Feb 112016
 

House it Going in the Real Estate Market?

So this is the kind of house you can expect to buy in Vancouver today for about $1.19 million.

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To put this into context, the same $1.19 million could be used instead to create a dividend growth portfolio that would generate $40,000 each year of tax advantaged income for a lifetime. 🙂 Have homeowners completely lost their noodles in this city?

The economy has stagnated. The U.S. stock market is down about 10% over the last 12 month period. The TSX in Canada has seen worse, falling by 20% since this time last year. Canada lost more jobs than it gained last month, pushing the unemployment rate up to 7.2%. Low oil and commodities prices is costing us a lot of jobs not just in this country but also in emerging markets that export metals and other resources. Negative interest rates are as common as the flu. Asia’s growth is slowing down. U.S. Treasury yields have fallen from 2.0%+ to just 1.6% over the last 6 months. And as Lenore Hawkins, chief economist at Meritas Advisors, says, the slowdown of growth in “global trades is at levels we haven’t seen since around 1958.” It’s almost like the entire world is in recession.

But despite all the negative news and market volatility out there, local real estate as a whole has remained stubbornly bullish for the last 4 decades.

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Apr 162015
 

Canadian Farmland Values Up Again

Okay, it’s that time of year again when the national agency, Farm Credit Canada, release its farmland value report about the previous year’s farming landscape. As it turns out in 2014 the average Canadian farmland price increased 14.3%. 😀

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Meanwhile residential real estate prices increased only 5.2%, according to the Canadian Real Estate Association. Of course the most strategic way to invest in a portfolio of properties is to be exposed to both residential, and agricultural real estate. Farmland prices are assessed using recent comparable sales. These sales must be arm’s-length transactions. The highest price increase was an incredible 18.7% in Saskatchewan, the land of living skies. The full report is on FCC’s site.

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As luck would have it I decided to buy some Sask farmland a few years ago. 😉 Back then I had blogged about why land in Saskatchewan was the bee’s knees because of how undervalued it was compared to other provinces and neighboring States.

 

The Greatest Advantage of Real Estate Over Stocks: LEVERAGE

I leveraged 8:1 to secure my position as a farm owner. This meant I borrowed $7 of the bank’s money for every $1 of my own money to invest. So an increase in Saskatchewan’s farmland value of 18.7% last year actually means a redonkulous 150% rate of return on my capital. Not too shabby. 😉

My farmland was worth about $1210/acre last year, so after this year’s adjustment it should be worth $226/acre more now. Awesome sauce! 😉 $226 doesn’t sound like a lot of money to get excited about, but since I own 310 acres it all adds up pretty quick. 🙂

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Investing in farmland isn’t for everyone but hay, maybe I have it in my jeans. 😀

As much as I like to feel wealthy on paper, when one particular asset class consistently outperforms all the other ones I’m faced with an asset allocation problem. Farmland now represents about two-thirds of my financial investments (all assets except primary residence.) This means I am not very diversified anymore. 🙁 Although I realize this must be the ultimate first world problem, lol. 😛

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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! 😯 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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Jul 062012
 

Buying a home in the US right now is a pretty good idea. Prices have come down 30% from their highs in 2006 and the cost of owning is cheap compared to renting. However it’s not the same story on this side of the border. What goes up must come down right? well apparently not when you’re in Canada.

The US went through a housing correction because of ninja loans and subprime lending. In Spain, the housing bubble popped because they had about 23 million houses, but only 16.5 million families, lol. There wasn’t a real demand to build so muchRecent data now shows Canada’s home prices may also have hit its peak. There are lots of listings in Vancouver but not a lot of homes are selling. The amount of properties bought in June hit a 10 year low. A 27.6% drop from the same month last year. In Toronto the drop is less severe at just 13%. Common sense tells us if there is a large amount of supply (homes) but not a lot of demand (purchases) then this puts downward pressure on housing prices. It’s a buyer’s market now :).

Are we going to see a major correction here? I don’t think so. The demand here appears to be real. Vancouver has a vacancy rate of 2.4%, and Toronto’s is 1.6%. Those are pretty low numbers. We can’t have 0% vacancy because if all the homes were 100% occupied then how can we accommodate new people moving into the city? So I think the boom in residential developments (condo constructions) in major metropolitan areas are warranted to plan for future urbanization, immigration, etc. We might see a 5 to 10 percent downward movement for the average price of a Canadian home, but nothing major is likely to happen.

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Random Useless Fact: A study which polled over 2400 women concluded that the average woman spends nearly 1 year of her lifetime trying to decide what to wear.