Top Investor Edition: Why Long-Term Investors Don’t Fear the Correction

by Corben Grant on 23 Sep 2022

With rising interest rates being felt in real estate markets across the country, buyers and investors are beginning to feel unsure of their options when it comes to real estate. The result is that many markets are cooling, both in sales volumes and prices. Buyers are biding their time to buy homes at the lowest prices available, while sellers are attempting to sell fast to make the most of previously inflated values. Unfortunately, in investing, making fast decisions for short-term gains can often be a poor choice.

Despite the angst felt by many, there is a subset of investors who do not fear the dip: those who understand that investing, especially in real estate, is often best approached as a long-term pursuit, where temporary market ups and down mean little in the grand scheme of wealth building.

To learn more about why the fear in the housing market may be overhyped, we spoke to Mark Verzyl, an investor and top agent from Calgary and one of CREW’s top investment agents. Verzyl has had a long career in investing and has seen his share of ups and downs.

In fact, Verzyl saw much of the same concerns in his home city of Calgary during their own downturn around 2015. Now, and partly owing to that, he believes the city may pose one of the best options for risk-averse investors in the current market looking for a safe long-term investment.

In his day to day, Verzyl says he meets a lot of people who are concerned about the market, but this is nothing new.

“People are always worried about current conditions. When the market is hot, they're concerned it will stop. When the market is low, they're concerned that it's never coming back. That’s because some people only look at the future two or three months in advance, so they can't see the long-term vision of owning real estate. The reality is you can’t time these things.”

“I can think of so many times where people decided they weren’t gonna buy because the market was low, but then later they really wish they had. Other people think when things turn around that it’s the worst thing ever and it’s now too late. It’s the smart ones who keep steady and don't listen to all the rhetoric that come out ahead.”

According to Verzyl, overstressing about perfectly timing your entry into the market is unnecessary for two reasons. For one, you need to consider how owning real estate can benefit you in other ways than just pure price appreciation, such as through rental income. The second reason is that real estate is best conceived as a long-term investment, allowing you to overcome any temporary market dips. As the old saying goes, time is more important than timing. He recounts some of his own personal experiences, and how a long-term view led him to great returns.

“I bought a couple of townhomes at the height of the Calgary market in 2014. Then the market went down a little and if I chose to sell then I wouldn’t have made any money. I didn’t sell, and now eight years later I have tons of equity in those properties, into the six figures. So had I reacted at that time I would have completely missed out on the later gains, not to mention the amount of money that the mortgages were paid down on those townhomes over the past 8 years, all thanks to tenants.”

“Now, the higher interest rates only mean you have a little bit more money coming out of your pocket at the time, but then you also gain things like a higher tax write-off, saving money there. On the other hand, with fewer people purchasing and more people renting, we have this massive increase in rental rates which can benefit you as well.

In fact, despite the house price corrections being seen in many areas of the country, rental demand remains high, and rent values are increasing in many areas. After all, the need for housing is higher than ever, and it is only the current borrowing conditions that are suppressing activity. In reality, housing is dearly needed in this country, whether existing or newly developed. The investor who owns property stands to benefit from that shortage for a long time coming.

“Calgary is seeing a wave of both migration from within Canada and immigration. That wave is creating a problem where there aren't enough units, especially condos and townhomes, to satisfy the demand. Our rental rates have gone up around 30%, from January through June while our vacancy rates have absolutely tanked.

Finally, for those who are still wary of investing in a down market, Verzyl makes an argument for looking to other markets for investing. Investing beyond where you usually would allow you to not only find the best deals from a larger selection of properties but also helps to diversify your assets geographically, betting your protection against market fluctuations.

Even our current market dip being seen in many areas is not being felt equally across the nation. In areas like Toronto and Vancouver where prices shot sky high, massive corrections have been seen. Meanwhile, in Calgary where prices have seemingly been undervalued in recent history, the corrections seen have been minor in comparison, and the market is expected to remain much more stable.

“Vancouver and Toronto, even Ottawa and Montreal to an extent, got blown completely out of proportion in terms of prices. Calgary on the other hand was down before 2019 and only became balanced after. When things took off in 2020,  Calgary finally started to catch up to where it should have been and still has a long way to go. That's mainly why it's still such a good buy here.”

Looking again at the long term, those in the know are predicting great things for the future of Calgary beyond our current market correction, providing a long-term investor with a lot of confidence.

“We’re predicted to lead the country in economic growth in GDP of any provinces for the next three or four years. So do I think buyers should wait out the market? Not here. Absolutely not. You wait out the market here, and you're only going to be paying a higher price.”

Interested in investing in Calgary real estate? Get in touch with Mark Verzyl through his website for more information on why it may be right for you, as well as to see local listings and tips for buyers.

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