Hello Hamilton Real Estate Investor!
While negotiating with another agent yesterday, he pushed me for a decision on some repairs needed on a property I had listed on my client’s property. My response was “it’s pretty hard to make a decision without quantifying the repairs.” My point is numbers drive decisions so lets have a look at some of the latest numbers on the Hamilton market.
One analysis I like to do is to look at extremes, in the below case the peak of the market in April 2017 vs the most recent completed month December 2017. Let’s focus in on freehold only since that’s what we invest in the most and the median sale price. April’s median sale price was $534,500 vs December’s $462,250, without factoring seasonality (winter is traditionally the slowest season in real estate) the overall market was down $72,250 or 15.6%. Sounds like doom and gloom no?
Now as an investor, you have to make a decision, is now the time to enter or exit the market OR simply wait. Not only do you have to make a decision, hopefully it’s an educated one. While no one can predict the future, what we can do is have a look at the past. In a previous economic update podcast episode, I shared how the Toronto real estate market has on average appreciated 7% since the peak of the market in 1989 to the end of 2016.
Next you take a look at what the economic drivers are saying: employment, GDP, population changes, etc… then the important part, YOU TAKE ACTION on what your analysis is telling you.
Right or wrong, based on my analysis, I invested in two houses after the peak spring market in Hamilton that I’m adding basement suites and will be looking to acquire more in early 2018. I’m no economist though hence I rely on folks like Benjamin Tal. Here’s what he said about supply and demand from article http://www.cbc.ca/news/business/housing-prices-cibc-tal-1.4401743:
“when the fog clears it will become evident that the long-term trajectory of the market will show even tighter conditions,” Tal said. “The supply issues facing centres such as Toronto and Vancouver will worsen and demand is routinely understated.”
“Short of a significant change in housing policies and preferences, there is nothing in the pipeline to alleviate the pressure,’ he wrote.
At the same time, Tal said that actual demand in the housing market is stronger than official estimates. He pointed out that Canada’s annual immigration quota is slated to rise from 250,000 to 300,000, and eventually 450,000. That comes amid a current tight land supply based on rules that don’t capture the changes in the market, he said.
To summarize, tight supply with no alleviation and increasing immigration by about 50%. What do you think will happen to the housing market? Now take action.
For myself, we buy for cash flow and we personally purchased two investment properties after the peak month of April with plans to invest more in 2018. If you listen to my podcast, everyone is doing the same but please don’t do what everyone is doing e.g. real estate, buying Bitcoin, tulip bulbs, whatever. Do your homework and know that we’ll be here to support your real estate action whatever you decide.
Till next time – Just do it! I believe in you.
Erwin
