More Investors Eyeing Ottawa Real Estate: Survey

Excerpt from the Ottawa Business Journal- November 8th, 2010

Ottawa is now one of the top five Canadian cities on the radar of domestic commercial real estate investors, according to a new survey.

Nine per cent of respondents named Ottawa their preferred investment destination, placing Canada’s capital fourth, according to the Colliers International Canadian Investor Sentiment Survey.

The Greater Toronto Area remained on top, with 26 per cent of respondents opting to invest in that market, followed by Vancouver (18 per cent) and Calgary (14 per cent). Montreal was fifth with seven per cent.
Six months ago, Ottawa failed to crack the top-five list.

Local investment observers frequently comment that the city lacks quality assets available for sale. However, the survey also ranked Ottawa highly among markets where investors were looking to sell their properties.
Six per cent of respondents named Ottawa, the same number that named Calgary, Kingston and Burlington.
Toronto came in first at 53 per cent, followed by Vancouver and Montreal with 12 per cent each.

Overall, the survey found Canadian institutional and private investors expressing cautious optimism and believing the market has reached rock bottom and is on the verge of an upswing.

Sixty-one per cent of respondents planned to expand their portfolios, while a further 22 per cent planned to rebalance it.

Almost nine in 10 intended to invest at home in Canada. “The relatively sound Canadian economy and its ability to weather the recent recession better than other countries, have increased investors’ confidence and appetite for risk,” said Milton D. Lamb, chair of Colliers’ Canadian national investment services, in a statement.

The survey included responses from more than 200 major institutional and private investors whose combined investment portfolio exceeds US$710 billion.

A Good Time to Invest in Real Estate in Ottawa

If you follow the news these days you might be lead to believe that Ottawa and Canada were on the verge of a US style housing bubble crash and that home prices were doomed to crash. While it may be true in some metropolitan regions across Canada, experience downward pressure on house prices, Canada and Ottawa in particular are in an entirely different dimension that the US.

In the US at it is estimated that as many as 20% of all home owners, (some 25 Million home owners) may be at risk of mortgage default or have mortgages that are worth more than the current market value of their homes. In Canada the number of home owner's at risk of default is estimated at between 0.25% and 0.3% or fewer than 30,000 homeowners across the country, and more than 95% of those are CMHC insured.

At the same time, while the US economy continues to languish and joblessness is at its highest levels since the 1930's, Canada's economy, and in particular, Ottawa's economy has weathered the recession quite well and employment is rising.

Ottawa in particular has been largely insulated from the current and past economic downturns primarily because of the Provincial and Federal Government, which directly or indirectly accounts for more than 70% of employment in the region.

So is now a good time to invest in real estate in Ottawa? Consider the following:

• According to Stats Canada, based on the 2006 Canadian Census, the  average size of a household in 2006 was 2.6 people and declining.
• The City of Ottawa's 2009 Residential Land Strategy for Ottawa 2006-2031 paper, projects a requirement for 147,532 new dwellings, approximately 6000 new units every year, between mid-2006 and mid-2031 to accommodate and expected population growth of some 350,000 people during that period. They also projected that:
• between mid-2006 and mid-2031, 91% of all new dwellings (134,254) will be built in the urban area and 9% (13,278) in the rural area.
• new rural dwellings at 94% single detached, 1% semi-detached, 4% townhouses and 1% apartments.
• new urban dwellings at 35% single detached, 5% semi-detached, 29% townhouses and 31% apartments.

• Ottawa projected population growth of some 15,000 people per year will requires approx. 6000 new residential units per year just to keep up. 
• To achieve a distribution of 31% of new construction as condominium apartments, Ottawa builders will have to construct approx. 45,000 new Condo apartments over the next 20 years. 
• Mortgage rates are at 50 year low's with local lender's currently offering 2.5% variable 5 year, 3.44% fixed 5 year and 5.19% fixed 10 year rates.
• Ottawa has one of the most highly educated work forces of any City in Canada 
• Ottawa also has one of the highest per capita incomes of any City in Canada
• Ottawa also has one of the highest per capita proportion of Baby Boomer's in Canada, whom as they leave the workforce in the coming years will require the migration of tens of thousands of new workers to the City to replace them.
• Baby Boomer's and Generation 'Y' households are the largest purchasing cohorts of new Condos.
• Home ownership rates in Ottawa are currently above 70%, but almost 30% of the households must still seek rental accommodations (which translates into approx. 2000 new rental units needed yearly for the foreseeable future)
• As mortgage rates rise over time, housing affordability for first time home buyers will decrease, increasing the proportion of the growing population which need rental accommodations.
• Properties in Ontario any property built after June 17th 1998 or "any building, or mobile home park, or land lease community, where that space was never previously occupied for residential purposes before November 1, 1991, are not covered at all by rent controls."

