Connect with us

Real eState

Everything’s A Bubble, and Canadian Real Estate Was One of The Worst Returns – Better Dwelling

Published

 on


Canadians are scrambling to buy a home and catch that huge wage of profits… but is it really that profitable? It depends what you’re comparing it to. When central banks flood the market with cheap money, almost everything soars. It’s not just real estate that is profitable. Real estate is just the only investment many Canadians understand. So, out of morbid curiosity, I ran the numbers on Canadian real estate compared to other places Millennials parked cash, over the past year. Here’s how a downpayment would have performed in some assets that have drummed up a lot of media coverage lately.

About the Returns

First of all, this isn’t investment advice, and historic returns aren’t indicative of future returns. This is just a comparison of how $200,000 would have performed over the past year in various investments. The amount chosen is the minimum downpayment for a benchmark home in Vancouver. For Toronto and the aggregate home price, the minimum downpayment can be smaller than the one used. However, then you’d also have to add in the cost of high-ratio mortgage insurance for those two cities. Yeah, we’re saving money. Fun already, eh? Just a quick overview to avoid some questions later.

For the real estate nerds, we’re using the return on the downpayment for a benchmark home. This means we’re factoring in the “benefits” of leverage, as opposed to an all cash purchase. The only deductions made are for interest, and property taxes. Interest is using a 25-year amortization, with a rate of 2%. Property taxes are estimated using the cities’ rates, and the aggregate is the Canadian average. It’s far from a comprehensive account of costs, but gives us a decent idea of what kind of returns people have seen. Some notable costs would be acquisition and disposal, maintenance, and insurance.

The return on equities and crypto is for selected indexes and assets popular with Millennials. The TSX 60 and NASDAQ 100 use two popular ETFs that replicate the makeup. FAANG is short for Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX); and Alphabet (GOOG). They’re America’s big tech conglomerates, and commonly traded as a group. We didn’t include acquisition or disposal costs here either. They’re way lower than Realtor fees though, and in some cases can be free. Leverage also wasn’t used, but could come in various forms like margin or options. 

Remember, we’re just estimating these returns, and trying to get an idea of how they did. We’re doing napkin math on returns, not building a portfolio. If you are building a portfolio, do a lot more reading, especially on diversification and risk. The other, and easier option, is to find some professional help. Phew! That took forever, now let’s get on with the numbers.

Canadian Real Estate Made Big Gains

Canadian real estate did provide a “modest” return across most of the country. The urban aggregate index would have returned 33.7% (+$67,400) from a year ago. In Greater Toronto, a benchmark home was a little better at a 41.2% (+$82,400) return over the past year. In Vancouver, it works out to a return of 22.9% (+$45,831) over the period. Remember, this is after accounting for the cost of interest and carrying taxes only. However, a hefty fee to dispose of the asset would drop the return value. Nothing to sneeze at, but let’s see how it compares.

Canadian Real Estate Gains Compared To Other Assets

The estimated percent return on a $200,000 investment if invested in selected Canadian real estate markets, compared to other assets popular with Millennials, over the past year. Source: CREA, Better Dwelling.

The NASDAQ Outperformed, While The TSX Sucked

Investing in US equity markets greatly outperformed Canadian equity markets. The cash put into the NASDAQ 100 (QQQ) would have generated a 44.6% (+$89,200) return over the past year. The same cash in the TSX 60 (XIU.TO) would have returned around 2.97% (+$5,940) over the same period. The NASDAQ is largely tech focused, whereas the TSX is largely into financials and mining. Where did you think your mortgage interest went? Not exactly a mystery why Canadians have been sinking record cash into US equities.

Canadian Investment In US Equities and Funds

The net dollar amount Canadian investors have sunk into US equity markets. Source: Stat Can, Better Dwelling.

FAANG Returned Almost Double Vancouver Real Estate

FAANG  (a.k.a. big tech) had a huge year too, which isn’t surprising considering it’s a large part of the NASDAQ. The downpayment cash put into the stocks would have returned around 45.8% (+$91,000) over the past year. That’s just a little under double the return on Vancouver real estate, so you have a little rent money too.

