Saturday, October 30, 2010

Future outlook on Canadian Housing Market

Got the following email this week. 

Another article that came out yesterday, analyzed the prospects of a Canadian housing bubble by not looking for similar underlying reasons that led to the U.S. housing collapse but by comparing against the back-drop of 1985-1989 Canadian housing bubble.



http://www.howestreet.com/audio/Alexandre_Pestov_2010_10.pdf


The key take-away of this article is reiteration of what other articles have also predicted that "home prices will decline, although as not as violently as the home prices in the US did, and then stagnate until fundamentals catch up, similar to the 1990-2000 period".


However what is more concerning is the statement "...upcoming price stagnation should be of the most concern for those whose well-being directly correlates with appreciating home prices. Property developers, real-estate agents, “buy-and-flip” investors and other market participants should take a note and make necessary adjustments."

If you read the attached report and check through the accompanying documents, I find the data a bit misleading.  The first issue is that the data from 1985 to 1989 was a five year period, 2000 to 2010 is a ten  year period.  Comparing the quick five year run up with a slower increase over ten years seems a bit like apples and oranges. 

In the data, there is no consideration of the impact of governmental policy and the implementation of the GST.  These two items lead directly to the slowdown in the 1990s. 

I also found his research was indicating problems in Calgary and Vancouver, but not so much in Ontario.  In the 1990s, Ottawa had three down years, which totals about a 5% drop.  Within three years, the 5% was completely recouped and property values increased.

Thursday, October 28, 2010

Most Ontarians confused about HST and resale homes

56% mistakenly believe HST applies to purchase price Toronto, Ontario, October 27, 2010 –

An Ipsos Reid survey commissioned by the Ontario Real Estate Association (OREA) and released today reveals that fully 56 percent of Ontarians mistakenly believe that the new Harmonized Sales Tax (HST) applies to the full purchase price of a resale home. In fact the HST is only levied on the various transaction fees associated with the purchase of a home that has been previously occupied (i.e. not a newly-built home).  Currently, the average price of an Ontario resale home is around $330,000.

Therefore, this confusion leaves the majority of Ontarians wrongly believing that the HST will add more than $40,000 to the transaction cost. There is growing concern among real estate professionals that this misperception about the HST is dampening the Ontario housing market.

“We see it on the front lines every day. Clearly, Ontarians still don’t know what the HST covers and what is exempt,” noted Dorothy Mason, President of OREA. “This is not helping the housing market, and it’s not helping the Ontario economy. This confusion means that many buyers think the cost of a resale home is tens of thousands of dollars higher than it actually is.”

The results of the survey conducted earlier this month were consistent across all age groups. However, there were some differences across other demographic categories. For instance, of those surveyed half of the university graduates, 71 percent of northern Ontarians, 59 percent of those living in eastern and southwestern Ontario, and 54 percent of GTA residents all mistakenly believe the HST applies to the full purchase price of resale homes.

“We’re doing our part to inform our clients, but we shouldn’t have to do it alone. We’re calling on the Ontario government to launch an immediate public awareness campaign to educate taxpayers and end the HST confusion,” concluded Dorothy Mason. “For average homebuyers, learning that the HST does not apply to the full purchase price means a $40,000 saving they weren’t expecting.”

Ipsos Reid conducted the survey among 830 Ontarians from Ipsos’s online panel, between October 4th and 11th, on behalf of the Ontario Real Estate Association. The estimated margin of error is +/-3.8 percentage points, 19 times out of 20.

Thursday, October 21, 2010

Tenant turn over

I got notice mid-month that a tenant of mine is moving out.  They gave me 45 days noticed instead of the requisit 60 days from the first of the month.  I made a deal with them not to charge the extra month if I could find a suitable tenant in the meantime. 

Yesterday, a nice young lady employed at the government rented my unit for $200 per month than the previous tenant.  What a wonderful day!

I have wished the previous tenant well and released her with the 45 days notice and the bonus will be an extra annual income of $2400.

Turnovers are not always bad!

Wednesday, October 20, 2010

Has this changed my life?

