Monday, January 30, 2017

2017 Real Estate Trends: Trump

Did you hear the US has a new president?  Unless you’ve been living under a rock, you’ve no doubt heard about incoming president Donald Trump.  The unlikely victory by the polarizing figure has sparked protests across the US and the world.  No doubt, this a volatile time.  Regardless about how you feel about him and his term as president, there is change coming.  Today, we are going to discuss how some of that change could affect our real estate market.

Disgruntled US Citizens Moving North Of The Border
During the campaign season, you heard over and over from non-republican voters that they would consider moving to Canada if Trump became president.  Although this sounds great, I don’t think we will see a material population of Americans trying to move to Canada.  There are too many logistical issues such as immigration, etc that would prevent it.  Overall we don’t expect to see much impact from this.

Immigrants Choosing Canada Over The US
As two countries with lots to offer immigrants, Canada and the US sometimes battle over the most skilled applicants.  With Trump being viewed unfavourably by much of the world, these cream of the crop immigrants may choose Canada over the US.  This could be good for growth in Canada and therefore our real estate market.

Focusing On The Economy & Jobs
The emphasis on much of the policy Trump is expected to be putting forward centres around jobs and the economy.  He doesn’t really mind if he ruffles feathers in the process of gaining or keeping jobs in the US.  We’ve already seen announcements from different manufacturers about moving jobs back to the US or deciding the keep them there instead of moving to a lower cost jurisdiction.  Most of this rhetoric is aimed at low cost producing countries such as Mexico or China.  Canada is a higher cost producer and has a pretty balanced trade relationship with the US.  Therefore we do not see Canada as a trade target of the Trump Administration.  If we see a resurgence in manufacturing in the US, that could benefit our economy by proximity and inter-country companies building components in both countries, making it mutually beneficial.  As a border town, this could benefit our local manufacturing sector and therefore our real estate market.

General Uncertainty
Markets and companies don’t like uncertainty, which without a doubt, the incoming Trump administration has brought about.  People like to invest in stable economies.  During this period with Trump, Canada could look very attractive as a place to invest for companies and real estate investors.  Our real estate market could benefit from this perceived relative stability.
The times they are a-changing.  Those are some of the takeaways we see from the changing landscape under Trump.  What are your thoughts?

Tuesday, January 24, 2017

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?

Friday, January 13, 2017

Real Estate & Related Predictions for 2017

Happy new year everyone!  Hope you all had a great holiday season and are rested up for a busy 2017.  While the year is still young, we wanted to consult our crystal ball and take a stab at making some real estate predictions.  Here goes.
Interest Rates Edge (Modestly) Higher
Since interest rates are near all time lows, common sense would dictate that they don’t have anywhere to go but up.  We think this year that happens, albeit in a limited fashion.  With the combination of higher bond yields, and some of the government mandates coming down on the financing industry to curb runaway real estate markets in parts of Canada, this will finally be the year for higher rates.
Buyers Get Multiple Offer Fatigue
During 2016, it seemed like every listing had 5-10 offers on it and bidding wars ensued.  While the market dynamics forcing this are still in place, we feel a segment of the market is growing tired of the constant competition.  This will result in a lesser number of the crazy bidding wars we saw over the past year (hello 31 offers!).
Cap Rates Flatten Out
We remember back 6-7 years ago when obtaining an apartment building with a cap rate of 10%+ was common place.  Those days are long gone and prices have been bid up consistently since then, compressing cap rates.  Today you have a hard time finding an apartment building with a cap rate over 6%.  This dynamic has also been seen in retail plazas, office buildings, and other commercial properties.  We don’t see much more room to run on cap rate compression going forward.
Continued Sticker Shock On New Construction Costs
With new construction going through a boom in the last few years in our local market, builders and related trades are very busy.  Combine that with increased prices for land and imported material costs rising because of the low Canadian dollar, buyers will find their price range won’t get them as much when considering a new build.  We don’t see this subsiding anytime soon and if anything expect further price increases.
New Condo Projects Coming Online to Meet Demand
Build it and they will come.  It wasn’t always this way in our local market, as condo ownership was slow in being generally attractive to buyers.  But times have changed and the condo market may be the tightest of them all.  The market can now support more condo developments and developers will respond to this demand with multiple new projects in our area that we expect to be met with brisk demand.
Those are some of our predictions for 2017.  Time will tell if our crystal ball was right.  What are your predictions?