Barring the existence of said crystal ball, the best way to predict the future when investing is to employ some sort of strategy. For the seasoned property investor the question is certainly about what they are investing in- but as important, is where they are investing.
When you are investing in real estate, it would be nice to have a crystal ball.
So what factors should you look at when looking to invest in property?
The common denominator
St. John’s Nfld’s Leslie Penney, Vice President, Business Development, APlus Mortgage Group/Mortgage Alliance says that there are fundamentals to consider, no matter where you are looking: “There are many fundamentals for property investors to consider when looking at investment properties. Sometimes investors will invest with their heart or based on what they believe will happen without looking at many of the underlying aspects.”
“The biggest factors to consider are the housing market, population growth, the job numbers and employment levels, up-and-coming industries, education, average income, infrastructure in the area, the political leadership of the city and province, and so on.”
Also, and perhaps most importantly, property investors must consider local factors that will affect the value of their property.
Identification of Property
Beyond the where of property investment, it also is advisable to look at opportunities in terms of what kind of property offers the best return on investment.
Part of a successful strategy is not only picking a location poised for growth, but of having an awareness of the needs of the local market, and of the associated properties.
It’s not only about looking in the right locations; it is about keeping your ear to the ground, and knowing what to look for. It’s about keeping connected with the community, and identifying “diamond in the rough” opportunities.
Says Hamilton area Realtor, Robert J. Morrow, Editor: www.HamiltonHomeReview.com,Sales Rep, Chase Realty Inc, Brokerage, “The part of my business that I am focusing on is student housing. Not many of my peers recognize that MacMaster is increasing student capacity annually but is not doing anything about residences. The off-campus housing market, therefore, is booming. But we have to be diligent and ensure the safety of the kids while simultaneously ensuring investors receive a better than average ROI (currently 4-8%, sometimes as high as 10%).”
The good news for property investors is that there is ample opportunity to get in to markets that are poised to grow, and promise investment growth as well. Propertywire.ca has looked at various markets across Canada- and at some common threads between them and, in no particular order, here are a few that have been deemed by authorities in the industry as areas to keep on the radar. This list is by no means an exhaustive one, merely a snapshot of what is happening across the country at present.
Calgary
Calgary was the golden child of the West during the mid to early 2000’s, that saw an absolute boom in terms of population growth, creation of jobs, and a city sprawling its’ fingers out at a good speed.
The bigger they are, the harder they fall, and Calgary’s housing market fell rapidly in the midst of the recession, and is now, by all reports is expected to rebound as steadily as it fell.
This return to affordability is expected to draw homebuyers back to the city. “This could be great news for those homebuyers who have been putting off purchasing in Calgary for fear that homes may still decrease in price, says CREB President Sano Stante. “2011 will offer buyers the convergence of unprecedented affordability, low interest rates and a large selection of inventory,” he adds.
Calgary is expecting a broad return of the prodigal net migrants, as the employment-rich oil sands draw workers back to the region, as jobs begin to be created again. Alberta, in general, is expected to pick up broadly, as the health of the energy sector is expected to spill over to others, and to boost prices and long term growth for the region as well.
Similarly, Calgary is one centre that has been designated by a number of US retailers, who are looking to expand northwards,
Calgary- and many pockets of Alberta in general, lend breadth to the old investing adage “buy low, sell high”--- as the prices have deflated significantly, and are a fraction of what they were pre-recession, but are expected to rebound at a reasonable, sustainable rate, in a region surrounded with corporate wealth, and natural resources that translate to economic viability.
Saskatoon
Standing straight out, and straight up in the Prairies, is Saskatoon.
Saskatoon has many things going for it, among them very low unemployment, and a very hot, burgeoning economy.
Known as the biggest producer of potash, Saskatoon is also becoming a major centre for employment in both technology and health sciences.
In the past four years property prices have grown an impressive 27% over the last four years- and are expected to continue at decent rate. Good levels of affordability, and the ratio between income and housing prices is healthy and supportive of long term growth.
According to the Saskatoon Regional Development Authority: “The Conference Board of Canada reports that the Saskatoon Census Metropolitan (CMA) led Canada in 2010 with the fastest population growth at 2.7% to 265,300 people. ...In addition to this, the average disposal income of the population has been steadily increasing.”
