`A really good buy and hold opportunity' for investors
Real estate report points to Edmonton possibly nearing end of its slump phase
Investing in real estate in the capital city does not look like such a capital idea, according to a recent report.
But that doesn't mean some investors aren't seeing an opportunity to scoop up properties at lower prices and hold on for better days, says Jennifer Hunt, vice-president of research at the Real Estate Investment Network (REIN).
“We're coming into a really good buy and hold opportunity.”
Hunt is the author of REIN'S recent COVID-19 Special Edition: Real Estate Cycle Update that shows where major Canadian cities' real estate markets are in the investment cycle.
All are in the slump phase of the cycle, but Edmonton is further along in this phase, meaning it may be the ideal time for investors seeking to buy a property, hold it and see its value appreciate over the next few years.
Indeed prices are lower than they were during the peak of the market in 2014, she says. The challenge, however, is renting out these properties may prove difficult. That's due to a rise in competition in the rental marketplace. Hunt says Edmonton has seen a lot of multi-family purpose-built rentals come on line in the last few years. Still, demand remains strong, especially for larger properties — such as townhouses and single-family dwellings.
“The pandemic has made different assets more attractive than they were before rental-wise,” Hunt says. “We're seeing immigration on hold, but we are seeing a demand for space because of COVID.”
Realtor Tom Shearer says the investment market in Edmonton is more neutral than being mired in a slump.
“There isn't the perception, however, that there is an opportunity to make a quick buck by buying and holding for a short period of time,” says the broker/owner of Royal Lepage Noralta Real Estate.
“That being said, prices are hinting at moving up and vacancy is reasonable.”
Realtors Association of Edmonton data reveals the median price of a home year to date was up 2.8 per cent in November. And the most recent available data from Canada Mortgage and Housing Corp. shows the vacancy rate fell to 4.9 per cent from 5.1 per cent during the past year. Furthermore, larger units — i.e. three bedrooms — had the lowest vacancy rate at 3.9 per cent.
Hunt notes the REIN report points to Edmonton possibly nearing the end of its slump phase, heading into a recovery — something that was occurring at the end of last year prior to the arrival of COVID-19.
As such, buy and hold investors are likely to be successful in their strategy as the economy recovers along with home prices and rising demand for rent. Still, investors also must be aware of growing supply from purpose-built rentals, particularly apartments, which make renting properties more challenging.
Consequently investors are best advised to have capital to cover the cost of their properties for several months. The reason being that while REIN is certain about current conditions, it's less so about the near future, Hunt says.
“We can never predict the duration of each phase because at any moment the outlook can change like, for example, by a pandemic.”