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Is climate change being priced into coastal real estate? Depends if you are buying from a believer or not – Financial Post



Many believe climate change will affect economies and societies across the planet, and there are already signs that concerns are working their way into certain real estate prices.

Recently published research in the journal The Review of Regional Studies revealed that dwellings facing the highest risk of flooding from a rise in sea levels sell for a discount relative to risk-free properties.

Authors Jason Beck and Meimei Lin analyzed sales of 42,000 single-family homes in Savannah, Georgia, for the period covering 2007 to 2016. Using data from the National Oceanic and Atmospheric Administration, the authors categorized vulnerability to inundation for each dwelling. The flooding risk was deemed the highest for properties expected to be inundated with a one-foot rise in sea level. The lowest risk was assigned to properties only likely to flood for a six-foot increase in sea level.

For Savannah, properties susceptible to flooding for an increase in sea level of three feet or less sold at a 3.1 per cent discount relative to dwellings deemed not at risk. Houses exposed to flooding for a rise in sea-level between three and six feet, however, did not report a discount relative to the risk-free properties.

When the authors divided the study into two distinct periods, they observed that the discount due to climate change was higher for the more recent period. This suggest that with the passage of time, risk awareness increased, and the effect of potential flooding risk grew over time.

The results come with one puzzle. Waterfront properties in many coastal regions across the globe continue to sell for a premium. If the risk of flooding posed by climate change is real, do property values reflect such risks?

A soon-to-be-published paper in the journal Review of Financial Studies offers some clues to the problem. Markus Baldauf of the University of British Columbia and others analyzed millions of residential transactions in the United States to determine the impact of future flooding vulnerability on transaction prices.

They also controlled for climate-change related beliefs at the local level by categorizing counties as “believers” and “deniers” using beliefs data from Yale Program on climate change. The Yale Climate Survey posed the question: Do you think that global warming is happening?

The answer was tabulated as the share of respondents in a county who answered yes. The authors characterized counties as “believers” if the share of those who answered yes was greater than the median value for the overall response. The “denier” counties were those who responded yes were less than the overall median response.

The authors quite interestingly found that “homes located in climate change ‘denier’ neighbourhoods sell for about seven per cent more than homes in ‘believer’ neighbourhoods.” Using the median priced house as an example, the authors demonstrated that if such a house was “relocated” from a denier county to a believer county, its value would decrease by approximately $26,220, which accounted for 13.8 per cent of the median price of $190,000.

It is not evident from the paper if the believers were overreacting to climate change risks or the deniers were in denial, the difference in valuation, though, was found to be statistically significant.

Research on housing in Helsinki, Finland, showed that when flood risks were disclosed to residents in the form of high-resolution flood maps, a statistically significant price drop was observed for coastal properties with greater probability of flooding.

The Finnish study, published in the Journal of Real Estate Finance and Economics in 2016, showed that in addition to the price drop, some demand for housing shifted from coastal dwellings with an elevated risk of flooding to places with similar coastal amenities, but a lower risk of flooding.

The review of research presented above allows us to draw some conclusions. Waterfront properties in coastal regions continue to be in high demand and sell at a premium. Coastal properties, though, can be categorized based on flooding risk due to global warming or other factors.

Empirical research has demonstrated that properties less or unlikely to be flooded in the future sell at a premium. However, as the flooding risk elevates, coastal properties experience a discount in property values.

Still, a drop in values is more pronounced in areas inhabited by those who believe in climate change. In counties where climate change deniers are in majority, the expected drop in valuation is lower.

Thus, the answer to the question of whether global warming affects housing prices depends at least in part on who you’re asking.

Murtaza Haider is a professor of Real Estate Management at Ryerson University. Stephen Moranis is a real estate industry veteran. They can be reached at www.hmbulletin.com.

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What are the Most Popular Types of Real Estate Ownership? – RE/MAX News



While the term real estate is familiar to most people, understanding the intricacies of what the term encompasses might be a different matter. Real estate is a type of property that can include different land, buildings, or both. It is a tangible asset that is owned or leased and depending on the nature of your lease or ownership, you’ll have certain rights to use and enjoy the land and its buildings.

