HOT REAL ESTATE MARKETS

The 10 real estate markets wealthy investors are going gaga for

Gus Lubin, Business Insider
Apr. 7, 2011

The most favored investment type of rich people around the world is property, according to the Citi Private Bank and Knight Frank Wealth Report.

True high rollers consider real estate of all kinds in all countries. Like distribution and industrials in the UAE. Or development land in Zambia.

The Wealth Report picked out 10 great international real estate investments.
1 means low risk, poor yield, low potential; 10 means high risk, high yield, high potential.

#1 Commercial real estate in emerging Asia
Risk Factor: 8
Yield Factor: 8
Capital Appreciation: 8

"We like emerging Asia for one simple reason – real-estate returns are driven by economic growth and very favourable demographics, rather than leverage and yield compression. Greater trade and industrialisation drives demand for logistics facilities; growing incomes swell the middle class, which creates opportunities in retail and leisure; an expanding services sector opens up opportunities for offices; while a young, growing population needs modern residential accommodation."

#2 Development land around Lusaka, Zambia
Risk Factor: 7
Yield Factor: 8
Capital Appreciation: 7

"Zambia has a serious housing shortage – it needs to build at least 150,000 housing units a year. Construction is a major contributor to the country’s economic expansion. Growth in the sector is expected to have reached 10% in 2010, driven by strong demand for residential and commercial developments, energy, mining and transport infrastructure."

#3 Secondary UK residential investments
Risk Factor: 5
Yield Factor: 7
Capital Appreciation: 7

"First, go for secondary stock in good locations in central London. Headline figures demonstrate the strength of the recovery in the London market, but they also mask that secondary properties, even in good residential areas, are trading at a deep discount to the best stock. They offer some of the best rental returns and improvement can often add value. Second is development stock in good regional cities, such as Manchester, Birmingham and Bristol..."

#4 Commercial property in Poland
Risk Factor: 5
Yield Factor: 7
Capital Appreciation: 6

"The Warsaw office market has avoided the overdevelopment that it experienced during previous market cycles, keeping the vacancy rate well below those of other CEE capitals, at 9% at the end of 2010. Warsaw’s rental growth prospects are among the best in Europe – forecasts say that prime office rents will increase by 3.2% in 2011 and 4.7% in 2012."

#5 Distribution and industrials in the UAE
Risk Factor: 6
Yield Factor: 8
Capital Appreciation: 5

"In some sectors values have fallen by as much as 60%, but away from high-profile offices, glittering shopping malls and alluring waterside residential schemes, the understated “shed” sector can provide robust income returns. Values have fallen along with other property assets, meaning that now could be the time to take advantage of a sector that looks undervalued, yet is supported by strong market fundamentals."

#6 Luxury new homes in prime European cities
Risk Factor: 1
Yield Factor: 2
Capital Appreciation: 5

"The smart money going into the European residential market is likely to keep a clear focus on property that offers both the very best quality, and for which there is a marked scarcity. A beautiful private home in a sought-after location will always attract interest. The appeal is to owner-occupiers and the commitment is long term. The enjoyment of ownership is equal to the performance of the investment."

#7 Education real estate in Asia
Risk Factor: 5
Yield Factor: 0
Capital Appreciation: 8

"Investments in education real estate demand the same selection discipline and risk appetite by investors as with any other residential real-estate investments in developing countries. For longterm visions of such projects, investors should choose to work with developers who are not only locally rooted, but also understand the education needs of the community."

#8 Residential development in eastern Mumbai
Risk Factor: 6
Yield Factor: 4
Capital Appreciation: 8

"The coming decade will see most infrastructure spend and development in Mumbai to the east of the city and on enhancing connectivity with the west. Infrastructure projects, such as enhancements to the Eastern Express highway, the Versova-Andheri- Ghatkopar Metro rail project and the proposed new airport at Panvel are expected to benefit the eastern corridor more than the west. This is likely to accelerate change in residential and commercial markets in eastern Mumbai."

#9 Distressed US real estate and property debt
Risk Factor: variable
Yield Factor: NA
Capital Appreciation: NA

"The next two years could provide opportunities for investors seeking to exploit the challenges many financial institutions face. These asset dispositions should create attractive investment opportunities in underperforming and nonperforming loans. Non-performing loans can often be purchased at an attractive discount to par value."

#10 Commercial property in Sao Paulo, Brazil
Risk Factor: 6
Yield Factor: 8
Capital Appreciation: 5

"The demand for A+ and A-grade office space has been exceeding supply as newcomers are establishing activity in the country or expanding their operations. Sao Paulo is experiencing a vacancy rate of 2.8% and as of October 2010, about 105,000 sq m have been absorbed in the A+ and A-grade office market. Private equity and real estate funds have been very active, as they expect further increases in lease rates and price per sq m. Cap rates of about 11% have proved attractive to foreigners."

