2011 to remain a buyers' market

1. What developments do you foresee in the 2011 housing market?

2011 is going to be another year of uncertainty ... but the health of the housing market is all going to come down to the way people want to measure the numbers ... What's going to happen in the first half of the year, everybody is going to be making comparisons to the first half of 2010 when we had lots of speculative buying and we had lots of people buying before interest rates went up, or before the HST was introduced. So for the first half of 2011, people are going to think the sky is falling because they're going to be comparing it to the first half of 2010, when real estate activity was strong.

Then what's going to happen in the second half of 2011, if you compare it to the second half of 2010, things are going to look OK. Because it will be an opposite of what's happening in 2010.

It's going to remain a buyers' market no doubt about it. And people will look at the market and they'll spin the numbers to whatever they want them to say. For example, realtors associations will use the numbers in the first half of 2011 to their favour, while someone who wants to predict doom and gloom will use them to paint a dire picture.

The good news is that the perception that sales are bad will help somebody who's buying in the first part of 2011.

2. What would you do if you had to invest money in the Canadian property market in 2011?

My investments are still going into the province of Alberta and in particular into Edmonton ... The beautiful thing about Alberta is that is has one of the lowest unemployment rates across the country. Another thing is I like people who have high incomes and Alberta has the highest average income in the country. It also has the highest rate of population growth in the country. And a report just came out rating Alberta the freest place for capital to flow in Canada. When you have freedom to let capital flow it attracts even more people, even more jobs and even more infrastructure - which all lead to a sustainable housing market.

3. What do you think will be the biggest challenge facing investors in 2011?

The biggest challenge is going to be getting access to capital. When it comes to real investors, banks are still very, very tight with their lending practices. And even if you have a very good portfolio and even if you have done your homework, banks are still very reticent about lending right now.

The other thing that's going to be a challenge is those who don't pay much attention to the market or who are uneducated will be confused by the mixed messages. For a person who might just be part time or just doesn't care too much, they're not going to know what to do. And when people don't know what to do their default is to do nothing. But when things are uncertain, that's when you should maybe taking action.

The No. 1 thing investors need to do is make sure they buy cash-flowing properties because the stronger the cash flow from your real estate the more access you get to capital. Investors also need to make sure their personal house is in order, meaning their own personal finances.

So if someone is out there speculating and buying a few houses to flip and their financing them while generating no revenue until they sell the property, they're going to be hard pressed to get anymore financing. But if someone buys a property and has strong cash flow, meaning all the bills are paid and their generating an income for themselves, they'll have less challenges getting financing.

4. And the biggest opportunity?

The biggest opportunity is that there's going to be a lot of supply. If you're in the market to pick up a property you're going to have more supply than you would have in the last few years. And typically with more supply, you'll find more motivated buyers.

Another thing is you're going to find more renters. If an area is growing in population and they're not building any new houses and people aren't buying, you're going to have more renters. And when you've got more renters to you can increase you're rent.

And the final opportunity is that inflation is going to remain low, which will keep your costs low, unless you're in B.C. or Ontario and you're stuck with the HST.

5. What are your tips for investors in 2011?

Make sure you stick with your investment system. Only buy properties based upon the income they generate because you have to be able to sustain that asset with the income it generates. And just because next year you might find a motivated seller and you might be able to get a home for what you might think is a discount it still doesn't mean you have to buy it.

If you find a great deal make sure you analyze the property to ensure that you can hold it for the long-term. And you need to take a view in real estate that you are going to hold your properties for a minimum of five years.

6. Final thoughts?

Next year is going to be another year of uncertainty, but you don't have to wait for all the lights to turn green before you leave your garage. There are a lot of people who will wait until everything is perfect before they do anything.

Next year is going to be a good year to go out and buy some good cash-flowing real estate and not have to be panicked. But if investors do buy a piece of real estate they need to be active in it because there's no such thing as passive real estate investing. They need to treat investing like a business.

For the full article, pick up a copy of our Forecast issue, on newsstands now.

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