People purchase or lease real estate for different purposes including as a principal place of residence, a vacation home, an investment, commercial purposes and a rental property. Here we dive a little deeper into what real estate is, the different types of real estate and the benefits it offers.

Types of Real Estate

In general, there are three categories of real estate:

  1. Residential real estate can be single-family or multi-family dwellings that are owned or rented by individuals and include undeveloped land, houses, condominiums, and townhouses. Their sole intent is providing a home.
  2. Commercial real estate includes nonresidential structures intended for business use which can be a single-use property such as a small shop, restaurant or doctor’s office, or a multi-purpose structure such as shopping centers or office towers. Properties include office buildings, warehouses, and retail buildings.
  3. Industrial real estate includes factories, business parks, mines, and farms.

So basically, the type of real estate is based on the purpose it serves whether that is a home, to generate revenue or to produce a product.

Residential Real Estate Ownership

Residential property provides the opportunity for homeownership. When buying a home to live in, your property is considered to be owner-occupied. Residential properties allow you to build equity and gain wealth. That’s always a good thing. Most homeowners acquire their homes through a mortgage, a loan specific to real estate. Residential properties can also be purchased as rental properties to earn income.

Commercial Real Estate Ownership

Commercial real estate is used for business purposes from shopping malls to skyscrapers and freestanding shops to houses converted for business use. The difference between commercial and industrial properties is that it is intended for “commerce” while industrial space is used for manufacturing products. Although multifamily buildings such as high-rise apartments do generate money for their owners, they aren’t considered commercial properties.

Real Estate Investment

Investing in real estate can prove to be very lucrative, as almost all properties tend to appreciate over time. As well when purchasing properties for lease you can often not only regain the money you pay for the property from rent but also continue to generate gains as the property appreciates in value. There are several ways you can invest in real estate including:

  • Buying tracts of land
  • Buying structures
  • Buying shares in real estate through publicly traded real estate investment trusts (REITs)
  • Buying mortgage-backed securities (MBS)

The benefit of real estate investment is that it takes severe market issues such as a major recession, for properties to depreciate. There can also be other unexpected factors such as investing in “swamp” land, which would greatly reduce your odds of reselling the land for profit.

Land is not likely to make any gains if it is lacking purpose or is not located in an area where demand is likely to increase. Both at the time of buying and the time of selling, investment value is dictated by a number of factors including the local economy, employment rates, local transportation, the availability and quality of municipal services, property taxes and even the quality of schools if investing in residential properties.

Benefits of Owning Property

The main benefit of owning property is the fact that in most cases, if you buy at the right price, your property will tend to appreciate. The trick is to ensure you never pay more for a property than the fair market value, the average price properties are selling for in the area. This price can vary greatly, even for neighbourhoods a few kilometers away. So, working with a real estate agent who understands property values in a specific area is very important as they will guide you on true values and negotiate a price that makes sense.

For example, if you had purchased a home in Toronto or Vancouver around 2015 in a high demand downtown neighbourhood, chances are you overpaid for your home at the time.

Pros and Cons of Real Estate Investment

The pros of owning investment properties include:

  • If you find and maintain steady tenants, it will generate steady income
  • In most cases, you enjoy capital appreciation
  • It is an excellent way to diversify your portfolio
  • It can be bought with leverage
  • Can pay for itself and then become strictly profit generating
  • If rented, your tenants pay for the property, eventually making the property strictly an income generator
  • There are also cons to property investment including:
  • It is not liquid
  • There can be influences that will greatly reduce value making it difficult to sell
  • It does require larger upfront capital unless you choose REITs or MBSs
  • Requires management of some type even if just basic maintenance unless REITs or MBSs

Of course, the type of real estate you buy impacts the pros and cons.

