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Don Campbell - 2011 landscape

Don Campbell, shares some of his insights on the Canadian investment landscape in the latter half of 2011.

Video transcript below:

Don Campbell, President, Real Estate Investment Network

Don Campbell: Sure if you talk about the US, if you are really looking at the US market, I see that it is over 44 billion dollars of Canadian money over the last two years into that US market and it’s very interesting, the majority of that money has not been investigated. Nobody has done the diligence before they got over the border. Maybe they are really great articles, they get excited about the brothers, uncles, sister who’s bought down there and more importantly they see that it’s cheap and the worst thing you can do is buy an investment, especially a piece of real estate because it’s cheap.

What you need to look at is the underlying economic fundamentals and when you do the analysis all the way from 1970 till today you find that the US real estate market is not cheap. As a matter of fact, it is right back to on trend, which means that now you are finding that the price that you are paying today is the price that it’s actually supposed to be selling for. So sure it’s cheap next to the bubble prices, but at the end of the day if you know what you are looking for and you know how to analyse you will find that we are back to trend, we are not cheaper than it should be.

Okay, here’s the thing, we are entering Canada’s economic decade right where this hurricane is twirling around and so we are not immune to it. But what we need to know is that we’ve got food, fuel, fertiliser and forestry which we have talked about before on this site and now we have got that 5th F, which is called Fiscal foundation and Canada when you start to compare the economic fundamentals against most of the other countries in the world, you will see how stable we are from a foundational point of view. And that foundational point of view will allow us to weather the storm much better than others.

Now let’s take a look at the in migration and now the economic fundamentals of the provinces across the country and you are going to see that the west is going to outperform economically because there is more food, fuel, fertiliser and forestry out in that region and the Ontario market is seeing a lots of immigration and what the western states are seeing, western provinces are seeing is that more in migration from other provinces. The job growth is out west, which means it’s going to attract more population, which means there is going to be more rental demand and at the same time you are going to see more increase in values on real estate.

If you are going to be investing in Ontario you need to have a long time line because it is going to have to weather this economic storm that’s going around the world more than out west. Now that being said, Ontario was not a one contiguous market. You’ve got cities like Hamilton, you’ve got cities like Kitchener, Waterloo, Cambridge, you got those areas that are going to outperform GDP, population growth and income growth and there are other places in Ontario. So make sure when you are looking at Ontario, you are looking at it in little pieces. I suggest you look at the [barrier] really a growth corridor. I think you look at Kitchener and Cambridge as you too and of course Hamilton is a great spot for growth. Look at where Toyota is going to spend 500 and something million dollars revamping their plants, therefore creating stabilising the jobs. That’s where you want to look rather than winding up around the block thinking that you are going to get a great deal buying a condo.

But when the US market continues to go through its turmoil we are not immune. The nice thing is it’s not 1970. 1970 they sneezed we caught a cold, we would go into recession just alongside them as we found out in this last big deep recession that they went through, we kind of dipped into recession but came out of it, because we had a much more diverse market now and also that the demand for our commodities is also very strong around the world. That doesn’t mean that around the world is buying from us, it means that the place of our commodities where we are selling to our regular customers is higher, therefore more profitable, therefore more job creating.

So now that we have diversified a lot more in this country economically, we’ve got a strong foundation, we are absolutely, I don’t know if you saw this article recently where we become a great white tax haven. You know the great white north, here we are and we become considered a tax haven for the wealthy. We are also becoming the place for people to park their money in this time of turmoil. We have seen billions of dollars around the world coming here because it’s safe, secure and most importantly boring and that’s what you want in your investments, you want a boring investment. Chasing money is going to lead up to the end of a cliff. So that’s what the nice thing about Canada is. We are not immune but we are starting from a much stronger position than Spain or Portugal or UK or US or Japan or Vietnam, Australia even, [will all be] in a much better place.

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