Sustainable housing and real estate in Kitchener-Waterloo Region


Build wealth with investment property
January 14, 2010, 1:13 pm
Filed under: Judita Makos | Tags: , , , , , ,

Why  buy an investment real estate in Waterloo Region?
The communities of Kitchener, Waterloo, and Cambridge, known collectively as Canada’s Technology Triangle, are becoming known as a competitive area to build high-tech businesses. The area is so strong economically that the Real Estate Investment Network™ in its past research has dubbed it the “Economic Alberta of Ontario”. This continues to prove true as the region was once again selected as the number-one investment town in Ontario. Within a 24 hours drive, the Technology Triangle has access to more than 60% of Canada’s population and 40% of the U.S. population. The reinvention of the region’s economy in the last few years has led to investment in the information technology sector, a venture which has protected the Triangle from the steep increase in job losses experienced in many other Ontario communities. A commitment to infrastructure improvements and transportation projects will also help drive the economy and the real estate market in this area.

 Research indicates that there are more buying opportunities now than in the last few years, meaning more investment options and better yields” said Don R. Campbell, REIN™ President and author of the best-selling books Real Estate Investing in Canada and 97 Tips For Real Estate Investing.

“With today’s mixed market signals it is critical that investors and home-buyers complete that extra level of due diligence. An economic fundamental, not speculation, plays the key role in whether a property increases or drops in value. The years of skyrocketing prices are finally over; however, over the long-term the economic fundamentals of these key regions will help their property values dramatically outperform other regions of the province.”

The Top Ontario Investment Towns report list:
1) Kitchener, Waterloo, Cambridge
2) Hamilton
3) Simcoe Shores:Barrie- Orillia
4) Brampton
5) Durham Region – Whitby, Pickering, and Ajax
6) Ottawa
7) Brantford
8) Toronto
9) Vaughan
10) Whitchurch-Stouffville

Why isn’t everyone buying real estate? Most people don’t understand how to buy, how to evaluate and how to manage their investment. First basic rule is not to buy a property unless it can produce cash flow. When you calculate the rent and subtract expenses there shouldn’t be anything else to pay. If you have to add money every month to pay for this investment then stay away!

The second rule for buying an investment property is to be wary of listings showing a great rate of return on projected values. If you are looking at an investment property ask for the income and expenses for the past 24 month. Also, allow for reasonable vacancy rate and don’t forget maintenance per unit.

Next step is to calculate capitalization rate, also known as the cap rate.  It is not generally a great idea to have cap rate under 6-7.5% unless the property has some real upside. For example, it has additional land, it has been extensively renovated, or there is some potential for additional income.

Another factor to consider is the mortgage rate interest. For example, you buy an investment property at 6.5% cap rate, pay 25% down payment and pay 5% interest on remaining mortgage. On the money invested, you will earn 6.5%, but on the money borrowed you will earn the difference between cap rate and the interest rate. This creates increased return on investment (ROI).

Like all investments, buying and owning investment property poses a form of risk. Real estate investment is dependent on your management skills. People may end up selling, what would be the best investment for them in long run, only because they don’t have knowledge, patience and understanding of managing real estate.



May was definitely blooming! K-W monthly update.

May was a strong month for real estate in Kitchener-Waterloo region, as the number of residential sales saw a nearly 10% increase over May 2008.

Home ownership incentives introduced in the new budget such as the changes to the RRSP savings program, the First-Time Home Buyer’s Tax Credit, the temporary Home Renovation Tax Credit, and the ecoENERGY Retrofit program, seem to be encouraging more home ownership.

The average residential sale price for properties sold in May has seen a 24% increase in value over the past five years, now resting at $295,968 for single detached homes, $207,682 for semi-detached, $229,724 for freehold townhomes, and $166,814 for condo units. It appears overall values are remaining relatively steady. Single family detached homes are moving the fastest with 358 unit sales in May, up 15.1% from this time last year. There were 28 semi-detached homes, 41 freehold townhouse , and 98 condo units sold in May.

