INVESTOR PRESENCE GROWING IN
RESIDENTIAL HOUSING MARKETS ACROSS THE COUNTRY
 Recent gains in average price are attracting a growing number of investors to major markets across the country. According to a report released by RE/MAX, one in six Canadians plans to buy an investment property in the next 12 to 24 months.
Based on on-line interviews conducted in December, 2005 with 1,200 homeowners across Canada, the report highlights developing interest in residential real estate as an investment. Close to 30 per cent of respondents already owned one or more investment properties and approximately 18 per cent indicated that real estate represented more than 51 per cent of their total investment portfolio.
Why are purchasers turning to real estate as an investment, considering that prices are rising fairly rapidly, vacancy rates are relatively high compared to past years and stock markets have bounced back? There are two key factors:
1. Purchasers view residential real estate as a simple, sound and safe investment -- something that is very familiar to them. The risk factor is greatly reduced compared to other financial vehicles.
2. The promise of continued upward trending in housing values is a major factor influencing investors. Over the past five years, residential prices have appreciated close to 10 per cent on average, nationally, a fairly impressive return on investment.
The RE/MAX report also found that investors were younger than anticipated. Forty-three per cent of those who intended to invest in the next two years were under the age of 40. Once tagged “Generation X,” these individuals supposedly rejected more traditional values like owning a home.
In recognition of residential real estate’s potential for long-term growth, 50 per cent of investors indicated they plan to hold their properties for 10 years or more. However, if an investor were to realize a tidy profit in the interim, he or she may be inclined to move on to the next income property.
The report also confirms that real estate investing is not just a male activity. Females represented 16 per cent of those who say they intend to purchase an investment property in the next two years. Singles are also playing a greater role in investment, with 10 per cent planning to buy an income property in 2006 and 2007.
Real estate speaks to a broad range of purchasers; they do not have to be a millionaire to invest in housing. According to reported household income levels, today’s investors are solidly within the middle class, with one in five earning $50,000 – $60,000 a year and one in three earning $75,000-$100,000.
The report found spending intentions almost equally split between those planning to spend less than $200,000 and those considering properties in the $200,000 - $500,000 range, This suggests investment interest is spread throughout the marketplace, with respect to property category and geography. For example, 41 per cent of investors say they intend to purchase a home, 35 per cent a multiple unit building, 24 per cent a condominium, and 13 per cent a townhome.
Additional Highlights:
- Corporate executives and entrepreneurs are expected to be the most active investors, representing 25 per cent and 19 per cent of respondents respectively.
- Investors were generally well-educated, with most possessing some post-secondary education. Fourteen per cent had gone on to a Master’s or Professional Degree.
The RE/MAX Investment Survey was conducted by Toronto-based Hart & Associates Management Consultants in December, 2005. The results are considered accurate within a margin of error of plus or minus 2.5 percentage points 19 times out of 20.
I am honoured to have been awarded the 2005 EXECUTIVE CLUB AWARD from RE/MAX Aboutowne Realty Corporation, for outstanding sales achievement.
Thanks to all of you, this has been an extremely busy year for my business, and as a result, I am pleased to welcome aboard Cynthia Hill as my very new Administrative Assistant. She has a sunny temperament combined with focused and dedicated work habits, and as result is a joy to work with. Already time is being freed for me to offer more personal attention servicing my clients. I am relying also increasingly on the contract assistance of Computer Technician and Web Wizard, Adrian Ellis, and the part-time E-Services of Robyn Ellis. I extend my thanks to all of you for this exciting expansion.
INVESTOR PRESENCE GROWING: Hamilton
Exceptional demand for residential real estate has driven home sales to new peak levels in Hamilton/Burlington this year. Consumer confidence has been a major factor in the marketplace, bolstered by strong economic performance and historically low interest rates. The number of homes sold is expected to climb just beyond the 13,300 of 2005, which topped the 2004 record. There were tighter market conditions throughout 2005 which created greater demand for residential product. Multiple offers, however, were few and far between as buyers refused to be drawn into bidding wars.
Condominium apartments, town homes, and smaller, single-detached houses priced between $175,000 and $225,000 were extremely popular with both first-time and move-down buyers. The 2004 phenomenon that saw parents of McMaster students buying up homes in and around the university tapered in 2005. An ample supply of properties in the $250,000 to $350,000 price range accommodated the growing move-up segment of the market.
The exciting new developments underway in Hamilton for 2006 together with plans to revitalize the downtown core should serve to further prop up economic performance.
* RE/MAX Housing Market Outlook 2006
INVESTOR PRESENCE GROWING: Toronto
As the lynchpin of Ontario’s strong economic engine, Toronto has experienced solid growth in recent years. The city’s residential real estate market has posted record-breaking activity year-after-year, attracting the attention of domestic and offshore investors alike. Many have been active in the market for investment properties over the past four to five years. The RE/MAX Housing Market Outlook 2006 found that the vast majority of major Canadian markets surveyed are expecting modest price appreciation ranging from two to five per cent in 2006.
However, with average price in the GTA hovering at $335,000, and Toronto now the third most expensive city in the country, smaller investors are looking at duplexes, tri-plexes and homes with basement apartments in less expensive peripheral areas. The objective is to find good quality property in a rentable location, with adequate parking, that is mechanically sound and adheres to code.
Today’s younger investors tend to use the equity in their existing home to purchase properties, often with only five per cent down. If the intention is to purchase and generate cash flow from tenancy, rather than renovate and sell, a long-term hold is the norm. Small investors with one or two properties will more likely self manage, while investors with more than two properties will hire property managers.
RE/MAX Investment Report 2006/2007
* RE/MAX Housing Market Outlook 2006
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