Understanding Real Estate Appreciation

Appreciation in real estate builds over time, starting from the time of your purchase. For example, if you buy a home in Toronto for up to $500,000 (very unlikely, but this is for simple math purposes) in value all you need for a down payment is 5%. So, your down payment amount for your personal property is considered equity because you own that part of the property out and out. The average increase in home prices in Toronto rose 12.3% from January 2019 to January 2020. So, in a year, if you sold your home, you would have gained $150,000, which includes the $25,000 for your down payment, plus the $125,000 roughly gained in appreciation. Factors such as interest rates determine how quickly equity builds.

The best way to see gains in real estate is to find a neighbourhood in the “gentrification” stage where homes are still selling at lower prices in a less trendy or developed area. As people catch on the neighbourhood has potential, they begin to buy homes in the area that attracts trendier cafés, restaurants, shops and services. This increases the value of your property.

For commercial properties such as vacant land, prices can skyrocket if a natural resource is discovered such as oil. Office space can rise in price as a city begins to attract a certain industry such as tech companies that increases the demand for office space.

Regardless of the type of real estate, appreciation also rises based on basic rules of supply and demand, so the lower the inventory available in the real estate market, the higher the prices.

If you are shopping for real estate whether it is commercial or residential, the experts at RE/Max can help.

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Ontario Passes Bill Intended to Modernize Real Estate Rules – Toronto Storeys



Bill 145, the Trust in Real Estate Services Act, 2019 (TRESA) has officially passed and the new rules will now reflect today’s changing housing market.

On Thursday, at the Ontario Real Estate Association’s REALiTY Conference and AGM, OREA President Sean Morrison announced the Ontario Government had passed the Bill.

READ: Ontario Changes Real Estate Rules For The First Time in 20 Years

According to OREA, the legislation was called back for a third reading on Wednesday, and, at 11:50 am on Thursday, the Bill unanimously passed third and final reading and TRESA amends the Real Estate & Business Brokers Act, 2002 (REBBA).

Morrison said the passing of TRESA is a “huge win” for its realtor members, their clients, and Ontarians.

“Thanks to the Ford Government’s newly passed legislation, Ontario’s homebuyers and sellers can have greater confidence that the Realtor at their side during the largest financial transaction of their life has the highest professional standards, training and modern tools in North America, such as the ability to form personal real estate corporations.”

The passing of the Bill will help “enhance professional standards, create a more fair and efficient business environment, and better protect consumers dealing with those who trade in real estate in Ontario, including realtors.”

OREA says it’s been advocating for a review of REBBA for over a decade and the passing of the legislation is “historic” as the rules of the former act were outdated and over 18 years old.

“By strengthening consumer protection and fixing the broken real estate discipline system, the Government of Ontario is showing Realtors and home buyers and sellers that it is on their side,” said OREA CEO, Tim Hudak.

“Ontarians deserve the best when it comes to making the biggest financial transaction of their lives and TRESA will make this province the North American leader once again when it comes to a well-regulated real estate market.” Speaking with Toronto Storeys earlier this month ahead of the bill’s passing, Hudak explained that it would put Ontario realtors at the “forefront of professional standards.” Adding that while real estate is changing, “trust in a realtor remains king”.

TRESA is one of the few pieces of legislation in Ontario to receive bi-partisan support with positive and constructive debate in the Legislature led by Minister Lisa Thompson and NDP Consumer Critic Tom Rakocevic, as well as other MPPs.

Now, OREA says it will continue to work closely with the provincial government to develop regulations for the Bill and work towards enacting the legislation into law.

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High demand for luxury homes in Collingwood, says real estate company – CollingwoodToday




Engel and Völkers Collingwood Muskoka is reporting a strong current trend of affluent baby boomers selling their luxury Muskoka properties and relocating to Collingwood to live full time.

At the same time, boomers from Toronto, and a new wave of millennial buyers, are showing interest in making Collingwood their full-time residence.

The area’s walkability and proximity to hospitality, recreation and entertainment. are attracting both young families and retirees who enjoy the year-round active lifestyle.

Collingwood has shifted from a seasonal vacation market to a popular full-time residential market with increasing investment. Private schools are growing in popularity due to the influx of new families, and its millennial buyers are entrepreneurial, opening breweries, fitness studios, interior design studios, restaurants and other service-related businesses.

