December 31, 2019, wasn’t just the end of the year, but also the end of a decade. The past decade has been one of solid growth for the real estate industry after a rocky start. The new year and the new decade will bring new opportunities and challenges to real estate investors.
Table of Contents - Real Estate Trends You Can Expect in 2020
- Housing demand eases but remains high
- Investment shift to secondary markets
- Hipsturbia hysteria
- Community-focused amenities
- The industry becomes more tech-savvy
- Investors move to alternative property types
- Best investments for 2020
- How will the real estate market fare in 2020?
What can real estate investors expect in this next iteration of the Roaring Twenties? Changing demographics, new technologies and increased demand will impact the landscape of real estate investing this year.
Housing demand eases but remains high
Housing is still in high demand, which has been driving up prices. The aggregate price of a Canadian home expected to rise 3.2 percent year-over-year to $669,800 in 2020, according to Royal LePage. Low supply will boost home prices in the Toronto area, while Montreal is expected to see the highest appreciation rate.
Having high home prices is good news for investors who already have a solid portfolio, but difficult for investors looking to grow. New listings are harder to come by as people are staying in their homes for longer than they previously were. Fortunately, October saw a historic 5 percent bump in building permits, totalling 1.46 million. While new construction looks to close the gap, demand is expected to be higher than supply until at least 2024.
With mortgage rates a historically low 3.5 percent in 2019, many investors snagged any remaining inventory, making the market more competitive. Mortgage rates are expected to remain low in 2020.
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Investment shift to secondary markets
The top real estate markets in Canada – cities like Vancouver, Toronto, Ottawa, Halifax, Montreal – are at the top for a reason. People are willing to pay a lot to live in these urban centers, and savvy investors are snatching up a property to rent for a pretty profit. However, the market has become over-saturated. It’s harder for investors to purchase a limited number of available properties.
Smaller investors are turning to secondary and tertiary markets for their investments. There is a lower barrier to entry and less competition from foreign investors. Exurbs like Windsor and London in Ontario and the Hope Valley area in British Columbia are attracting more investors and residents alike. As more offices allow employees to work remotely, people have increased flexibility with where they can live. Renting to families and professional tenants in these smaller markets is a smart investment move.
Young adults may be moving to the exurbs, but they still want the amenities of urban life. They seek trendy neighbourhoods that are walkable and have plenty of options for working, dining, shopping and entertainment.
This move towards hip exurbs is partly because millennial's would like to live in the city but can’t afford it. The out-migration is reviving many small towns that hadn’t seen new business and young families in years. The same way inner cities saw a revival towards becoming spaces where people can work but also live and play, so too will the exurbs.
At the heart of the push for spaces that accommodate living, working and playing, people want to live where they can access a community. Renters want mixed-use apartment complexes, featuring space for retail, co-working and food. They also want community spaces like a pool, gym, fire pit, recreation area and more. Both millennials and baby boomers alike want to live in places where they can meet all of their lifestyle needs. Developers are building properties that accommodate this trend, with opportunities for investors to join.
The industry becomes more tech-savvy
Slowly but surely the real estate industry has digitized and automated their processes, but there’s still plenty of work done with old-fashioned pen and paper. As young home-buyers and investors have come to expect everything else in their life to be high-tech – from their watches to their banks – the real estate industry will need to keep up.
Investors can expect that the digital processes they’ve been using – such as online mortgage applications and e-signing – will become streamlined. Rather than have a different provider for each piece of the process, it will be easier to handle your buying, selling and renting online. The more things move online, the easier it is to expand your radius for where to buy your next property.
Investors move to alternative property types
The traditional real estate asset classes are crowded spaces, so investors are turning to alternative options. Alternative property types offer less competition and often greater return on investment.
Some of the most popular alternative property types for 2020 will include warehouses, fulfillment centers, data centers, self-storage, senior housing and medical offices. As tech pervades more parts of our daily lives and services and goods are increasingly on-demand, data centers and fulfillment centers will be key investments.
Best investments for 2020
What should your next investment be in the new year? According to research from professional services firm PwC, Canadian investors should consider buying these properties:
Warehousing and fulfillment space
As more customers come to expect same-day delivery for their items, retailers will need more space for warehousing and order fulfillment. These were the top two development opportunities according to a PwC survey.
Canadians are looking for affordable multi-family housing. This could be co-living spaces, apartments or rental condos. Despite the boom in new multi-family properties, demand is still strong, meaning landlords still stand to earn a profit from these properties.
Development near transit
People want to live, work and shop near reliable transit lines. Ontario is looking to develop their future routes based on where development occurs. Montreal’s regional transit project is expected to encourage $5 million in development along the route.
As more of Canada’s population enters the senior category, they’re looking for senior living that can keep up with their active lifestyles. They want convenience and security but also access to high-end amenities.
Successful real estate investing requires keeping up with the latest market trends. Make sure you stay informed about the latest Canadian real estate news.
How will the real estate market fare in 2020?
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