If you'd like to know how to buy 3 homes for the price of 1, drop me a line.

Ottawa’s Year-to-Date New Housing Remains Strong on Positive Employment and Earnings Trends

Excerpts from the Ottawa Citizen Nov 9'2011

New construction slowed in Ottawa in October with housing starts down 44% from 2009, most notably in single family homes and new condo aprtments, however year to date new construction is running almost 15% ahead of 2009 per CMHC.  

“ Employment growth for the first-time home buyer segment keeps fuelling the housing market, particularly for the more affordable housing type such as townhomes,’’ said Sandra Pérez-Torres, CMHC’s senior market analyst for Ottawa.

“ The combination of stable employment conditions and average weekly income levels that reached their highest point this year are factors that will help support the ( Ottawa-area) economy and hence housing demand.’’

In September, work began on 463 units, compared with 475 in the same month the previous year, a drop of only 2.5 per cent.

The only Ottawa area to have more starts this October compared with 2009 was Cumberland, with the majority of its construction geared towards townhomes.

Multiple-family dwellings dominate the landscape in Kanata, Nepean and the old city of Ottawa. Townhomes make up more than two thirds of construction in Kanata and Nepean and condominium development continues to define new home construction in the old city of Ottawa.

Understanding the Landlord's Role

Courtesy Greg Blok - Bennett real Estate Professionals

The Residential Tenancies Act (RTA), 2006 is what governs Landlord/Tenant relations.  http://www.ltb.gov.on.ca/

- 80% of rental units owned by Landlords in Ontario are by "small investors" with less than 6 units
- 32% of people in Ontario are renters (1.35 million renters)
- 2% of the tenants in Ontario are considered "professional tenants" who seek to profit off unsuspecting landlords (27,000 tenants)

Tenants are provided free representation under the RTA, Landlords are expected to have "higher level of understanding".

You cannot have more than one month's rent in your possession.  If you rent to a tenant, you get their last month's rent, ask for a certified cheque on the day you provide the keys.

NOT COVERED under RTA - Living units in which the roomer/boarder does share kitchen/bathroom facilities with the owner/landlord (includes the landlord's spouse, child or parent)

A rental complex or building of which no part was rented for residential purposes before November 1, 1991 is not subject to rental controls under section 6 of the RTA.

Landlords must provide to each tenant with an information pamphlet on the responsibilities of Landlords and Tenants.  It is advisable to get the tenant to sign an acknowledgement of receipt of this document. 

There are NO rental increases allowed to be carried forward.  For 2011, the rental increase is 0.7%, if you do not increase the rent by this factor, it is lost, there is no carry forward.

Landlords cannot demand 12 postdated cheques.

When giving notice, if you send through mail, the accepted timing is it will take 5 days for notice to arrive, 3 days if done by courier.

Landlords can increase the rental deposit each year by the allowable rental increase.

Each year, landlords must pay the tenant the interest on their last month's deposit.  Interest is calculated by using the number for the Consumer Price Index.  If you do not pay annually, it is compounded interest, not simple.

Landlords must provide their full legal name and address to the tenant within 21 days of their taking occupancy.  If you do not want the tenant to have your home address, you can provide your lawyer's office as an address. 

All paperwork signed by tenant must be provided to them, including the rental application form.

TENANTS must
1 - not harrass the landlord
2 - pay the rent
3 - pay for any repairs for any damage they have done
4 - cannot change locks without giving landlord a key

On a rental application, make sure you verify all details, do not use their information, get the information direct from the source. 

