As our focus has changed more to Canada and less on the U.S. in the last few months (We are in negotiations regarding a new building in Windsor, find more info about it here), it seems prudent to dive into the new long-term housing figures recently released by the Canada Housing and Mortgage Corporation.
Housing starts are expected to slide to 141,900 total this year, down from 211,056 in 2008 and a significant decline from multiple years of 200,000+ starts. “Even when the economy turns positive again, housing starts will climb back only slowly, to reach 176,800 units by 2013,” the report said. “‘Canada’s growing population demands about 170,000 new homes a year,’…said Pascal Gauthier, economist at Toronto-Dominion Bank.”
We often say that to succeed in our business, you really don’t need a level of math higher than what you acquire in Grade 6. 170,000 new homes needed per year plus starts that will be under that number for four years equals what? That’d be a housing shortage, a shortage that will show its ugly face very quickly starting one or two years from now, just around the time that interest rates will be going back up.
There is a golden window of opportunity in this market right now. The economic climate will unfortunately be bruising for many for years to come…but not to those who have their money in apartment buildings.
I like your thinking and the math comment. I agree! In the U.S. one of the biggest problems we are having is the appraisal process. With so many foreclosures and short sales in the marketplace and the fact that appraisers are now being forced to use those as comparables to new sales it is hard to get value. Is the same true in Canada?
By: cwr466 on June 19, 2009
at 6:07 pm
Appraisers are wary in Canada but have looked at and appraised the market value issue as seen through the eyes of the buyers.
Properties grew in value with money available at low rates. the rate went through the roof and house prices held firm at first. Then values reduced by 10%. The appraised/market prices stabilised and are affordable at present due to and concurrent with property loan rates.
The new kicker in the property market is that entrants to the market are unable to find affordable 1st time properties that existed 18 months ago
So no new starters = far less action in the higher value properties.
By: Richard on July 31, 2009
at 1:57 am
Yep! it is hard to get value. Sold prices in the cities have firmed up by around 4-8% from the original lows during the last 6-9 weeks(that recent) so confidence is coming back and sales are moving well. If interest rates take a jump after the easy money it will could all start again.
I have personally been looking at a single dwelling residential property I have thought of buying.
Started out at $550.000. was not looked after and over 2 years has a worn/tired/falling down look.
Frozen pipes overwinter. hot water heating shot to hell.
price now down to: 230.000CD may consider 180.000CDN
We may have some more twists and turns with the money men and developers as the after market is making the running.
Time will tell
By: Richard on July 31, 2009
at 2:17 am