Homes in the $225,000 to $249,999 price range sold in the highest volume, with nearly 18% of all sales in this range. 71% of all sales occurred in homes priced between $200,000 to $400,000. 8% of sales were priced higher than $400,000.

Kitchener west of King Street had the most sales for the Kitchener-Waterloo region with 216 units sold in May in this area. West Waterloo had the next highest sales volume with 122 sales in May, followed by Kitchener East with 104 unit sales, and Waterloo East with 85 unit sales. Hespeler had the most sales for Cambridge with 18 units sold, followed by Preston and North Galt with 4 unit sales each, and Galt East and West with 3 unit sales each.

There are plenty of stock available for those looking to buy with 677 new residential property listings processed in May and nearly 1,500 active residential listings to choose from.

Historically low interest rates won’t last much longer.Now’s the time to buy!



Spring has come.

Winter is coming to a close and it is finally beginning to look like spring outside. Spring always brings with it one thing in real estate– open houses and increasing sales. You can properly tour a home and view it in its prime, as plant life begins to sprout again around it. It adds a certain beauty and appeal to the search process and allows visitors to truly see the property without the hindrances of deep snow. Many begin their home search in the spring time, with the expectation of closing and moving over the summer months while their children are on summer vacation.

If you are thinking a listing a property in the near future, take a couple things into consideration. The current average number of days on market has slightly lengthened and property value has slightly decreased. This means your home will take slightly longer than normal to sell and may sell for a slightly lower price than expected (closer to 2007 prices). 

Prudent Realtors will bring you a Comparative Market Analysis on your home to help guide you to price your property at a reasonable value. The Comparative Market Analysis takes recent sales data of similar homes in the area and compares them with the listing property to help determine a fair market value and develop a price that will make the property sell the quickest and for the most value. It will take some recently sold properties, some recently expired properties and some currently active properties that have similar characteristics or features and base the price upon these. Sold properties usually indicate pricing that was somewhat reasonable. Expired properties usually indicate inflated pricing or major problems with the property, although sometimes it is an unwillingness of a seller to budge on pricing or conditions or poor marketing done by the Realtor.

Unfortunately, difficult financial times are often associated with less than reputable business practices. In real estate this can translate to what we call “buying a listing”. Essentially the Realtor presents the seller with an overly optimistic sales price for the home, doubtful that it will actually sell for this price in the hopes that he or she can “buy” the listing by suggesting the seller will receive a higher sale price. They expect to talk the seller down every couple of weeks to lower and lower pricing.

Why would they do this? Sometimes homeowners have inflated perceptions of their home value, but mostly, it is done by unscruptulous Realtors who are desperate for listings.  The best way to protect yourself? Find a Realtor you can trust, and review all the materials they bring to you. If they suggest a certain price, ask them for proof to back this up.

Interview at least 3 Realtors and get their Comparative Market Analysis. Look at the criteria they are using to determine the value of your home. Are all three using the same comparable material, and where do they differ? Are they using current data (from the last 2 months)? Are they using reasonable comparable properties to your home? Are they taking into consideration the solds, expireds and active listings? If you are unsure, ask.

One high pricing may seem like a dream come true, but after weeks on the market, you may be singing a different tune. Protect yourself up front and ensure you are pricing the property properly. Listing too high will scare away potential buyers or limit them from even searching or viewing your property. Staleness will creep in, and as your price drops, fewer and fewer viewers will be attracted. Get the price right the first time and save yourself the hassle.



What’s going on in the Kitchener-Waterloo region housing market?

Kitchener-Waterloo has been feeling the effects of the economy. There have been layoffs, or talks of layoffs in several industries, and many people are feeling very anxious. This anxiety has impacted the real estate, housing and building industries; slowing housing starts (the construction of new buildings) to slightly lower levels and decreasing housing unit sales. Buyers are finding a wide range of units to choose from and increased bargaining ability as the market remains in their favor. Sellers are finding their home is sitting slightly longer than usual on the market before being sold. Overall, conditions are still relatively comfortable, though perhaps not entirely optimistic for the next couple of years.

