From about 2014 to most of 2017 Canadian real estate remained a dream to invest in. Staying on the positive side of a balance sheet promotes comfort among investors. An Aggregate Composite from the Canadian Real Estate Association (CREA) showed 2016 and 2017 to rank as banner years. Like all market views, values and versions change. In 2018 the steamy hot Canadian market that could do nothing but multiply investors money rapidly has cooled dramatically. Still a good investment but not the high-flying thing it was. Retooling, and reforming 2019 will shape up to become a different type of real estate investment.
Reminders
The soaring Canadian jay of Canada still soars but not so much in the lofty heights. Real estate remains a good buy. Each city has a different set of numbers. Housing prices in Victoria listed an 8.7 percent positive as recently as September 2018. Then British Columbia only had a 2.2 percent rating around Vancouver, but in the Fraser Valley area, it has a positive 8.5 percent. It means more checking into the information before investing.
Pull back a moment from the numbers and look at the balance. When measuring the markets of supply and demand examine for the bigger picture check the standard of deviation of the long-term average. Balanced market conditions have one standard deviation for that. Now check those 17 local markets in 2018 and nearly three-quarters of those local markets met balanced market conditions in September.
Pricing of real estate may simply reflect how enthusiastic buyers want to purchase in an area or if a shortage of homes exists or not. In late 2018 it took 5.3 months nationally to liquidate inventory. Skewed data appears in real estate markets when averaged. A national estimated average of $487,000 became the September 2018 average. Two markets Vancouver and Toronto housing prices caused the skew. Remove those markets the national average moves to an estimated $383,000.
A more normal market
Astute investors will find significantly undervalued properties and turn it around. It will take work now. Reuters polled 16 analysts in the first full week of September. A consensus estimates a 1.7 percent rise. Add in the banks decided this year to put in a “stress test” for borrowers has impacted the rate of home sales and prices form. With more scrutiny, it can appear Canada has a failing market, but it does not. The Canadian jay has decided to fly closer to the ground but still well above the ground like in the trees.
Possible trends
Take a hard look at asset allocation in the portfolio and what real estate ventures an investor has. It appears some homework will have to become done if real estate stock has a regional flavor or overall diversification. Check if a portfolio needs a new balance or just an adjustment. Watch what real estate investment trusts do. Is it an acquisition phase or doing development then redevelopment strategies to get better returns?
Pricewaterhouse Canada developed an emerging trends 2019 report. Increased digitization of the industry has begun to impact. With the Canadian government supporting so many technology companies it looks like a long-term trend. Data analytics will reveal unexpected opportunities to buy or sell. Canadian consumers have asked for smart technology home integration. Areas with drones, autonomous vehicles artificial intelligence topped the list of things buyers were looking for in a region when decided where to locate. Selling lower quality holdings to buy a few higher quality holdings has developed. A feeling that valuations have reached their peak in the markets. Tariffs and interest rates have reached the public’s mindset and become a concern but also with real estate in pricy markets.
Offerings on TSX
Lots to digest in the next month or two for real estate investors. On TSX real estate companies, real estate operating companies and real estate investment trusts exist. If Canadian real estate cannot satisfy, it becomes possible to invest in other lands. Whether industrial, technology, life science, investment, real estate or diversified it has two tiers for investors to seek opportunity. It screens for working capital and financial resources. If the company does not have revenue, then it requests a two-year management plan showing within 24 months how revenue will stream in. Offerings do not always obviously state if local, regional, national or global. As the data comes in for the final quarter of 2018 take some time to view over present holdings and look for additional opportunities. As the Canadian government develops public transportation, properties nearby getting added value. Otherwise a decent market with decent rates. Like the Canadian Jay TSX, real estate investors have that friendly, hardy, intelligent persona that can go the distance.