Photo By: PnP

WHERE'S WALDO BUYING?

Where to buy: Top 10 cities
Jesse Kinos-Goodin, Financial Post
Sunday, Aug. 8, 2010

When investing in real estate, sometimes it’s necessary to look beyond your own backyard. The Real Estate Investment Network (REIN), a national organization of investors, has compiled what it says are the top 10 Canadian cities in which to invest. Few are major cities and some are surprising. Don Campbell, president of REIN, as well as one of the researchers on the study, says the results are based on factors such as planned transportation improvements, or if the area’s average income, population growth and job growth are increasing faster than the provincial average.

Oddly enough, nothing east of Ontario shows up on the list, and while Mr. Campbell says cities like Halifax, Saint John and Moncton “still provide decent returns,” the top cities are ones that will outperform the national average between 2010 and 2015.

1. Calgary

Calgary is “poised to outperform the average by a wide margin,” says Mr. Campbell, making it the top-ranked city.

After two years of declining average resale housing prices, the Canada Mortgage and Housing Corp. has predicted they will increase year-over-year in 2010.

The REIN report credits the downturn to a much-needed correction, and that it was “economically impossible for the [Calgary] market to continue at the pace at which it was heading.” But now that it is coming out of the recession, along with economies elsewhere, Calgary’s strengths in producing food, fuel and fertilizer will boost its growth.

“Calgary is in a unique economic and geographic position to take advantage of the direct and indirect jobs this increase in demand will create,” says Mr. Campbell, who adds that with strong in-migration and renewed affordability, the city provides a good buying window for long-term investors.

2. Kitchener-Waterloo-Cambridge, Ont.

REIN refers to Canada’s Technology Triangle as the “economic Alberta of Ontario.” That means KWC is not only seen as the economic engine of the new Ontario economy, but also that it “will outperform all other major regions in eastern Canada,” Mr. Campbell says. For indicators, he points to job growth, student growth and a new light rapid-transit system.

3. Edmonton

Edmonton sits near the top of the report’s list because of its future potential. Calling it a “perennial overachieving market,” REIN says the city is a “growing market, [with] an increasing population, and a forward-looking leadership.”

It will also be the main benefactor of energy development in Western Canada, says Mr. Campbell, resulting in a “very affordable, strong rental market with strong in-migration from across Canada.” Major infrastructure improvements, such as the ring road and LRT expansion, will be key.

4. Surrey, B.C.

British Columbia’s second-largest city is growing so fast it could become even bigger than Vancouver.

“Just a decade ago, it was known as the punch line to many a joke,” Mr. Campbell says. But with two border crossings to the United States, links to five major highways, deep sea docks and four railways, Surrey is a prime location to do business, he says.

Although there may be a strong rental market, it’s a city that requires a closer examination, taking “neighbourhoods and even the street’s characteristics into consideration when deciding where to purchase,” REIN warns.

5. Maple Ridge & Pitt Meadows, B.C.

The Translink and Gateway Project infrastructure improvements have made these B.C. towns the “most accessible regions in [Vancouver’s] Lower Mainland,” the report says. They’ve come a long way, Mr. Campbell says. The unofficial motto of Maple Ridge used to be “You can’t get there from here.” As a result of poor infrastructure in the past, property values have been historically low in this area. But with the improvements, it’s predicted an additional 400 business will move into the area, REIN says, improving the demand for both residential and commercial property.

6. Hamilton, Ont.

“The perception no longer matches the reality of Hamilton,” Mr. Campbell says. “The city’s leadership, as well as local business owners, have transformed what was once a rough-and-tumble steel town to a city with economic vitality, diversification and population growth.” REIN applauds Hamilton’s leadership as being innovative in revitalizing the city, adding Hamilton

“has beaten its overall building permit value for the second year in a row.”

7. St. Albert, Alta.

“Long thought of as a satellite of Edmonton, St. Albert is poised to be the biggest benefactor of the new Edmonton Ring Road,” says Mr. Campbell, who adds that as the transportation access improvement is completed, the city will begin to experience “a flood of not only new residents, but also the relocation of companies and jobs into town.” Other attributes of the city include consistently low vacancy rates, high rents and strong property value increases. It also helps that the city has “turned itself into a major retail centre for the northern region while adding to its industrial and commercial job base,” REIN says.

8. Barrie & Orillia, Ont.

These two cities have been shedding the perception of being just cottage country and have become a “hot bed for growth,” Mr. Campbell says. University and college expansion campuses have brought new life to the area, and the addition of Go Train access has made them viable commuter towns for the Greater Toronto Area, REIN says. For investors, this all adds up to healthy property appreciation, a respectable vacancy rate of 4.7% and the youngest residents on average in a given Census Metropolitan Area (CMA).