Hi Marnie,


I just wanted to send you a quick email to thank you and the team at Bennett Pros. I went a seminar of yours last Oct 09, received the info from that seminar, met with Greg the following week, and I was hooked, investing in real estate was want I wanted to do for some time but did not know what type of investing that would met my goals. After meeting Greg, he lead me in "MY" right direction of investing which landed me at the doors of a packaged investment product, since then I currently own 3 investment properties and closing on 2 more next month. For my personal goal, that's 5 down and 5 more to go!

Has this changed my life, is the question I am asking my self every day, I often wonder how my life will change in the future because of what I did last Oct by going to your seminar, but right now I live as nothing has changed enjoying every bit of what I do now and look forward to many things in the future like paying off my mortgage for the house I currently own 6 years earlier, taking a extra trip(s) with my family to the Caribbean per year, having the money for my children's post secondary education,moving into the house of our dreams once I pay off my mortgage and renting out my house I currently own to help to pay off my new mortgage, looking forward to retiring maybe 10 years earlier then what I thought we would be, so lots of great things ahead for me and my family which I thank you and your team once again.

Thank again!
Gary, Tracey, Rebecca and Lauren

Thursday, October 14, 2010

New pre-construction condominium opportunity

Launching October 21, 2010
Prices starting in the $230s
Be part of the Bennett VIP Program

Send me an email to get more details - gblok@kwottawa.ca

Wednesday, October 13, 2010

Phoenix Auction Purchase - typical scenario

I have worked out a typical scenario for a buy and flip investment in Phoenix, Arizona.  These homes are bought from the trustee auction, through our exclusive relationship with http://www.smartazforeclosures.com/

The effect of the Baby BOOM!!!

Over 10 million people ... # of Canadian baby boomers.
Over 76 million people ... # of US baby boomers.

There are over 86 million people between the ages of 45 and 65 living in North America today.  These people are the most powerful force in the purchasing community.  Approximately 1/4 of the population of Canada and United States are baby boomers, a large percentage that any other 20 year grouping. 

Think of some of the booms ...
- American muscle cars in the late 1960s/early 1970s - Ford Mustangs sold  over 400% better than originally predicted.
- Viagra pills ... enough said
- tennis in the late 1970s
- golf in today's market place
- Minivans in the late 1980s/1990s - Chrysler revitalized their business solely on this product
- Baby/Children stores - Toys R Us, Baby Gap, etc

Just to give you some perspective ...
If the baby boom in Canada and the US were a country, it would be the 13th largest country in the world, behind the Philippines and ahead of Vietnam, Ethiopia, Germany, United Kingdom, France and Italy. Almost 2 and 1/4 times larger than the population of Canada.



#1 question all investors should be asking themselves now is ....

Where are Baby Boomers headed next?
Trend #1 - Smaller properties
Studies also show that roughly 70% of baby boomers will be downsizing to an apartment style condominium or bungalow.  Most baby boomers have an interest in moving into the core of the city being walking distance to amenities.  About 3 out of 10 are predicted to move to cottage type properties, smaller communities or stay in their current neighbourhoods.  Assuming two people per dwelling, this would equate to 60 million dwellings need in urban areas in the coming decade or so.

Trend #2 - Warmer climates
Studies show that 58% of retirees want to have a property in a warmer climate (either primary or secondary residence).  Assuming two people per household, that should be 25 million households needed to fulfill the demand.  About 56% of downsizers (Snowbirds) buy on the Eastern Seaboard (Florida, Georgia, Carolinas, etc), which would total  14,000,000 households and the other 44% buy in the SouthWest (Arizona, Nevada, Texas, New Mexico, California) which would be 11,000,000 homes.

Closer to home ...
 In Ottawa, we have approximately 900,000 people housed in 260,000 homes.  Estimates have about 35% of the population falling into the Baby Boom category, which means 315,000 baby boomers in the city of Ottawa.  Assuming two per household, and assuming 1/3 of baby boomers have already downsized, there will be an influx of 75,000 more apartment style condos and bungalows needing to satisfy their needs. 

Tuesday, October 12, 2010

Legal Rent Increase 2011

Hi Ontario Real Estate Investor,


On August 31st the new statutory guideline for rent
increase came into effect for Ontario rental properties
under the Ontario Residential Tenancies Act.
Landlords may now increase rent by upto 0.7% of the
current rental rate charged to the tenant.