Similarly, the Conference Board of Canada has listed Saskatoon as “one of the most diversified economies in North America.”
Hamilton
The “sleeping giant’, on the outskirts of Toronto, where property prices are escalating at a high rate, Hamilton has been named by many to be one to watch. Hamilton is also referred to in some circles, as currently the “best kept secret” for property investors.
Says Morrow, “Hamilton is a "best kept secret" because the rest of the country has not realized that we're not about steel anymore. MacMaster University drives the Canadian medical field and has attracted many industries related to the medical field to the area. High-tech has also grown because of our proximity to Silicon North (Kitchener/Waterloo) for businesses related to that field. Hamilton has become the commuter city for workers who can't afford that area.”
“In addition, the Hamilton International Airport is growing rapidly and already boasts three of the four major national courier companies using it as their main base; it's just a matter of time before the final one arrives. The airport is closer to the waterfront (for shipping) and rail, than Toronto is and costs are much lower for companies serving Southern Ontario to use our transportation network. “
Like other regions that are showing great promise, Hamilton boasts a great diversity of industries.
“Of course past industry was steel related but that is no longer the case. MacMaster University has attracted many high-tech medical and manufacturing companies through its Innovation Park project and the government is supplementing many research projects around town, administrated by MacMaster. “
“Tim Horton's built a large plant here; Canada Bread moved here, so businesses that need large amounts of space to build find it just south of the city, well connected to the city via highways.”
What is perhaps the greatest appeal for investors too, is the proximity to all Toronto has to offer, at a fraction of the price. As Morrow points out, “The commute to the outskirts of Toronto is approx 60-90 minutes. But house prices here are, in some cases, half what they are in bedroom communities closer to Toronto...A recent REMAX report stated that high-end properties in Hamilton are attracting those affluent in Toronto who can't afford the $1 million plus. Homes in the $800,000 range are doing well in this area. Growth in the high-end market started several years ago in Ancaster, downtown Burlington, Hamilton Mountain, etc., where there is a large inventory of large homes just below $1 million or just over.”
St. John’s
St. John’s is rife with natural resources, including a prosperous oil industry and rich nickel deposits, presenting ongoing opportunities for lucrative employment. The local economy has expanded by 5.8% last year.
Penney feels that great options abound for property investors in his local market of St. John’s. “St. John’s is a great place for property investors right now. On a national level, home prices are still relatively cheap and we are current economic leaders in growth. At this point in time our vacancy rate is approximately 2.1% which is very low by any standards and is causing a change in affordability. Also, our unemployment levels are starting to ease, which is another indication of good things to come.”
And, as Penney points out, St. John’s is not just a one-industry centre either, offering a wide diversification of opportunity for growth. “Our economy is largely driven by offshore oil revenue, but we are looking to diversify with sources such as hydro, mining, and technology. The ocean has always served us well, with the ocean providing for families for generations with the fishing industry. “
“However, since the cod moratorium in 1992 many rural Newfoundlanders have moved to the urban area of St. John’s. Fortunately, there are still great investments in things like mining that are going on all over the province, but the St. John’s area largely remains as the hub of the province. “
“Along with the collapse of the fishing industry, the return of Newfoundlanders back home from other provinces such as Ontario and Alberta, it has increased our talent pool and created demand for more things like houses and other services. We also have a university in St. John’s which is drawing students and other professionals to the area to study and work.”
Similarly, affordability in St. John’s is very attractive, despite a recent surge in property prices- which has among other things, increased the need for property rentals in the area.
“Affordability is harder than before due to the recent surge in prices (approximately a 36% increase in the past four years) which is led by our economic growth. Again, it’s still relatively cheap, but far more expensive that previous prices. “
“The record lows in interest rates have prompted people to buy recently and this has driven up demand and therefore prices. With the increase in prices it is making it harder for many to get into their first home due to larger carrying costs and down payment requirements, and is forcing those to rent. With an increased demand in rent the rental market here is heating up and the demand for multi-unit homes is on the rise.”
Certainly there are fundamentals at play in each one of these centres- industries based on richly based on consumer need over want and reasonable levels of affordability- with most signs suggesting upward movement over the long term.
Tell us about the opportunities for growth in your area of Canada using the comments feature below.
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