The government’s emphasis on rental housing and the B20 guidelines might impel brokers to switch from the residential to commercial sectors.
According to Mark Yhap, the managing partner of MCAP
’s Commercial Mortgages Group, reasons are piling up for residential brokers to make the switch. The government has been actively trying to slow down the residential real estate market for the last 13 months, and with the Office of the Superintendent of Financial Institution’s Guideline B20 regulation, it may have succeeded.
But have brokers actually started transitioning? MCAP
“We think it may have already started happening—the answer is yes,” Yhap told Mortgagebrokernews.ca. “There’s an opportunity given that the federal and provincial governments are pushing for rental housing. CMHC has been very accommodating in their policies, so there is a lot of opportunity for residential brokers to tackle multi-family rentals.”
Multi-family rentals are purpose-built apartment buildings comprised of at least seven units.
That Toronto is beset by a rental inventory shortage is no secret. It is also believed by many within the building industry that the Fair Housing Plan’s reintroduction of rent control has dissuaded developers from building purpose-built rentals.
However, the Liberal Party’s national housing strategy is aiming to solve the rental scarcity problem.
“All governments want somehow for the affordable housing stock to increase because affordability is a big issue in the marketplace,” continued Yhap, “and obviously they’re taking steps in the homeowner market, which is pushing some people into the rental market, but we don’t have enough rentals.
“They’ve put in rules to make sure the homeowner market remains stable over the long-term, but that is causing some homeownership purchases to be deferred, which is putting pressure on the rental market, and I think that’s where the opportunity lies—that as the residential market shrinks, look at the commercial market.”
While it’s likely the government will ensure the construction of new purpose-built rental buildings, Blake Cassidy, a managing partner at Romspen
, says mortgage brokers should always be broad-minded because opportunity always comes knocking when it’s least expected.
“I’ve always encouraged all mortgage brokers to be open-minded as to all aspects of the business,” he said. “To always remain open-minded when they see a commercial transaction, to not be afraid to run with it, or make enquiries about it if they have a lender they feel confident and open in communicating with, because it can be a stone unturned.”
Commercial mortgages’ risks and rewards are certainly not to be disregarded. While brokers can make sizable commissions from a single mortgage, the time invested can stretch for months—and if the deal doesn’t close, it will have been all for naught.
“Commercial has always been there and people are finally recognizing that it does represent a sizeable component of the overall market,” said Cassidy. “There is a need for a more comprehensive understanding of the space, the expectations of the speed with which those deals move, but having the right broker-lender partnerships is the key way to be successful in commercial brokering and commercial lending.”
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