However, under certain conditions Ontario landlords
can legally increase rent amounts by much more
than 0.7%.

Further, if investors or Ontario realtors representing
them aren’t aware of the new rules governing listing
tenant occupied properties you may needlessly
costing yourself or your client thousands of dollars.

Get the very latest updates on Ontario landlord tenant
law by taking my course “A Landlord’s Rights &
Obligations, Ontario 2010”. Below are the upcoming
course dates and locations:

Ottawa, November 3
Ajax, November 4
Mitchell, November 9
Markham, November 16
Kitchener, November 23
London, November 25
Scarborough, December 2
Windsor, January 11

For more information on the course content visit
our website. For course registration visit our
online registration page.

Regards,
Katherine Paliwoda
Katherine Paliwoda & Associates
P.O. Box 174,
Mitchell, ON.
N0K 1N0
1-866-548-6358

Website: http://landlordtenantmatters.ca/
Online Registration: http://www.eventbrite.com/org/48230265?s=2089209

Sunday, October 3, 2010

Why Phoenix?

Phoenix, Arizona is the fifth largest city in the United States, with growth continuing ongoing. Phoenix has grown by more than 100,000 people per year over the last 25 years. This is astonishing growth. Through the economic downturn, change in population in major markets across the US shows that Arizona, resource-rich Utah, Colorado, Texas, and tech hub North Carolina led the nation with greater than 2% growth in population from mid-2007 to mid-2008. An April 2010 report from University of Arizona forecasts population increase of 875,000 persons, pushing total Greater Phoenix population to approximately 5.2 million by 2016.

Job growth and diversity of employment both have a positive impact on the local market. Phoenix has a diverse employment base with jobs in high tech, government, farming, education, warehousing, manufacturing, natural resources and mining, construction, travel and leisure. The Phoenix area has a lower unemployment rate than the United States average (8.6% to 9.5%). An April 2010 report from University of Arizona forecasts an increase in employment of 409,000 by 2016.

The other reason people move to Phoenix is the great climate, golf courses and lack of natural disasters. Being in a desert, there is limited humidity and temperatures are great year round (except August when it is 110 degrees Fahrenheit plus). Phoenix also contains a very diverse employment base and all six major sports (football, baseball, hockey, basketball, golf and Nascar). The Greater Phoenix area has become a destination for second homes with 37% of MLS sales in 2010 coming from Canadians and people from the Northern States.

Simple economics state that if supply is low, demand is high and vice versa. The years of 2007 and 2008, in Greater Phoenix area there were massive amounts of foreclosures and excess resale inventory that drove the MLS active listings to more than 60,000. A healthy market in the Phoenix area should have 35,000 active listings. Currently, in Phoenix, there are 37,000 active listings on the market right now and 30,000 of those are single family homes. Out of those approximately 1/3 of listings are short sales, those 12,500 active listings cannot be purchased in a traditional sense and require a six plus month negotiation with a bank. Short sales are homes that are in pre-foreclosure.

As the inventory has declined, the average sales price per square foot has shown a promising growth at certain price points. There is evidence that home prices at certain price points have stopped falling and are bouncing along the bottom. They are neither growing nor declining. With the per square foot price of active listings and pending listings stabilizing and the affordability index climbing, the evidence of market recovery begins to become quite convincing. Phoenix is now a very affordable city to buy a home in, which fuels corporate relocations to the city. Experts predict the market will reach an 80% recovery by 2013.

Phoenix also contains the second largest university in North America – Arizona State University, which consistently brings new people to the Greater Phoenix area. The major fortune 500 corporations, such as Honeywell, Wal-Mart, Intel, Wells Fargo, Home Depot, Target, US Airways, IBM, Verizon and many health care facilities routinely provide sectional lectures to the university for the opportunity to recruit the best and brightest. The average age of people in the city of Phoenix is 34 years old.

In my recent online poll, 66% of respondants thought it was a good time to invest in US real estate and 100% thought that the Southern states were better investments than the Northern States.