Dec. 2, 2009 - With a vacancy rate of just 0.1 per cent, migrants must plan ahead before venturing off to Brandon, Manitoba. "You can't just show up, look in the newspaper and expect to find a place," says Jeff Powell, senior market analyst with the Canadian Mortgage and Housing Corporation.
Indeed, Brandon has been enjoying population gains it hasn't seen in years based on its expanding economy, which has supported rentals and housing sales. New units are consumed as quickly as they are developed, and the vacancy rate has consistently declined despite feverish efforts to build more multi-family apartments. The tight market conditions have even led to the city providing a rental directory, www.brandon.ca/rental, which is free for landlords to use.
Traditionally dependent on agricultural, Brandon's economy has become remarkably diverse for a city of only 50,000. This has allowed it to whether the economic downturn. While many cities have seen housing prices slide, the average home price in Manitoba's second largest city has increased $10,000 since June 2008 to around $160,000 in June 2009. Brandon's economic strength was drawing people back to the city from Alberta even become the crash in oil prices.
Its economic fortunes have been largely aided by a number of corporate expansions and construction projects. Chief among those has been the addition of a second shift to the Maple Leaf Foods pork processing plant. As of April, the company had hired 1,500 foreign workers from four different language groups-mainly Spanish-speaking migrants from Mexico and El Salvador. Family reunification had brought an additional 1,000 people to Brandon as of the end of 2008.
The company expects to add an additional 200 foreign workers to its second shift this year, with another round of family reunification in 2010. In all, the addition of the second shift is expected to add 5,500 people to the city's population once all secondary development has occurred.
The arrival of family members of foreign workers has ramped up demand for three-bedroom homes and starter homes, leading to an undersupply in both the rental and home sale market. A two-bedroom starter home in the growing North Hill area was listed for $170,000 in the summer. Such a property can get $1,200 per month in rent. Thus, with a 25 per cent down-payment and 4.5 per cent you're looking at a positive cash flow of about $160.
North Hill is the site of another initiative that has sparked development in Brandon. In 2008, the first phase of a multi-stage relocation of Assiniboine Community College to the Brandon Mental Health Centre in North Hill began. The School of Trades was the first to move, and within five years the entire 2,500-plus student population will make their new home in the neighbourhood. The move will undoubtedly impact the neighbourhood's rental market, which consists largely of duplexes along Knowlton Driving (facing the Sportsplex).
Even before the college established its presence, North Hill was an emerging community. Five years ago, a 440,000 square foot Power Centre (Corral Centre) was established on 18th Street and Kirkcaldy Drive. The centre, built on the base of the hill, contains a Walmart, Home Depot and other attractions. New housing developments have also accompanied North Hill's commercial development. A 36-suite condo project is under construction, and just to the north is a new townhouse development on Braecrest Drive.
The neighbourhood just east of the Brandon Regional Health Centre is another transitioning area. Increasingly, young families are purchasing their first home in the area, which means a very different market in coming years. Six multi-family units went up in the area just two years ago.
Investors should keep in mind that Brandon, like all of Manitoba, abides by The Residential Tenancies Branch, which limits rent increases according to the rate of inflation, plus an economic factor. Thus, rent increases typically average about two - 2.5 per cent per year. However, units built after 2002 are exempt from these limits for 20 years, as are some units that have been renovated. As a result, rents are 30 per cent higher for newer units, but their vacancy rate is also a few percentage points higher. "Rents aren't like they are in larger cities, but neither is the cost of building," says Ray Brownlee, president of the Brandon Real Estate Board. "So we're looking at a five to seven per cent return on a multi-family block from rental income."
From the October 2009 issue of CRE