Five reasons to buy rentals in the city
This week the Alberta government quelled fears of impending rent controls, signaling the market will continue to support investment real estate as a method of wealth accumulation.
Furthermore, amid low oil prices, vacancy rates have risen to only 3.4 per cent, according to the Canada Housing Mortgage Corp. (CMHC). That’s well below the five per cent vacancy level where we encourage people to consider real estate investment purchases more carefully.
In addition to favourable vacancy rates, here are four more indicators supporting real estate as an investment:
• Rental rates rising: In response to low vacancy rates, rental rates are expected to rise through 2016. The average rent for a two-bedroom condo in Calgary is $1,319 as of April 2015, and is forecasted to rise to $1,360 by 2016. In the same way that vacancy rates under five per cent are a positive for real estate investing, so to are rising rents.
• Positive employment growth: Even though low oil prices will potentially have a negative effect on employment, the question is whether growth will slow or be eliminated all together. The last time oil prices fell In 2009 and 2010, employment growth did not contract by more than two per cent in either year. In fact, those are the only two years employment growth was negative over the past 15 years. For 2015 and 2016, the Conference Board of Canada expects growth to slow but remain positive, which is a good thing for real estate investors.
• Positive net migration: Even with the economic slowdown in 2009, net migration has remained positive in Calgary every year for the last 15 years. Migration is expected to remain positive for 2015 and 2016 as well, which means newcomers to our lovely city will need a place to live. Most of them will rent upon their arrival.
• An affordable real estate market: According to the RBC Affordability Report, Calgarians still spend on average less than 40 per cent of their incomes on housing. By comparison, those from Toronto and Vancouver spend more than 60 and 80 per cent, respectively, making Calgary’s housing market significantly more affordable.
• The low rate bonus: With mortgage rates at all-time lows, real estate investments can be bought at very low interest rates. Most people don’t realize they can also combine low rates with 30-year ammortizations when buying rental properties, allowing for attractive returns on investment.
These five reasons plus low rates are what we call the perfect storm for real estate investment. To learn more, register to receive Mortgage360’s Why Calgary report at www.mortgage360.ca/cash-flow.
Nolan Matthias holds a Bachelor of Arts Degree in Economics, is the co-founder of Mortgage360, and the author of The Mortgaged Millionaire.
* This content was produced by CREB®Now’s advertising department, in consultation with Mortgage360. CREB®Now’s editorial department was not involved in its creation.