A blooming cannabis industry in the area has seen an uptick in inquiries for agricultural land, and the first cannabis shop officially opened its doors in December, hiring 15 people. Another major segment is comprised of a cohort of professionals who work remotely, particularly in tech industries.

According to 2016 Census data, Collingwood is one of the fastest-growing communities in Canada, ranking 24th on the list of fastest-growing municipalities located outside a census metropolitan area. Collingwood saw a 13.3 per cent jump in population, increasing to 21,793 from 19,241.

Market spotlight

Collingwood is currently a balanced market with conditions favouring sellers due to a supply shortage, particularly within the condo market.

Demand remains high within the luxury segment with new-to-market residential freehold properties between $1 million to $2 million selling quickly.

In 2019, Collingwood experienced increased construction activity, seeing it become a hot destination for long term living – particularly for new families and high net worth baby boomers – a major trend to watch in the area.

Last year ended strong, with residential sales in the Southern Georgian Bay Area totaling 158 units in December 2019, up 22 per cent year-over-year.

Home sales in the western region, which includes Wasaga Beach, Clearview Township, Collingwood, The Blue Mountains, the Municipality of Meaford and Grey Highlands numbered 89 units in December 2019. This was an increase of 11.3 per cent (nine sales) from December 2018. An In-Depth Look

Home sales in the western region numbered 1,997 units over the course of 2019, up 10.6 per cent from the same period in 2018.

MLS reported that home sales improved throughout 2019, with the average price of homes sold in the Western Region in December 2019 reaching a record $594,714 – a drastic increase of 20.7 per cent from the previous year.

Active residential listings numbered 751 units at the end of December 2019, up 4.2 per cent from December 2018. This pick-up and interest in market activity is expected to grow in 2020.

The Blue Mountains remains as the top luxury hotspot in the area with average prices hitting $926,070 in January 2020. Following close behind is Collingwood, particularly in the infill, with the area seeing a lot of new luxury developments and interest in tearing down and building new properties.

Waterfront properties along Georgian Bay ranked the highest in terms of top-selling luxury properties in Collingwood and The Blue Mountains. The market saw more buyers seeking and building custom contemporary builds with flat roofs, large glass windows and smart home tech integration. This is expected to continue.

According to Engel & Völkers Collingwood Muskoka, Thornbury is experiencing an increase in interest and is expected to see a pickup in luxury real estate. Meaford is also growing as people are beginning to migrate west for residence.

Engel & Völkers Collingwood Muskoka currently has 14 listings priced at over $1 million in Collingwood. In 2019, the shop closed 11 deals over $1 million with the most expensive sale at $2.2 million.

This luxury segment of $1 million-plus properties represents 8.4 per cent of Engel & Völkers Collingwood Muskoka’s total transactions in 2019. Currently, the most expensive property listing from the shop is 449 Island View Road, priced at $2.99 million.

2020 Forecast

Engel & Völkers Collingwood Muskoka expects prices in the region will increase by 10 per cent within the Collingwood market. The Collingwood market is projected to grow at a healthy, steady pace in 2020, with the average sale price across all property types up 30.9 per cent to $618,571 in January 2020 compared to January 2019. In the Western District, the average price grew from $594,714 in December 2019 to $663,552 in January 2020. With this rapid price growth in January alone, Engel & Völkers Collingwood Muskoka expects the market to remain a real estate hot spot that will grow further into 2020.

Three trends to watch in 2020 include the movement of millennials and baby boomers to the market, the end to the market correction, and a steady uptick in average home prices with new interest in the luxury segment.

Overall, home prices in Collingwood are expected to rise with the popularity of the recreational market and increasing desire for long-term living in the area.

Mortgage rates are expected to be on the decline in 2020 as some have dropped below 4 per cent. For example, Royal Bank of Canada, the country’s largest mortgage lender, has reduced its rate to 3.09 per cent in January 2020 and TD Bank has recently cut its rate from 5.34 per cent to 4.99 per cent. Rates are predicted to continue to decline – posing a good opportunity for buyers to enter the market.


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