TIM REID
Real Estate Columnist
Business Edge News Magazine
The real estate market in Alberta, regardless of what the other media may tell you, is in the nal stretch of a two-year downturn. Meanwhile, the rest of the major Canadian cities are thriving. Why is that? The underlying factors that normally indicate real estate heading in an upward direction are in-migration and job/economic growth. In Edmonton, the market has been far more resilient with average sale prices still almost $100,000 less than Calgary for single-family homes.
When the market turns to favour buyers instead of sellers, normally there is downward pressure on pricing. But this has not been the case in the Calgary market, which only saw an average $30,000 price drop amid the di culties in the energy sector. We need to highlight the fact that luxury homes always drop the fastest and take the longest to recover in a normal real estate cycle. Higher-priced homes inexplicably have seen strong year-over-year growth, according to our teams on the ground. Meanwhile, Edmonton, fueled by strong migration to Alberta, is seeing average days on market 50% less on average than Calgary, taking into account all property types.
West of Alberta, in a multitude of places, the market is still on fire (though thankfully not B.C.’s forests this season). Metro Vancouver pricing has created a ripple effect that has prices jumping as far away as Vernon. The government attempt to slow the market with foreign buyers taxes and vacant home taxes most recently have made little to no impact on the market absorption rate or pricing in the Vancouver area.
This is a fundamental land-locked issue where supply has historically never kept up with demand. It is something that the government can’t simply legislate out of existence. With population growth comes jobs, and those workers spending in the marketplace, which is what truly drives an economy in the positive direction.
Developments in auxiliary markets such as Langley have seen over 2,500 people line up for the pre-sale of 98-unit buildings! This is the only market in Canada where you show up with proof of deposit, get a number like the lineup at the delis of old ...and the developer draws numbers out of a rotating bingo drum.
Vancouver is an incredible market indeed. This extreme demand is forcing buyers to move farther from the metro area and commute to work, thereby clogging up Highway 1 for hours during peak traffic times. Demand shows no sign of slowing in the condo space for the next few years. Single- family homes have so ened during all this craziness, due to the land value for a tear-down home being so high that buyers are choosing new inventory condos or townhouses in the suburbs that are much more affordable.
Regina, Saskatoon, and Winnipeg are still hot markets for those who want to buy income properties and flip houses. These markets have not seen the rental decline of a depressed income base in Alberta. Markets such as these have lower-priced homes in mature settings where due to population levels the prices have remained low compared to the AB/BC markets, allowing a wider variety of real estate strategies to be e ective. When asked: “where should I invest in rental property?” my answer is always these three cities where you can get CAP rates that align with industry standards (6-7% or greater) and the rental demand remains less volatile than markets to the west.
Toronto is the business and nancial hub of our country that has always created strong migration. Development in Toronto is holding strong despite the fundamental truth that they could build outward and not upward. There seems to be a trend for high income earners to remain closer to downtown to avoid the nasty commute on the Ontario highways that struggle to support the population density in those areas. Ottawa is not a “sexy” place to invest in real estate – it’s not exciting but very predicable in terms of growth, rental, and sales prices due to the very stable government sector in our nation’s capital. Quebec has similar fundamentals to Ontario with great manufacturing sectors and a lot of government positions – slow and steady here as well.
Canada’s East Coast is often misunderstood as the “no one has a job” market. This area of our country has extreme pride of ownership, and with an often difficult job market the fact is prices are very favorable, giving you great CAP rates on residential and commercial buildings. Rental rates are lower that western centres, but that is o set by the high-quality, long-term tenants that you can place in your properties with proper management in place.
No matter what your strategy, despite some markets flying in the face of what SHOULD be happening, if you know where to look, there are opportunities for everyone in Canada right now.
Tim Reid can be reached at 403-246-4409, treid@phoenixrealestateinvesting.com or visit www.phoenixrealestateinvesting.com.