Struggling to decide on your next investment property? Investors may want to look no further than which grocery stores are in the vicinity.
Canada’s two main grocery stores are No Frills and Loblaws; one is considered thrifty, while the other has been deemed premium. And their prices obviously reflect that. But how do they relate to housing prices?
A recent study by theredpin.com discovered some interesting findings. The company studied two years of Toronto housing data, including 9,000 condo sales, and discovered just how much a house is impacted by the type of grocery store within walking distance.
The study found that there are around 134% more condos within walking distance of a Loblaws than a No Frills.
Prices are also higher for homes around Loblaws.
The average price for a condo around Loblaws is $472,657 compared to $415,684 for those around No Frills stores. That’s a 12% difference.
The average price for a detached property around a No Frills is $955,953 – 37% cheaper than the average around a Loblaws ($1,526,006).
What does this mean for investors?
It seems better deals can be had on homes around No Frills; cheaper homes will mean lower mortgage and, perhaps, a higher cap rate and better yield.
Couple that with the fact that many renters would likely prefer the price-conscious offerings at No Frills as opposed to the premiums charged by its swankier counterpart.
However, investors looking for appreciation may be more enticed to purchase a unit near a Loblaws. The study found that homes within 10 minutes’ walking distance to a Loblaws increases 4.8% between 2014 and 2015. The value on homes within the vicinity of a No Frills remained “relatively stagnant.”
The findings should be taken with a grain of salt. It could be a “chicken or the egg” situation; both outlets are owned by the same company and market research based on local incomes could determine which grocery stores are best suited for certain areas.