The Patz McMillan Team

Canadian Investors Flocking to Housing Market (article date 01/27/06)

Recent gains in average price are attracting a growing number of investors to major markets across the country. In fact, one in six Canadians plans to buy an investment property in the next 12 to 24 months, according to a report by RE/MAX of Western Canada and RE/MAX Ontario-Atlantic Canada.

Based on online interviews conducted in December with 1,200 homeowners across Canada, the report highlights developing interest in residential real estate as an investment. Close to 30 per cent of respondents already owned one or more investment properties and approximately 18 per cent indicated that real estate represented more than 51 per cent of their total investment portfolio.

Why are purchasers turning to real estate as an investment, considering that prices are rising fairly rapidly, vacancy rates are relatively high compared to past years and stock markets have bounced back?

"Certainly, the promise of continued upward trending in housing values is a major factor influencing investors, particularly in British Columbia and Alberta," says Elton Ash, RE/MAX of Western Canada Regional Vice President. "Over the past five years, residential prices have appreciated close to 10 per cent on average nationally. That's a fairly impressive return on investment."

The RE/MAX report also found that investors were younger than anticipated. Forty-three percent of those who intended to invest in the next two years were under the age of 40.

"We believe these purchasers view residential real estate as a simple, sound and safe investment - something that is very familiar to them," says Michael Polzler, Executive Vice President and Regional Director for RE/MAX Ontario-Atlantic Canada. "The risk factor is greatly reduced compared to other financial vehicles."

In recognition of residential real estate's potential for long-term growth, 50 percent of investors indicated they plan to hold their properties for 10 or more years. However, if investors were to realize a tidy profit in the interim, they may be inclined to move on to the next income property, Ash says.

The study also confirms that real estate investing is not just a male activity. Females represented 16 per cent of those who say they intend to purchase an investment property in the next two years. Singles are also playing a greater role in investment, with 10 percent planning to buy an income property in 2006 and 2007.

"Real estate speaks to a broad range of purchasers," Polzler says. "You don't have to be a millionaire to invest in housing. According to reported household income levels, today's investors are solidly within the middle class, with one in five earning $50,000 to $60,000 a year and one in three earning $75,000 to $100,000."

The RE/MAX Investment Survey was conducted by Toronto-based Hart & Associates Management Consultants. The results are considered accurate within a margin of error of plus or minus 2.5 percentage points 19 times out of 20.

Copyright © 2006 RE/MAX International Inc. 1/27/06

Vancouver's strong economy is fuelling growth. CMHC (Canadian Mortgage and Housing Corporation) statistics indicate that Vanocuver's housing starts climbed in March to 1550 units a 51% versus last year. The multiple housing starts climbed 106% while single detached dwellings dipped 21% to 351 units.

This is the highest recorded number of housing starts since 1994 when 1845 units were started.

Senor Market Analyst, Cameron Muir said "The pent-up consumer demand that drove the Vancouver housing market over the last 3 years is now giving way to much stronger market fundamentals. Expanding net migration, increasing Job growth and rising wages are fueling housing demand. In fact, today's economic conditions point to a housing market that is more robust and sustainable than at any time during the last decade."

Choosing your next home..

There are so many things to consider when you are purchasing your new home. What you need now, what you need in the future, does it meet your personal, professional and family needs?

Location: It is one of the most important deciding factors when you are looking for your new home. Is it accessible to work, close to family or schools, or in desirable area. Do you want easy access to the beach, ski hill, park or walk to shops.

Lifestyle: Is the way you live now likely to change in the near future. Are you planning a family or are the kids going to be moving out? Do you have one car and are going to be purchasing another? Do you need room for new toys?

Understanding Residential Mortgages

Mortgage Types:

A closed mortgage will only allow you to prepay a certain amount of the principle and is normally locked in for a period of time (from 6 months to 25 years), at a set interest rate. (You can get longer terms - please contact a mortgage broker). Prepayment privileges can be anywhere from 10-20% allowed per year of the original mortgage balance. This can give you peace of mind knowing exactly what mortgage payment (interest and principal) you will be paying during the term of the mortgage. You can pay the closed mortgage out in full before the term is completed but this normally involves interest penalties.  Closed mortgages usually have the benefits of lower interest rates on fixed and variable products. 

An Open mortgage can be a fixed or variable rate product.  Open indicates that there are no penalties to payout the mortgage balance in full.  There are no restrictions on how much you can pay against the balance.  Most open products are at higher rates than closed mortgage.

CMHC Premium Reduction

Effective April 22nd, 2005 CMHC reduced the premium rate on all homeowner applications with a loan to value ratio between 90.01% and 95% from 3.25% to 2.75% and reduced the premium rate on its Flex Down product from 3.40% to 2.90%.

The comparisons show a solid increase in prices versus last year. This is normal but needs watching. Sellers remember that 61% of all sales take place between February and June each year. Detached homes new construction listings are up 31% and new condo listings are up 73% as compared to last year.