Canadian Real Estate Gains Compared To Other Assets

The estimated dollar return on a $200,000 investment if invested in selected Canadian real estate markets, compared to other assets popular with Millennials, over the past year. Source: CREA, Better Dwelling.

Bitcoin Would Have Made Over A Million In Returns

Bitcoin, which recently crossed a $1 trillion market cap, ripped much higher over the past year. A downpayment invested would have returned around 530.97% (+$1,061,900). Tesla, which made more profit on bitcoin in a few weeks than selling cars, also saw a big spike. An investment with Tesla over the same period would have produced an estimated return of 337% (+$673,900). Not enough to live, but it’s a start.

I know, but what about rent? You still have to pay that, so checkmate. If your rent was $56,000/month, and you replaced it with a typical Canadian home, you’re right. Bitcoin investors didn’t make much at all.

GameStop Would Have Made You 33x More Money Than A Home

Unless you’ve been living under a rock, you’ve probably heard about the piles of cash made in GameStop. If invested a year ago, one would be sitting on a profit of around  926.20% (+$1,852,000) today. That’s today. If sold at peak, the return is actually closer to 8,707.1% ($17,414,000). It’s somewhat absurd, but really puts into perspective what “huge gains” looks like in 2021.

I know, it was a total fluke, right? Not exactly. Michael Burry, the Big Short dude, had been discussing GameStop since 2019. Sure, the 926% gain you would have made still holding today, isn’t as good as Burry’s 1,500%. However, he also sold before the infamous Reddit short squeeze, calling it “unnatural.” Yeah, one of Wall Street’s greatest investors thought 1,500% was totally natural.

Again, this isn’t investment advice, just trying to put things into perspective. Sure Canadian real estate is making huge gains… if it’s not being compared to anything else. If you’re watching other asset classes, almost everything has been ripping higher. Central banks flooded the system with the cheap money. This is providing a huge jetstream to propel mild performance. Will that be the case for the next year? Who knows, but investors in stocks and crypto can get off whenever they want for a small fee. Not so much the case for real estate. 

Like this post? Like us on Facebook for the next one in your feed. 

Let’s block ads! (Why?)



Source link

Continue Reading

Real eState

Canadian Real Estate May Get Cooling Measures As Early As This Month: Scotiabank – Better Dwelling

Published

 on


One of Canada’s big banks expects cooling measures for real estate soon. Derek Holt, Scotiabank’s Head of Capital Markets Economics, sees the Spring Budget including cooling measures for real estate. In a note penned to investors, the economist highlights how policy has been overly loose. He feels the next budget likely includes measures to cool the market, which can come as early as the end of the month.

Canadian Home Sales Are Unusually Strong For A Pandemic

Canadian home sales are extremely strong. Not just for a recessionary environment, but in general – they’re better than they were in Canada’s best economy. Holt points to Toronto home sales reported earlier this week. Sales were up 15.9% for the previous month, when  seasonally adjusted (SA). This follows a 3.1% monthly increase in January, which followed a 21% monthly increase in December. He also notes these increases are accompanied by fast rising home prices.

Greater Vancouver also reported an equally hot market just a day before Toronto. National sales data will be released later this month, and is likely to show similar trends across Canada. This is occuring in the winter, which Holt emphasized multiple times. He further adds, “Apparently, there are a lot of masochists out there who are not fussed one bit about moving in -20’C or colder weather and heavy snow!”

Canadian Home Permits Increased Over 7% 

Canadian new home permits are also a point watching, according to Holt. He highlights house permits increased 7.3% m/m in January. This breaks down as 15.1% m/m for singles, and 4.1% m/m for multiples. This doesn’t just highlight a rapidly expanding market, but “reinforces the move to the ‘burbs” narrative, he stated. 

“If Canadians are taking out permits and buying resales at such a pace during the winter, what does that say when the key Spring housing market and vaccines arrive?” Holt wrote. Adding, “Policy is arguably overly easy and macro prudential changes may be afoot in a Spring budget.”

