Ross PAVL

Hogtown investors gobbling up Calgary deals

Toronto speculators are scooping deals as local investors shy away from the market.

Out of town investors, taking the larger view of Calgary’s real estate market, know that this city is the hottest place to invest in residential real estate. As our market finally shakes off the effects of the massive downturn, and the concurrent bust in what had been a booming market, Calgary is poised to lead the country in real estate investment.

A report last week from the respected Real Estate Investment Network concluded that Calgary is the best place in Canada to invest in residential property. As the economy recovers, Calgary will begin to heat up again. But, says REIN’s Don Campbell, investors need not fear another bursting bubble. “The thing about Calgary is I think we’ve learned our lesson about the inflation and the boom… everyone’s just a bit more cautious this time,” says Campbell.

And what do actual investors have to say? Contacted at work in Toronto, real estate authority and active investor Ish Dhand agreed to share his thoughts on why he is investing in Calgary. Asked why he was taking his money to Calgary, Dhand said “Prices in Calgary are very competitive” and “there are better opportunities in Calgary.” He adds that there are fewer opportunities in other large centres, like Toronto or Vancouver, where the markets have plateaued.

Dhand expects to profit from his investments in Calgary. As he explains, “I made money in Calgary during the last boom, but now prices are down.” Sensing that Calgary is ready for a resurgence, Dhand has just closed deals to purchase two premium condominiums in Calgary. “The market will open up soon,” he says, and “I will make money.” Asked what his expectations are for the Calgary market, Dhand conservatively expects “a 10% return in the next two years.”

Out of town investors know the truth: Calgary is a great place to bring their money! The market right now is cool enough to pick up some real deals, but is set to be strong enough – soon – to make some real profits.

It's time to invest in a Calgary condo market!

Are thinking about investing in condominium living?

You may not know it, but there are several reasons why it’s an excellent time to enter the market.

1. The possibility of rising interest rates.

Experts say that interest rates are set to rise – and stay that way for some time. While Canada slowly recovers from the recession, bankers and market analysts are looking for interest rates to rise incrementally over the next two years. A canadianmortgagetrends.com survey of big bank economists suggested that over the next 19 months, the prime interest rate will more than double, going from the current 2.25% to a high of 5.25% (Survey posted May 13, 2010). What this suggests is that if you are not locked into a longer term mortgage, your payments will rise substantially.

Smart investors know that rates today are at an all time low and that locking in will create stability in property cash flow over the long term.

2. The new Canadian mortgage approval rules.

The government’s new mortgage qualification rules, enacted last month, have created challenges for investors buying investment property. Investors must now have 20 percent as a down payment before they can qualify for CMHC approval. This extra downpayment “cushion” will actually help with cash flow and prevent many of the speculators who were looking to “leverage” themselves with a lower downpayment.

3. Take advantage of the “Urban Living” trend.

From downsizers to young professionals, the trend is and will continue to be the inner city and downtown core growing in numbers. “People want to live close to where they work”, says Ross PAVL, a Re/Max realtor who specializes in downtown condo projects. “The trend is there in other large and growing downtown metropolitan centres and Calgary is no different. Now that we’ve broken the 1 million population mark, the momentum for downtown growth will continue. Also, as the baby boomer sector ages, the appeal to have a lifestyle free from exterior house maintenance issues and to get away easily, is definitely on the increase.”

With interest rates at all time lows, investing in this market is still appealing, despite the new mortgage approval rules. Condominium living in the downtown core continues to offer the best alternative to a lifestyle trend that has already proven itself in other key cities like Vancouver and Toronto. Low vacancies in the condo rental market help validate this, especially with newer, more modern condo suites.

Last month, the government of Canada changed the way you buy a home. New mortgage rules, designed to protect the market and buyers from the shock of changing interest rates, have left some buyers confused. Here, we offer a breakdown of what these changes mean and how they affect you when buying your home.

Almost all buyers must now qualify for a 5-year term, fixed-rate mortgage at their bank’s posted interest rate, but can still chose any mortgage term. Buyers who are looking for a variable-rate mortgage, which is tied to the Bank of Canada’s rate, can still do so. They MUST, however, show that they can service a loan at the higher 5-year term rate. As before, principal home owners must have at least a 5% down payment and can chose a maximum amortization rate of 35 years.

Buyers looking to enter into the investment market also face more stringent rules. Those buyers looking to invest in an income property must have a minimum 20% down payment. In the past, such buyers could obtain a mortgage with 15% down. There is one exception to this rule. Buyers looking to purchase homes that will serve as both their residence and an investment property (such as duplex units) can still qualify with just 5% down.

Keep in mind that the new regulations are not insurmountable obstacles. “They may seem strict,” says Treena Rogers, Mortgage Associate at Jencor Mortgage Corp. here in Calgary, “but they are there to protect you.” Her advice to potential buyers is to read the new rules, think clearly and speak to a mortgage professional. “People are afraid they can’t qualify,” says Treena, “but knowing the rules and talking to a broker will make everything clear."

Ross PAVL Marketing Group

for more information please visit www.rosspavl.com