 

There were 269 units sold in Kitchener-Waterloo region in February. The number of single family-detached homes sold in February was 27.5% lower than February of last year. The number of all residential units sold in February was down 27.2% from February of last year. Even with this lower number of sales from last year, the total number of sales was up nearly 26.7% from January 2009 and up 28% from December 2008; with the warming weather likely to only bring increasing sales. There were 53% fewer multi-family units sold in February from last year, up from January 33% and up 60% from December. Farmland and vacant land sales increased across the board.

 

Year to date sales are down for all units by 28.6% from 779 units sold by the end of February in 2008 to only 556 units sold so far in 2009. 91% of unit sales were in resale homes, with 9% in new home sales. The majority of these sales happened in single family detached residential units.

 

30% of these residential sales were priced under $200,000, and 78% of all the residential sales were priced under $300,000. There have been no sales over $750,000 so far this year.  The average sale price for residential properties was $244,419, down slightly from last year’s average of $254,564.

 

West Kitchener had the highest volume of sales last month with 130 sales, followed by West Waterloo with 73 sales. Waterloo East had the lowest number of sales with only 41 sales. In Cambridge, properties are moving the most in Hespeler, and least in North Galt.

 

Now is a great time for buyers. Interest rates are relatively low and as homes stay longer on the market, more bargaining becomes possible. Property values are still likely to increase over the long term (ie. More than 5 years).

 

If you are a (first time) home buyer, now’s the time to talk to a mortgage broker or banker to see if you can qualify for a mortgage and to take advantage of favorable interest rates.



How sustainable is the K-W region?

How sustainable is the Kitchener-Waterloo region? Well, according to the 2007 Corporate Knights report on sustainable cities, Kitchener ranked the 4th overall most sustainable city in Canada and 1st on the water and waste index with the relatively low water consumption of 390 litres/person/day in 2007. While we topped the 2007 list, we dropped out of ranking in 2008 and 2009. So what happened? This report focuses on more than just ecological issues, and also looks to economic security, governance and empowerment, infrastructure and social well-being.

So where are we failing? Kitchener-Waterloo region is reported to have air pollution levels as high as or higher than large cities like Hamilton and Toronto who have much greater populations. Kitchener currently has the worst air quality scores for ground-level ozone. This is fueled partly by the lack of anti-idling by-laws, polluting corporations and individuals and heavily by the coal plants in the Ohio Valley which contribute over half of the pollutant load in the K-W region according to reports. We are being heavily affected by coal plants hundreds of miles away in the US. This is just one of many reasons why developing more alternative energy is so important and why we all have to work together. We are affected by, and affect more than just our immediate neighbours. Carbon dioxide from retail fuel in the region has jumped 0.2 tonnes per capita in the past year alone, only adding to the air pollution concerns.

We are taking steps to improve public transit with over 13% of the Kitchener fleet now using alternative fuels. With housing starts primarily happening in transit-unfriendly single family or duplex units (just less than 2/3 of the housing stock), and few incentives to use the transit lines, this switch is having only minimal affect. We received a D overall in the Green Apple SMART Transportation Ranking in the past two years.

The region is taking some steps. Residential building starts were 17% more dense in 2008 than in 2007. The Region of Waterloo has also started a growth management strategy to help ensure that density is encouraged, but these steps alone are not enough. We must make a more concerted effort to be sustainable.

The Kitchener-Waterloo region is not new to sustainable technology. We are home to Arise Tech, a major solar technology company (http://www.arisetech.com/) and one of the best urban planning schools in the country (University of Waterloo). We also have energy auditing service grants available for low-income homes (http://www.reepwaterlooregion.ca/documents/assistance_brochure_waterloo.pdf), and several sustainable building housing projects to use as examples such as the KW YMCA (http://www.kwymca.org/Contribute/camping/OurFacilitiesandBuildings.asp), the little city farm (http://www.littlecityfarm.ca/sustain-5.php), the REEP homes (http://www.reepwaterlooregion.ca/prog_house.php), and several other initiatives.