Like this post? Like us on Facebook for the next one in your feed. 

Let’s block ads! (Why?)



Source link

Continue Reading

Real eState

These are the cheapest real estate listings in Calgary right now | Urbanized – Daily Hive

Published

 on


Good news for YYC house-hunters – you don’t have to break the bank to purchase your own home.

In this month’s roundup of Zoocasa’s cheapest real estate listings in Calgary, affordable properties can be found throughout the city for under $300,000.

A lower budget doesn’t mean you have to compromise your standards, as most of these properties offer updated kitchens and bathrooms, recently replaced flooring, and state-of-the-art appliances.

If you’re in the market for a new home, take a peek at these Calgary real estate listings.

5. $299,992: 6420 26th Avenue NE

Courtesy of Zoocasa

Listing details: 

  • Three bedrooms
  • One bathroom
  • 826 sq ft

This Pineridge home is close to schools, playgrounds, and shopping, making it a convenient location for anyone. The property offers a detached garage and a fully-fenced yard.

4. $274,900: 21 Copperstone Villas SE

Courtesy of Zoocasa

Listing details: 

  • Four bedrooms
  • Two bathroom
  • 1,132 sq ft

Located in Copperfield, this townhome features a fully developed basement, spacious tiled front entryway, and upgraded appliances in the kitchen. This is an end-unit property boasting tons of natural light and electric fireplaces.

3. $225,000: 14625 Shawnee Hill SW

Courtesy of Zoocasa

Listing details: 

  • Two bedrooms
  • Two bathrooms
  • 1,174 sq ft

This bungalow-style condo is located in The Highbury building in Evergreen Estates-Shawnee Slopes. The unit was recently updated and has stainless steel appliances, a spacious master bedroom, a walk-through closet, and luxury vinyl plank flooring throughout. Condo fees include everything except electricity.

2. $219,900: 3 – 812 McNeill Road NE

cheapest real estate Calgary

Courtesy of Zoocasa

Listing details: 

  • Two bedrooms
  • One bathroom
  • 441 sq ft

In this Mayland Heights bi-level home, house-hunters will find large windows, a dining area with a cozy built-in bench, and a spacious balcony with downtown and mountain views. The unit has been freshly painted and boasts new laminate floors.

1. $179,000: 32 – 3800 Fonda Way SE

cheapest real estate Calgary

Courtesy of Zoocasa

Listing details: 

  • Three bedrooms
  • One bathroom
  • 1,099 sq ft

Live in this new Fonda condo, featuring a renovated kitchen with stainless steel appliances, a main floor office, and laminate-engineered hardwood flooring throughout. The upper level is home to a spacious master bedroom and recently renovated four-piece bathroom.

Let’s block ads! (Why?)



Source link

Continue Reading

Real eState

Real estate company says demand for housing in Niagara will continue to grow – NiagaraFallsReview.ca

Published

 on


A Hamilton-based real estate company says Niagara’s economy as well as its real estate market are poised for continued growth.

After placing a renovated 12-unit apartment on Drummond Road on the market, Crescendo Equity secured a total sale of $2.9 million. That translates to $247,000 per unit, compared to a previous benchmark of $176,000 for units in the area.

The company predicts demand for housing in Niagara will continue to grow through 2021.

”Market conditions are being strengthened by interprovincial migration, as home buyers and renters from the Greater Toronto Area, Peel and Halton regions look to Niagara for more space and better affordability,” said Mathew Moxness, Crescendo Equity’s founder.

The Drummond Road property is part of the company’s larger strategy to take older, underperforming stock and reposition properties for maximum occupancy and potential.

“With growing demand for multi-family housing throughout Ontario, repositioning aging and underperforming assets will help to supply the segment and provide housing for those who need it,” Moxness said.

The company, which offers opportunities to private and group investors, purchased a shuttered retirement home in Niagara Falls last year, and plans to convert the property into apartments.

Let’s block ads! (Why?)



Source link

Continue Reading

Trending