Mar 282015
 

According to a Financial Post report the average price of detached homes in Toronto passed the $1 million mark for the first time last month. :) The GTA has experienced a housing bull market for almost 2 decades and there is no sign of it stopping.

I want to congratulate Torontonians for reaching the $1 million milestone. Welcome to the club. :) Meanwhile the average detached home in Vancouver now stands at about $1.4 million. But hey, it’s not a competition. ;) And extreme cases like the Point Grey mansion that was sold a few months ago for nearly $52 million will skew the average results. Can you imagine the commission real estate agents make around here?

We often hear complaints about how unaffordable housing is in Canada. But there are two sides to each coin. My friend’s parents bought a home for $70,000 over 40 years ago. They have since paid off their mortgage, and their home is now worth over $1 million. :D They plan to sell their house soon in order to downsize and will become liquid millionaires. That sounds great to me. The majority of Americans and Canadians are home owners. So financially speaking rising home prices should benefit most of us. :)

Recently a Vancouver house sold for $567,000 over the asking price. It was listed for $1,600,000, but sold at $2,167,000. People are even making jokes about how insane the housing market is. Below is a short video I found of a Vancouver real estate agent talking about his inexperienced clients. It captures the ridiculous nature of the current market around here. :lol:

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Feb 092015
 

Canadians are notoriously overweight. :P Financially overweight in real estate that is. ;) When it comes to buying houses we are even more gluttonous than our American pals. The Canadian median household net worth may be one of the highest in the world, but strip away the equities in our homes and many of us would feel financially emasculated. :|

Foreign ownership, low interest rates, and a growing population in major cities all contribute to our strong real estate market, which many say is in a bubble. But whether properties in Canada are overvalued by 10% or 30% it really doesn’t matter for investors who keep the following points in mind.

  1. Diversification –  Invest in more than one type of asset class
  2. Time – If we have a long term outlook then our risk of losing money is greatly reduced, especially if we combine this knowledge with diversification.

If we’re properly diversified and hold our investment long enough then we’re bound to make money in stocks, real estate, bonds, or any other market. Over 70% of Canadians are real estate investors. Fortunately most of these investors understand the benefits of a long term investment and forced savings. But it’s the first factor, diversification, that many seem to struggle with.

Having one’s net worth tied up in multiple condo units is not the best way to allocate assets. There are other types of properties out there like office space, restaurants, parking lots, etc. that are all available for anyone to purchase and rent out. With the recent lowering of interest rates and the falling Canadian loonie I’ve decided to take another look at real estate. Since I already have a residential property and farmland, I think it would a good idea for me to diversify my real estate portfolio and buy some commercial properties. :)

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Here is what I’m looking for in an investment property:

Type: Industrial – usage would include manufacturing, warehouse, garage, etc
Location: Greater Vancouver Area – includes Burnaby, New West, Richmond, Surrey, and the Tri-Cities
Price range: $250,000 to $500,000
Zoning: I, M, C – Each municipality will have its own naming convention. For example M-1 in Vancouver is a flexible designation for a range of business types like animal clinic, catering, laundry/cleaning, work shop, cold storage plant, etc. And C-2 can be used as a barber shop or beauty salon. These zoning bylaws can be found on the local government’s city website.
Capitalization rate: 4% to 5% – Similar to the ROI (return on investment.) This kind of return would be comparable to a high-yield bond fund, but with less risk. :)

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Jan 052015
 
The Bank of Canada Governor Stephen Poloz stated last month that this country’s housing market could be overvalued by as much as 30%. This may very well be true, but it’s nothing to be alarmed about. ;) In fact I would be really surprised if our real estate market was not overpriced given what’s going on in the rest of the economy. Toronto’s real estate has increased almost every single year for the last 19 years, except in 2009.
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A large part for the seemingly illogical run-up in real estate prices in Canada, the U.S., England, Australia, and parts of Asia over the last 2 decades, can be rationally explained by TINA, which is an acronym for There is No Alternative, a term first made popular by Margaret Thatcher. It’s the same reason North American stock markets reached all time highs at the end of 2014. :) The Canadian Stock market is currently overpriced by more than 20% according to historical averages. The S&P 500 stock market index in the United States currently has a P/E ratio of 20. That’s 25% more overvalued than the historical average P/E ratio of around 16.

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Jan 022015
 

To understand why the Canadian housing market is performing so well we have to look at where the demand is coming from. According to the Canada Mortgage and Housing Corporation, one person households are “expected to show the fastest pace of growth, making it the single biggest type of household by the 2020s.” As the population ages more senior women are becoming widowed. More young women are also delaying marriage and opting to buy smaller homes. As a result, the CMHC says that females today are over-represented in the singles condo market.

In 2011 Canadian women already represented 65% of all condo owners who are single. If we look at the statistics for people who are 55 and older, that number rises to 76%.

Back in 1971 couples with children made up 50% of all households in Canada, while only 13% of homes were occupied by unattached individuals like myself. But today couples with children households have shrunken down to 29%, and singles now represent 28% of all households. Gee willikers! 8-O How the times have changed.

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In the hot Canadian condo market, particularly in Vancouver and Toronto, the one-bedroom units are what’s selling today. “This is a very important force: more single people living by themselves, mainly women,” CIBC deputy chief economist Benjamin Tal says.

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Oct 252014
 

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I’ve been very fortunate with my past real estate investments. My Vancouver condo, and farmland near Yorkton, SK have altogether made me over $75,000 in pre-tax capital gains, at least on paper. ;) Not too shabby considering how 5 years ago I still had student loan debt and a negative net worth. :P

Researching a New Investment Idea

Recently I was brainstorming ideas for my next investment. Stocks are pretty volatile these days due to lower commodity prices like for oil, wheat, coal, and base metals. :( Residential properties also seem kind of flaky at this time because we don’t know whether or not the trusted Fed will tighten its monetary policy next year or open the gates to even more quantitative easing. :?  So it’s hard to find under valued assets these days.

However, I was recently browsing the MLS database on realtor.ca, which of course is accessible to the general public. And I came across several listing on the outskirts of Regina, Saskatchewan that caught my attention. These listings are for undeveloped plots of land, near the Regina International Airport (Code: YQR.) The size of each lot for sale varies from 2,000 ft2 (185 m2) to 10,000 ft(929 m2) or more, so they’re large enough to build an apartment or restaurant on. Here’s an example of one of those properties I might be interested to buy.

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