer.”

For mortgage professionals, the headline news from the announcement was undoubtedly the Bank’s revision of its forecast for changes to its policy interest rate. The timescale for planned rate hikes has accelerated, with the Bank now projecting they’ll take place in the middle quarters of next year rather than its previous prediction of the second half of 2022.

Did that news come as a surprise to the mortgage community? Not at all, according to RateHub.ca co-founder and CanWise Financial president James Laird (pictured top). He told Canadian Mortgage Professional that given the Bank’s recent ebullience on the economy, an amendment of its planned timeline for hikes had been in the cards.

“I wasn’t [surprised], given the positive news and that COVID numbers have stayed low in Canada, generally speaking,” he said. “I was expecting them to move that date forward; I thought it was possible they could have moved it even further forward than they did.”

That said, the Bank’s new timescale for the benchmark rate to begin rising is by no means set in stone, with the uncharted waters of the pandemic meaning it’s difficult to predict what’s in store for the Canadian economy in 2022.

Laird noted that a rapid surge in case numbers or the return of pandemic restrictions could lead the central bank to think again on its planned schedule for rate increases.

“This all depends on things continuing in a positive manner like they have been in Canada since June,” he said. “If we go backwards in the winter, they will change things for sure.

“If we have to go back to lockdowns, business closures and things like that, they will definitely push this out. I think this is dependent on us being towards the end of this pandemic.”

With variable mortgage rates tied to Canada’s benchmark policy rate, the news was also viewed as a signal that those record-low variable options are soon set to climb – although Laird said that with bond yields rising, fixed rates could also see further upward movement in the very near future.

Those yields crept up as the Bank announced the winding-down of its quantitative easing program, a staple of its approach to the pandemic since March 2020.

In its statement, the Bank said that it would be moving into the “reinvestment phase” which would see it only purchase government bonds to replace maturing bonds, having gradually tapered down its bond-buying program in recent months.

That decision arrived despite the Bank’s emphasis that “considerable monetary support” was still required to steer the economy through the current pandemic-related turbulence.

One of the biggest question marks hanging over the Bank’s plans to hike the benchmark rate is whether those will be significant increases – not to mention the possibility of one rate hike being swiftly followed by another.

The answer to that question will be an important factor in determining whether a fixed or variable rate is the best option for most clients in the current mortgage climate.

“When [the variable rate] rises, how many times and by how much?” said Laird. “And what’s the timing of those increases? If they’re more spread out over a five-year period, then you can still come out ahead over the variable rate.

“But if there are many next year, and if they do any 0.5% moves instead of quarter-point moves, then the fixed rate will be the best strategy right now.”

In a survey of 950 real estate professionals across Canada, 79% said they would recommend selling this winter, given the current strength of the seller’s market. This is 15 points higher than the 64% who recommended listing in the winter before the pandemic.

There’s a commonly held belief, the report says, that it’s best to wait out the winter and list your property in the spring. But market conditions during the pandemic have totally changed that.

Of those who recommended selling, 82% cited the main reason as the lack of housing supply in their region coupled with high demand — a perfect storm that creates a very strong seller’s market.

“Last year, we saw one of the busiest winter markets in our history, and with demand continuing to climb, this winter will be another very active market in British Columbia and across the country,” said Adil Dinani, a sales representative with Royal LePage West Real Estate Services in Vancouver. “Our housing supply is terribly inefficient and simply can’t keep up with demand. Even if there are fewer buyers in the winter, it is unlikely there will be enough inventory on the market to satisfy demand.”

The recommendations to sell were strongest amongst respondents in British Columbia (93%), Quebec (87%), and Atlantic Canada (85%). Out of Canada’s largest cities, Greater Vancouver had the highest number of respondents urging sellers not to wait. But it’s not the only urban market where potential sellers may want to consider listing.

“When deciding the best time of year to list your home, there are many important factors to consider. But if you are not under any time constraints, current market conditions in the Toronto area are favouring the seller, which is not typical most winters,” said Tom Storey, real estate agent, Royal LePage Signature Realty in Toronto. “While we expect another brisk spring market in 2022, homeowners today have a lot of flexibility as demand continues to significantly outstrip supply.”