Where To Put Your Money:
Real estate has always been one of the most solid, long term investments a person can make. Although it is still essentially playing the market, real estate has brought a reliable return time and time again. Even in the decimated economy of the late 80s into the early 90s real estate still showed incredible recovery. However, even though real estate is a great long term investment buying in areas that are already developed just isn’t appealing or affordable to the average investor. When dealing with $380,000 for the average condominium in Toronto or worst yet when looking at an average of $950,000 for the average Toronto detached house, people who want to buy some property for investment purposes are almost out of luck.
So where to go to invest those extra pennies
Depending who you read or who you, ask the average house price have been on the rise. Depending on the municipality statistics indicate anything from 2.1% to up to 8% per year, but one thing is certain the trend is still pointing up.
Since, for the average investor, buying a rental property in Toronto is out of the question, where should investors look to find the next up and coming neighbourhood? Let’s not forget that 30 years ago there was next to nothing North of Finch Ave., not to mention Steeles Ave. Thornhill was a new suburb somewhere north of the city where the TTC didn’t travel. 20 short years ago few families wanted to move north of Major Mackenzie, however, now, housing prices in those areas are well over half a million dollars for an average detached home, leading new families to Barrie, Bradford, Keswick if they are looking for an affordable home to raise a family.
According to Statistics Canada there are now 13.2 Million People living in the suburbs, and business and industry have followed. It is no longer imperative to travel to Toronto to make your living. Huge companies have moved to all four corners of York Region and beyond. Waterloo, as an example is a huge hub for technology, investing in digital media, biotechnology and life sciences. ICF (intelligent community forum) recognized waterloo as one of 7 most intelligent communities.
Barrie, another community where people do not find it necessary to commute to Toronto. Many who choose to live in Barrie find jobs within the city or a short commute from their homes and with Industry growth and expansion such as the Royal Victoria Regional Health Centre, Barrie has a healthy investment feel with its current lower housing prices.
However, please also be aware that despite the large Urban sprawl, most growth still takes place in and around the larger cities, so staying within a driving distance of the 400 series highway is a way to ensure that property values will stay reliable.
So, how to begin finding that diamond city in the rough? One needs to identify areas that are poised to be well structured and well supported in the future. One thing is certain; investors must focus on the economic fundamentals of the area that holds their interest, keeping in mind that past or current performance does not indicate how a city will perform in the future.
Here are some valuable pointers to look out for when looking to invest in a particular municipality. Courtesy of REIN (real estate investment network)
1 – Is the cities average income increasing faster than the provincial average?
2 – Is the population growing faster than the provincial average?
3 – Is the area creating jobs faster than the provincial average?
4 – Is there ONE major employer?
5 – Is the area affordable?
6 – Will the area benefit from the ripple effect of nearby cities?
7 – Has the political leadership created a growth atmosphere and are they helpful or full of boundaries?
8 – Transportation improvements at work, such as an expansion of a road
9 – Is it attractive to baby boomers?
10 – Is there a short term problem that is slated to disappear in the near future?
11 – Is there a noted increase in labour in the area?
According to Real estate investment network here are the towns worth investing in as of 2012
1- Hamilton
2- Kitchener-Cambridge
3- Waterloo
4- Barrie
5- Brampton
6- Orillia
7- Durham (Whitby, Pickering, Ajax)
8- Toronto
9- Vaughan
10- Brantford
But before you go out and buy a detached home to rent in Waterloo, to that family of 5, please note that our largest population is the baby boomer. Due to our growing aging population and partly because couples are choosing to have smaller families, the single detached home has seen the smallest growth since 2011. Seems like the smaller homes are winning out over the large detached family dwelling. On the other spectrum of the smaller detached home the multifamily construction has seen a large boom as parents move in with their adult children and we enter the sandwich generation.
Much of the growth in surrounding areas does not happen by accident. City planners strategically go over municipalities and growth trends very carefully, almost manipulating the urban sprawl. The “places to grow act 2005” states that 40% of all new growth must stay within the existing urban boundaries, that means places will be growing up instead of out… note that it will not be long before Newmarket will resemble that of Richmond hill condominium sky scrapers. So even though you would like to put your money into up and coming areas there are factors that will slow down the growth of an area even though if left to its own devices it may have sprawled out far bigger and far sooner.
So before you run out and start looking into that investment home, let me leave you with one formula. Have a look at a cities growth pattern before you invest in order to avoid owning one of these underperformers:
Be aware of the cycle:
GDP of the area grows, which in-turn results in job growth, resulting in population growth, rental demands, decreased vacancies, rent increases, property purchase demand, increase in price
Although nothing is fool proof in the market, doing your research will go a long way to protecting your investment, and remember, much like any stock on the market, real estate is generally a good long term plan.