9. Red Deer, Alta.

In the centre of the Edmonton-Calgary corridor, Red Deer is not close to either. But REIN suggests reviewing city plans, as there will be a lot of hidden opportunities. “The whole central Alberta region has witnessed very strong population and job growth, as well as a real estate market that has continually outperformed most other regions of the country,” Mr. Campbell says. He adds that with a continually expanding industrial and commercial job base, Red Deer is in a good position to “take advantage of the inevitable growth in demand for food, fuel and fertilizer.”

10. Winnipeg

Winnipeg is often left off the real estate investment radar, but Mr. Campbell says it’s a good city for “consistent economic performance — not too high during booms and not too low during downturns.” But people should stick to buying top-quality properties. REIN also notes that housing prices, after dipping last year, are back to double-digit increases, which could “lead to an influx of inventory on the market.” But with one of the lowest vacancy rates in the country, at 1.2%, there is room for movement. Another positive factor for the city is international immigration is expected to increase under the provincial nominee program being undertaken by the government.

EAT, PRAY, DWELL, LOVE

'Flippers' replaced by condo dwellers
Shift to homes to live in instead of simple investment
By Marty Hope, Calgary Herald
June 19, 2010

Calgarians aren't doing it as much as they were a year ago.

Those thinking about buying a condo for investment purposes has declined from just a year ago, says a national survey.

But despite a decline to 40 per cent this year, down from 52 per cent in 2009, Calgarians continue to lead the country in terms of those considering the investment route, says a TD Canada Trust poll.

But the number of flippers in the marketplace -- people buying and reselling in a short period of time -- has dramatically declined, says Christina Hagerty of Re/Max Realty Professionals.

"I am seeing a shift toward people buying a home to live in as opposed to speculators," she says. "People are seeing a long-term value and aren't looking to flip, (which is) what got us in trouble in the first place."

Forty-two per cent of Calgarians polled say lower maintenance with condos versus other styles of homes is the biggest motivating factor for buying a condo.

Affordability is the second strongest driver -- but only at 18 per cent.

"Calgarians continue to see the value in purchasing a condo as an investment strategy," says Chris Wisniewski, associate vice-president of real estate and secured lending for TD Canada Trust.

"Affordability and stable monthly expenses can make condos very attractive for both first-time buyers and investors."

Of the 40 per cent looking at condos as a possible investment opportunity, 41 per cent of that total would consider using the condo as a long-term source of rental income compared to 35 per cent nationally.

While slightly more than one in four Canadians say they plan to eventually move into their rental unit, only 16 per cent of Calgarians have plans to do so.

Jessy Bilodeau, mobile mortgage specialist in Calgary for TD Canada Trust, says condo prices in Calgary are starting to increase, as has the number of available units for sale.

"The current increase in supply would suggest prices may not rise any further as buyers will have more options to choose from," she says.

Carlimi and Jose Velazquez decided the time was right for them to get out of rental and into homeownership.

For the couple, who are expecting their first child in October, affordability and location were key to their decision to buy their first home.

"We're going to be paying less a month for our townhouse than we've been paying in rent," says Carlimi, adding that they are currently living in the Sasso development in the Beltline region of Calgary.

The couple, who married four years ago, also took advantage of historically low rates.

"Rates were going to start to go up, so we decided it was time to buy," says Carlimi.

The couple moved up its original purchase date because of the expected rate changes.

What they bought was a 1,300-square-foot home in Mosaic Aspen Hills by Heartland Homes.

They expect to take possession of the three-bedroom, 2 1/2-bath townhouse in August.

"We like the layout of the townhouse and also the location, says Carlimi. "We're still close to downtown and to our jobs and we have good access, and this area isn't as expensive as some others around the city."

Both work in the oilpatch -- Carlimi for Saxon Energy and Jose for Husky Energy.

The survey of Calgarians by TD Canada Trust found that they appreciate the affordability of condos.

However, even if they had more money, many wouldn't change their plans to buy a condo -- 61 per cent of those consider purchasing or already own one.

"Additionally, one-third of Calgarians considering a condo purchase would raise their family in one," says the survey.

Hagerty, who specializes in condos, says the majority of condo owners also live in their units -- a total that increased this year compared to 2009,

"We see both men and women purchasing," she says. "I'm representing a lot of couples either married or into shared ownership because of the more stringent banking guidelines."

Hagerty also sees a more balanced condo market, adding that those for sale that are priced right are selling, but those who are "reaching" with their prices are sitting and will likely have to make price corrections.

Figures from the Calgary Real Estate Board show the average selling price of condos listed on the MLS system was $304,662, up from $275,212 a year ago.

For the first five months of this year, the average was sitting at $291,802, up nearly six per cent from 2009.

The TD Canada Trust survey reports that for the fourth year in a row, the majority of Calgarians (82 per cent this year) say they would spend less than $400,000 for a two-bedroom condo.

In terms of condo fees, only six per of respondents would pay more than $400 per month.

Photo: Active Listing (#307, 3600 15A Street SW) MLS# C3433222