According to a report released by a U.S.-based property management software company, around 10 per cent of all active home listings in Canada right now are priced at less than $200,000.
There is a lot of investment capital out there that has been building up waiting to be spent, and a significant amount of that money is now flowing into real estate.
Is that a good thing or a bad thing?
If you’re scratching your head and asking, “Why are home prices going up?” part of the answer is: because you’ve been sitting at home for 18 months not spending anything.
There was also a lack of housing built in the past five years, especially in the U.S., so now the market is trying to catch up.
The result is that prices are shooting up, driven by lower interest rates (though rates are projected to rise somewhat), not enough supply, and lots of demand.
Does that make housing a good investment? Well, today it does.
If you own your own house and somebody is knocking on your door trying to buy it, it’s probably worth substantially more now than what you bought it for.
But what happens from here? If you have inflation, which we believe is here now, then your house should also be worth more money in five years.
That’s a good thing for property owners.
The same phenomenon is affecting the apartment building market. Again, there is a lot of money chasing apartment blocks right now.
As a potential investor, how do you determine what this means?
Well, a cap rate is generally what investors look at when they consider buying a property – it’s how you measure whether or not you should be buying a property. Many apartment blocks have been traded at cap rates around five per cent, while in bigger communities cap rates have been in the three per cent range.
If I own a property which was acquired at five per cent and cap rates have compressed to three per cent, I have made money if I want to sell that property.
With lots of money chasing real estate deals, that means you’re going to make money if you have the product.
But it’s very hard right now to find good product. When investors do find good product, there can be a feeling that they should grab it, whatever the cost may be.
On the other hand if you’re a value investor like I also am, I’ve been sitting very, very quietly on the sidelines. Somebody described me as a “lonely” investor because there’s no such thing as a value investment today.
That’s not a phenomenon that’s exclusive to real estate. There are many, many other examples.
For many higher-end consumer goods, if you go into a store today and find something you want, you have to buy it at full price or someone else will.
Take Rolex watches, for example. Everybody wants a Rolex. When you look at a Rolex Daytona, prices have increased from approximately $17,000 to $50,000 from a reseller. There is not enough supply and demand is huge.
Another example is the vehicle market, where it can take 12 months to take delivery of a new vehicle. You’ll pay more, too. If you used to pay $110,000 for a Cadillac Escalade, now it will cost $160,000.
Carmakers are dealing with chip shortages and labour shortages and can’t produce enough vehicles to meet demand.
If fashion is your passion, and you want an Yves Saint Laurent or Balenciaga bag, not only are they limited in supply, but because of the demand, companies like The RealReal are buying used products and selling them at high markups.
Again, high demand and low supply is driving inflation.
I was introduced to RealReal by my daughter. I walked around the store and was looking at a pair of old sneakers. I’d never put my feet in a pair of old sneakers somebody else had worn.
She asks, “Dad, how much do you think this is worth?” I reply, “I don’t know, I probably wouldn’t pay five cents for it.”
She says, “Yeah, this pair is worth $10,000.” And I respond, “What? A pair of sneakers?”
The demand for old-style nostalgia is crazy.
As we relate this all back to real estate, the point is there’s a lot of money out there chasing very few products which makes it difficult trying to be a value investor.
I wonder if there truly is a “value investor” any more.
If you want an apartment building, a retail building or even land, and there’s no availability and the vendor tells you he wants $1, he’ll likely get $1.10.
So, if you’re a value investor, you’re left sitting on the sidelines. Good luck, because you are probably sitting in a chair somewhere, lonely all by yourself.
If you want to be an active investor it’s time for you to write the cheque. As awful as it sounds, that’s how it is.
CALGARY — The city of Calgary has recruited citizens from the commercial real-estate sector to help get a new event centre and home for the Calgary Flames back on track.
When an agreement between the city and Calgary Sports and Entertainment Corporation, which owns the Flames, collapsed late last year, city council voted in January to get a third party involved.
John Fisher, Guy Huntingford and Phil Swift are tasked with determining whether the Flames still want to build an arena with the city, or if the city will have to look for other potential partners to build an event centre.
Fisher is executive vice-president of CBRE, Huntingford is director of strategic initiatives with NAIOP Calgary, and Swift is executive chairman of the Ayrshire Group investment firm.
“This team brings considerable expertise from the commercial real-estate industry including experience in larger development,” the city’s planning and development manager Stuart Dalgleish said Wednesday in an event centre committee meeting.
“The third party has spent considerable time understanding the items and interests behind the terminated agreement and the current landscape. These items have become clarified.
“Based on a meeting with both the city and CSEC, the next step is for the third party to make recommendations on a possible path forward.”
Dalgleish said there is no definitive commitment or timeline for a new agreement.
The city and the Flames agreed on an arena deal over two years ago with the initial estimate of $550 million split between the two.
Shovels were scheduled to hit the ground in 2022 for a 19,000-seat arena and concert venue replacing the Saddledome, which has been the home of the Flames for 39 years.
The cost estimate for the project rose to $634 million, however.
Since the two sides agreed to an amended deal last July, the city added an additional $19 million in roadwork and climate mitigation to the project, and wanted the Flames to pay for $10 million of that.
CSEC president John Bean said in December that the Flames were withdrawing from the agreement because of an accumulation of issues and increased financial risk.
“While CSEC was prepared to move forward in the face of escalating construction costs, and assume the unknown future construction cost risk, CSEC was not prepared to fund the infrastructure and climate costs that were introduced by the city following our July agreement … and are not included in the current cost estimate of $634 million,” Bean said then.
