Uptimo Property Management summarizes 5 relevant articles on real estate published during the month to keep you informed of the news. So be sure to be on the lookout for current topics by reading our monthly column.
Housing crisis in Sherbrooke.
According to the 2018 report of the Canada Mortgage and Housing Corporation (CMHC), the vacancy rate in the Sherbrooke Census Metropolitan Area (CMA) fell from 5.3% in 2017 to 2.6% in 2018, while the break-even rate is 3%.
Fleurimont is the area with the lowest vacancy rate with only 1.1%, followed by Rock Forest/St-Élie/Deauville 1.2%, North 2%, Brompton 2.1%, Mont-Bellevue 2.4% and Lennoxville 2.5%.
According to CMHC, the factors explaining such a decrease in vacancy rates are: the increase in the student population, international migration and the aging of the population.
Normand Couture, president of the Sherbrooke Tenants Association, anticipates a difficult 2019 for tenants, and more particularly for tenants in a situation of financial precariousness.
Read here: Towards a housing crisis? | By Denis Dufresne | The Tribune
Tax increases
The increase in property tax revenues of 2.96% in Sherbrooke is related to the increase in the value of real estate and exceeds the estimated inflation rate of 2.21%. In addition to the haunt of property taxes, there will be an increase in tariffs for drinking water supply (+4.2%), for water purification (+3.8% and for septic tanks (+5.7%).
According to the article published in the Tribune, the average tax increase is estimated at 3.25%; average increase for a single-family residence to 2.34%; Average increase per dwelling for a 6-unit dwelling at 5.74% and average increase for a vacant plot served at 16.56%.
This tax increase combined with the low vacancy rate in Sherbrooke provides an advantageous position for landlords and worries many tenants.
Read here: Taxes: $60.53 more for an average home | By Jonathan Custeau | The Tribune
Real estate bubble and economic crisis to be expected?
First, let’s look at the main factors that led to the 2008-2009 financial crisis. The real estate bubble was mainly caused by the subprime crisis. This subprime crisis can be summed up by subprime mortgages that had been granted by many credit organizations. In fact, its subprime loans combined with rising policy rates and falling house prices caused many failures among credit institutions that could no longer repay themselves in the event of default.
According to a CPA Canada study by Francis Fong, CPA Canada’s chief economist, finds that while there are some similarities to the 2008-2009 U.S. housing bubble (rising housing prices and debt levels of Canadians), it is unlikely that such a crisis will affect Canada. The main elements that suggest that such a crisis is unlikely in Canada and that differ from the U.S. market at the time are:
- The excellent quality of credit in Canada (increase in credit files considered “very good” from 2013 to 2017 from 81.5% to 84%)
- Credit institutions are concentrated among a small number of financial institutions and mortgage securitization practices mitigate risk
- Existing regulators that can better respond in the Canadian marketplace
In short, according to the report, “the overall risk emanating from the housing market seems fairly well contained” although Canada is not immune to all threats.
Read here: A housing collapse would be unlikely. Despite some similarities with the bubble of 2008-2009| By the editorial staff of the site conseiller.ca
Real estate market forecasts in 2019.
Immigration: According to an article by Joanie Fontaine in the newspaper Les Affaires, the sharp increase in immigration had the effect of increasing demand for rental housing and decreasing vacancy rates in 2018. For 2019, we can expect the still significant arrival of immigrants despite the desire of the leader of the Coalition avenir Québec to reduce the volume of immigration to Quebec. Indeed, according to a study published in Le Soleil, it is impossible for François Legault to reduce the number of immigrants as of 2019 since the selection of immigrants admitted in 2019 is the result of previous decisions (2016 to 2018).
Interest rate: Since 2017, the key interest rate has been raised by 0.25 percentage point five times by the Bank of Canada. Further increases are expected in 2019. According to a recent Desjardins publication on detail rate forecasts, it seems that the Bank of Canada will raise the key rate possibly in the spring.
Conclusion: The first half of 2019 is therefore likely to be quite dynamic since all factors are favorable to the real estate market. However, for the second half of the year, several factors remain uncertain. The rate hike could slow the economy and this would have an impact on the real estate market.
Read here: What to watch in 2019 on the Quebec real estate market | By Joanie Fontaine | Business
Different ways to invest in real estate
According to an article published on “mieuxinvestir.ca”, investing in real estate rarely rhymes with freedom. Indeed, owning apartment buildings can be attractive as a source of income, but also requires a lot of responsibility (managing tenants / maintaining buildings / etc.) and it takes a lot of time.
Since as the expression “time is money” says, the article in question offers you other real estate investments to enjoy income without taking over the tasks and responsibilities resulting from management:
1- Exempt market: The exempt market is a financial market created in Canada, which allows the distribution of securities without a prospectus to certain investors. This market is made up of many solid real estate companies that pay a stable and predictable dividend every quarter (between 7 to 10%). You can invest in this type of investment through your RRSP or TFSA.
2- Private loan: The idea is simple, you can invest your money by making a loan and obtaining a mortgage guarantee on a building in return. You can earn interest between 7% and 11%.
3- REITs: Investing in publicly traded real estate companies is the easiest way to invest in real estate. Again, its companies pay generous dividends between 3% and 9%.
4- 50/50 partnership: A financial partner brings 100% of the capital and on the other side a real estate investor brings projects on the table. The real estate investor takes care of everything. In the end, the financial partner and the investor separate the profits 50/50.
Read here: The magic of passive income in real estate! | By Dominic Goulet-Lapointe | mieuxinvestir.ca
