2017 Real Estate Trends: Bidding Wars – Part 3

For the last two weeks we've discussed several factors which are leading to the constant bidding wars in our real estate market.  This week we will wrap up the discussion with some factors you might not have thought of.  So without further ado…

Low Vacancy Rates

The Windsor-Essex area’s vacancy rate on rental units dropped to 2.9%, with CMHC’s latest report in the fall.  That is an amazing turnaround from 2008-09 with 12-14% rates.  With this decrease in vacancy comes a decrease in available rental supply and an increase in rental prices.  People in the area considering whether to rent or buy might be disappointed to see the available options for rent on the market and what that rent gets them.  Combine this with low interest rates and it can in many cases make it cheaper to own than rent.  This low rental supply and high rent price dynamic has definitely added to the demand from buyers in our market.

Sticker Shock On New Construction Prices

The cost of new construction in the area has really taken off in the last few years.  Part of that is based on increased demand.  But part of it also comes from increased soft and hard costs including building permits, increased building code, increased import prices due to the low Canadian dollar, etc.  Many people are no longer able to afford a new home so they are forced to settle for finding a suitable resale home, increasing demand of existing homes.  There is also a consideration that resale homes will tend to keep pace with increases in new construction prices, so the relative values don’t get out of whack.

A Period Of Depressed New Construction Before This Cycle

Approximately between the 2007-2011 period, there was a rough patch in the demand for new housing.  The auto industry was teetering on the brink of bankruptcy, unemployment was high and people were leaving the area.  Naturally, there wasn’t much building going on.  Now that things have turned around, the new supply hasn’t been able to keep up with the pent up demand due to that period of under-building.  To give an example, the condo market is extremely tight now for supply.  Hardly any condos were built in the area over the last 10 years.  But during those 10 years the population aged, the millennial segment of the population grew (with their admiration for condos) and the demographics were there for condos to be built.  However due to economic reasons, none were built.  Now we are in a period of catch up where there is a lag of new condo supply to meet that pent up demand.  Let's build some condos!

Upcoming Infrastructure Projects

Smart infrastructure has great spin off for the local economy and people are positioning themselves ahead of what’s to come.  We have some big projects coming to the area.  The new bridge crossing, the accompanying recently completed Herb Gray Parkway, the new Mega Hospital (even if the site is undetermined), the University of Windsor is moving downtown, and a new City Hall, just to name a few.  These sorts of projects if done correctly, increase economic activity and efficiency, lead to increased investment in the area, and trickles down to increased housing demand.  The future looks bright for the foreseeable future on this front.

This exhausts our discussions on the factors leading to bidding wars in our local real estate market.  We hope you found it insightful.  Do you agree or disagree with any of these factors.  Any you feel we missed?

More Real Estate & Related Predictions for 2017

Last week we made a few real estate and related predictions about 2017.  This week we will take a crack at a few more.  So without further ado…

New Construction of Rental Units

With the vacancy rate dropping again last year to a minuscule 2.9%, conditions are ripe for new construction of multi-family units.  Very little has been built in our area since the 70s.  Combine that with some incentives being offered, like no development fees in the downtown core area, and investment is sure to show up.

The Residential Vacancy Rate Flattens Out

After topping out north of 15% back in the recession of 2008-09, the local vacancy rate has continued to plummet in the last 7-8 years all the way to 2.9% in 2016.  As the law of small numbers would dictate, additional improvement will be small from here.  Combine that with an increased number of sales of condos and homes to investors and new construction coming online, the supply of rental units should increase to flatten excess demand.

New Construction Of Industrial Space

The vacancy rate for quality industrial space has really plummeted to near zero levels locally.  Suppliers are worried that they don’t have the floor space to produce enough to meet contracts.  The market might finally be ripe for a wave of new buildings being built.  Increases in rent prices are almost at the point to justify new construction costs for landlords.

Office Shows Modest Improvement But Still Too Much Supply

With the local economy being much improved, demand for office space is getting better everyday.  Having said that, there is still too much supply in the market.  We expect to sop up some of that inventory, but not materially so.

Windsor-Essex Real Estate Market Continues to Get Positive Media Exposure

Last year was the first year where local and national media really started to notice the renaissance going on in our local real estate market.  General inquires for real estate are rolling in everyday.  With continued migration, immigration and a buoyant local economy, things look rosy for 2017 and therefore we should see continued positive media.

There are some more predictions for 2017.  Hopefully we get some of them right!  Do you agree or disagree with any of them?

Investing In Real Estate – Building The Right Team #1: Realtor

Last week, we briefly reviewed a list of the team you should consider building if you want to become a real estate investor. Over the next set of posts, we will elaborate on some of these team members and what you should know. To begin, we will start with arguably the most important member of your team... the realtor ☺.

What should you look for when choosing a realtor to help you with investment properties?

Consider a realtor who specializes in income properties, or at least has significant experience with dealing with investor clients both on the buying and selling side. Ask for a list of properties they have worked on and possibly for references. It is also a huge bonus to have a realtor who is an investor themselves. They will be able to speak from first-hand experience and should be able to offer excellent insight. Choosing the right realtor is especially critical when investing outside of your home market, where you’ll be relying on them more for information about that market.

In what ways will my chosen realtor help in the process?

Your realtor should meet with you, understand your goals for investing and gauge your financial and management abilities to invest in properties. They should provide you information about the rental market, including rents, vacancy rates, employment info, demographics, municipal and fire code regulations, neighbourhood info and more. At this point you should be ready to look into specific properties and narrow down your focus to the right property for you. After finding the right property, your realtor will handle offer negotiations, facilitate inspections, appraisals, etc. to meet conditions and generally handle the sale right through to closing.

In what ways can my realtor go over and above?

Your realtor should have ideas and insights to help you be successful. They should understand the rental market and what makes a unit marketable to tenants. They can provide advice regarding value added renovations, marketing of vacancies, how to handle tenant inquires and applications and general maintenance of the property to keep things moving steadily. They can also provide referrals to other professionals for your team, including lawyers, mortgage brokers, insurance brokers, building inspectors, management companies, etc. Lastly, they should protect your interests at all times. They should see red flags such as blatant fire code violations, undesirable tenants, inefficiencies (electric heat loss) and other potential headaches of future problems.

This is a brief discussion about what to look from your realtor when looking at investing in real estate. It should give you some guidelines to get you started. Good luck!