So the Flames remain in the Saddledome, which is the second-oldest NHL arena behind New York’s Madison Square Garden.
CSEC also owns the Western Hockey League’s Hitmen, Canadian Football League’s Stampeders and National Lacrosse League’s Roughnecks.
The Flames recently announced they will move their American Hockey League affiliate from Stockton, Calif., to Calgary for the 2022-23 season.
For the first time in approximately a year, the average price of a house in Whitehorse has declined.
The real estate market has been on fire in recent months, with steadily-increasing prices.
In the last report from the Yukon Board of Statistics covering the last three months of 2021, the average house price in the city was $647,000. That represented an increase of $48,600, or 8.1 per cent from the fourth quarter of 2020.
The bureau released its latest report on Tuesday. It shows the average sale price of a single-detached house in Whitehorse was $637,300, lower than the end of 2021 but a rise of $46,700, or 7.9 per cent, from the first quarter of 2021.
In the first quarter of 2022, the total value of real estate transactions in Yukon was $81.4 million, with $70.8 million in Whitehorse and $10.6 million for the rest of Yukon.
It’s a decline of nearly $10,000 from the end-of-year report the bureau issued in March.
The average condo sale price in Whitehorse was $419,900, a decrease of $60,100, or 12.5 per cent, from the first quarter of 2021.
However, Marc Perrault, the president of the Yukon Real Estate Association, cautions people not to read too much into those numbers if they’re thinking the bubble has burst on the property market in the territory.
The first quarter of any year is usually the slowest for real estate sales, he told the Star today.
Coupled with concerns about inflation, Perrault said, he thought that was likely the reason for the dip in market values.
Perrault said he would have to see the trend continue for a year before he would become concerned about it.
The only thing that would change his mind would be other major signals of an economic slowdown, and that’s unlikely in the Yukon.
The market and economy here are very stable, he suggested, because it’s a government-based system which prevents most wild swings and
People are still immigrating into the territory to take advantage of its robust economy and growing public service, as well as other opportunities, Perrault said.
He doesn’t see that changing anytime soon.
“Demand is still greater than supply,” he noted.
The only category to show record-breaking growth was the mobile-home market. It hit a record high of $467,300.
A total of 54 single-detached houses were sold during the first quarter, an increase of 19 compared to the first quarter of 2021.
There were 49 condo sales, an increase of 27 compared to the first quarter of 2021.
The average condo price was $419,900, a decrease of $60,100, or 12.5 per cent, compared to the first quarter of 2021 ($479,900).
Four mobile homes were sold at an average price of $467,300.
Seven duplexes changed hands at an average price of $471,600.
Seven commercial properties were sold at a value totalling $6.9 million
In Whitehorse, a total of 130 real estate transactions was recorded in the first quarter of 2022, a rise of 46 compared to the first quarter of 2021. Over the previous five years, the first quarter average number of sales was 100.
Thirty homes sold in Whistle Bend during the period, with a total value of $18.5 million. It was the busiest neighbourhood in the city.
Copper Ridge saw eight properties sell at a total value of $5.3 million.
Porter Creek was the next-highest, with seven properties selling for $4.4 million.
The report showed that, excluding country residential properties, which typically sell for much higher prices than other single-detached houses, the average price in Whitehorse was $626,200 in the first quarter of 2022.
That compared to $632,100 in the fourth quarter of 2021 and $580,500 in the first quarter of 2021.
In Whitehorse, the median price of single-detached houses in the first quarter of 2022 was $620,500. That means the prices of half the houses sold were above this figure and the remaining half, below.
There are no listings for less than $200,000 in the Lower Mainland (except in Richmond).
Here are five residential properties in B.C. that are for sale at less than $200,000.
This 630 square foot apartment is almost 50 years old and has a monthly maintenance fee of $460.
It is on the ground level and a key reason that it is priced at $199,000 is because it is built on leased land. The lease is prepaid until 2087.
This 1.26 acre lot comes with a small older cabin that is livable and is priced at $129,000. It has solar and wind power. There is a dock a ten-minute walk away.
Sonara Island is one of the Discovery Islands where Johnstone Strait joins the Georgia Strait.
The closest large community is Campbell River on Vancouver Island. Sonora Island is not serviced by B.C. Ferries.
There are four apartments in different locations within Port Hardy on the top end of Vancouver that are priced at less than $200,000.
This one has two bedrooms and has been updated with new laminate floors and is south facing. It is priced at $169,000.
As a base for ferries to Prince Rupert, Port Hardy sees a lot of tourists in the summer.
Trail, the site of Teck Resources zinc and lead smelting and refining complex, was a decade ago a place you could buy a home for $50,000.
It’s now a place where you can get a detached home for less than $200,000. Despite the smelter that looms over the city, Trail is close to excellent skiing and recreation.
This 1,300 square-foot home has views of the Columbia River with a serviceable kitchen and even has a new washer-dryer. It is priced at $199,000.
Tumbler Ridge in the Peace River region was built from scratch in the early 1980s to create a community for coal mining companies in the area.
As a result, it’s a lovely town that’s well laid out and has great amenities. It is, however, beholden to coal demand, that has led to a slump in real estate prices.
With an asking price of $183,000, this 2,100 square foot home is on a large corner lot. It has three bedrooms and comes with a new furnace. It has been on the market for over two years.
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