Are we in position to be more efficient overall here in the K-W? Absolutely. So let’s take advantage of what’s available and make an effort to be more sustainable.

Remember though, of overarching importance to sustainability in the region (and the earth)  is the human lifestyle factor. Wasteful human lifestyle (being water usage, energy usage, waste, etc.) is something you can change. Make an effort to just use less. Conserve water and energy. Make baby steps  to be more sustainable. One thing at a time.



Renewable energy in housing

Most of our energy comes from non-renewable resources such as coal, oil, natural gas or radioactive elements. Once removed from the ground and used, these energy sources can take up to millions of years to reform. At the rate we are going, most of the resource deposits in the earth will be completely used up in less than 200 years (and maybe faster).

Renewable energy replaces itself quickly and can come from the natural flow of sunlight, wind or water. We need to spend more time and energy developing ways to harness these natural energies and to do so using sustainable resources. There are actually relatively cheap and easy ways to build yourself energy collecting devices You can check out www.re-energy.ca for some ideas to get you started. They can also be installed or retrofitted into your home so that you can create as much energy as you use and be more sustainable. This can result in great energy and money savings!

Did you know that Natural Resources Canada, the Canadian Mortgage and Housing Corporation and National Research Council Canada have been working together to export innovations in energy efficient housing (http://www.super-e.com/)?

We do have the research abilities here in Canada. In fact, we even have a Canadian Centre for Housing Technology to help test it out for us (http://www.ccht-cctr.gc.ca/). Many of these energy-efficient houses look just like any other suburban or city area from the outside. They have been working on these projects for over a decade, why are they not yet reaching the market?

Consumer choice and lifestyle will have a huge impact on the housing market and it’s progression. Look into other energy options. You might find out that an intitial investment will actually save you in the long run. You might even be able to help fund it through governments grants and incentives.

If you want more details, please ask me.



Should I buy a home right now?
February 17, 2009, 11:05 pm
Filed under: Buying, Market Conditions, Rebecca Sargent | Tags: , , , ,

Does the news scare you? Are you looking for solid answer on whether you should buy a home in K-W right now?

Unfortunately, there is no solid answer. No one can predict the future. That being said, we can take into account the entire situation and try to reason what the best options are. Most tend to agree we are in currently in a buyer’s market, where there are more buyers than sellers. This means that buyers have more selection and more room to negotiate. When there is more competition to buy, the prices tend to increase. Waiting until the market swings into a seller’s market to buy will mean that the prices will probably increase, resulting in you having to pay more overall for your purchase than you would pay today.

The economy is currently in chaos, but as it begins to repair itself, inflation rates will most likely go higher. This will make the interest rates increase, making it more expensive to carry a mortgage. In fact, the average 5 year interest rate offered by mortgage brokers has come down from 5.80% to 4.49%, making the actual cost of carrying a mortgage decrease considerably from past years.

Yes, certain areas did experience a noticable decrease in average sale price in Ontario in the last little while. Does this mean that prices have actually dropped? No. The decrease may very well be because higher priced homes are not selling, while lower priced ones are– bringing down the overall average. In January 2009, the number of residential properties sold actually increased 23.3% from the previous month in K-W. January is typically a slower time of year for real estate in Canada, so considering the current economic climate– this is actually quite promising.

Realtors have been lobbying to increase the amount of RRSP contributions for first-time home buyers to $25,000 per person and have finally been responded to favorably. This should reflect positively for first-time homebuyers over the next couple of months. Predictions are that there will be a decrease in sales in 2009, but from an historical view, the current number of sales is only slightly off from those 10 years ago. In fact, the current average sale price is only slightly lower than last year, but considerably higher (more than $60K higher) than 10 years ago.

With a new President in the White House and budget packages looming to help bail out the economy, the possibility of an economic upturn in the not-so-distant future is promising.

Should you be scared to buy? No. Not necessarily. If you have a steady job, you are still in good position to buy right now. So take advantage!