Previous landlords, not current landlords are the best source of information.  In an independant survey, 80% of landlords in the Middlesex county, said they would give an dishonest reference for a current bad tenant.  Get minimum 3 years and preferrably 5 year tenancy history.

Check their drivers license to verify their information.  People can use aliases and give nicknames, not proper legal names.

On student rentals, get parental guarantees.

Under RTA, landlords can give upto 3 month's rental discount per year, without dropping the rent.  That allows the annual increase on the actual rent, not a lower rent.

You cannot charge late fees, but you can give 2% prompt payment discount.

If tenants are not paying rent, you can refer them to the "rent bank" (Minstry of Community and Social Services).  They can also help tenants with utility loans, rather than the landlord taking over the service.

Properties have to be kept at 21.1 degrees

For common information and forms - http://www.ltb.gov.on.ca/en/Key_Information/STEL02_111283.html

Aging Canadians Will Help Drive Growth in Condo Market

Excerpt from CMHC - Canadian Housing Observer 2010

The vanguard of the large baby boom generation—the generation born in Canada during the two decades (1946-65) after World War II—is on the verge of becoming senior citizens.  The aging of Canada’s population will spur continued growth of condominiums, which more than tripled their share of the home ownership market over the past quarter century.

For young people, condominiums offer low maintenance burdens and the possibility of living near work and central attractions. These attributes, especially ease of upkeep, also appeal to empty-nesters and seniors.

Young adults and those aged 50 or older both favour apartment condominiums over other types. For seniors, this preference grows stronger as they age. Apartments are perhaps the easiest type of housing for occupants to maintain, and have the added attraction for older Canadians (at least in buildings equipped with elevators) of minimizing contact with stairs. For aging seniors, problems with vision, frailty, and balance can make climbing stairs a difficult and even dangerous activity.

Canadians of all ages are considerably more likely to choose to own and live in condominiums today than
just a decade ago.

From young to old, all birth cohorts had significantly higher rates of condominium ownership in 2006 than the same age groups five and ten years previously. The rise in age-specific condominium ownership rates, not the aging of baby boomers, accounts for the bulk of recent condominium growth in Canada.

If condominium ownership rates at each age had remained fixed between 1996 and 2006, the growth in condominiums would have been only about a quarter of the growth that actually took place.

Condos to Provide Good Investment in 2011, Report Says

Excerpt from Money - November 2, 2010 /10:36

Condominiums and greenbelt space will provide among the best investment opportunities in Canadian real estate next year, with the overall outlook remaining positive as long as U.S. woes don’t spill over the border, a report found. 

It may also be the time to consider selling low-yielding assets in favour of buying properties in the U.S. as the market there recovers, the report by PricewaterhouseCoopers and the Urban Land Institute found.

Apartments, if any are available, offer the best security, it said. Investors should also look for underperforming retail or commercial space to redevelop as condos as Canadian cities grow vertically, it said.

A separate report by RE/MAX released on Monday found that condos are the number one choice for first time home buyers as the price of a detached home is unaffordable.

Condos represent one in every three homes sold in the Greater Toronto area, it found.

The Canadian market for real estate investment has held up better than the U.S. because of strong bank balance sheets and a sound economy. That said, while many investors say it’s a good time to buy, few are willing to sell at these levels.

The report was based on interviews with 875 of real estate experts, including investors, developers, lenders, brokers and consultants in both Canada and the U.S.

Ottawa Population Expected to Increase by over 350,000 by 2036

Excerpt from Ontario Population Report Study Spring 2010

The population of Eastern Ontario is projected to grow 28.7 per cent over the projection period, from 1.71 million to 2.20 million.

Ottawa is projected to grow fastest (43.4 per cent) from 882,000 in 2009 to 1.27 million in 2036. The rest of Eastern Ontario will also grow, but below the provincial average, with Frontenac and Prescott & Russell growing fastest at 26.7 and 23.6 per cent respectively.

The census division of Stormont, Dundas and Glengarry is projected to experience population decline over 2009–2036, with population falling 4,300 or 3.7 per cent as both natural increase and net migration trends are negative.