By Julie Cazzin | From MoneySense Magazine, June 2012
With the amazing gains enjoyed by real estate investors in the past several years, it’s been easy for prospective home buyers to conclude that investing in real estate is easy—almost a sure thing. All you have to do to make money—or so it would seem—is to pick a property, lock in a low-rate mortgage and wait for the profits to start rolling in.
However, the dark side to the run-up in real estate prices is that finding a place that’s not overpriced is getting tricky—very tricky. And with all the recent talk of a housing bubble, you really have to ask yourself if there’s any place left in Canada where homes are still a good buy.
The short answer is yes. That’s because in some cities, home prices are still reasonable, and buoyant economies mean prices are destined to rise higher. What you need is a system that can consistently spot good places to buy real estate—in good or bad economic times.
So exactly where is it a good time to buy now? You may be surprised to learn that it’s not the mighty urban centres like Vancouver, Calgary and Toronto. The brightest real estate treasures are hiding in small and mid-sized towns across Canada, where rock-bottom house prices combine with strong local economies to make buying real estate there an attractive bet.
This year, Regina moved to the top of our list. While all this year’s winners earned the same A- overall, Regina edged its way to the top thanks to a slightly higher raw numerical score than its rivals. Close behind were Fredericton, Winnipeg, Moncton, N.B., St. John’s, Thunder Bay, Ont., and Edmonton.
Many of those cities also made the previous year’s list. Last year’s top city, Moncton, was back at No. 4. Strong data from Regina, Fredericton and Winnipeg put them back on the list as well. In all, out of last year’s top five, only Saint John, N.B., fails to appear on our list this year. A mediocre C in momentum played a huge role in knocking its overall grade down to a B—its sliver-thin house price increases in 2011 demonstrate that this city’s real estate market is slowing down.
Out of last year’s runners-up, only St. John’s made it on this year’s list. While the other runners-up from last year, Saskatoon, Gatineau, Que., Charlottetown and St. John’s, all earned a solid B+ again this year, several other cities zoomed past them thanks to better overall economic performances.
Now let’s have a look at two newcomers to this year’s list: Thunder Bay and Edmonton. These two cities did better across the board this year over last, scoring almost all As or Bs. For both cities, the value scores are solid and the economy grades have also improved. In fact, Edmonton was one of the rare cities in our survey that got an A+ in the economy category—an amazing achievement. The numbers also show that in both cities, affordability has seldom been better. It takes just over two years of average household income to pay for a house in Thunder Bay and slightly more than three years in Edmonton.
Below and in the pages to come, we’ll take you on an in-depth tour of the cities with the best deals in Canadian real estate. We’ll explain why these places are thriving, and tell you which neighbourhoods are attracting the most interest from home buyers in each city. Our results are great news for house hunters and real estate investors, as they show that you can still find decent housing bargains in every part of Canada. We caution you, however, to use our results with care. Make sure that a city’s situation hasn’t changed in some important way before you buy. Do your own research before putting down your hard-earned money.
Often swallowed by Calgary’s long shadow, Edmonton has all the benefits of Calgary’s booming economy, and a more affordable real estate market. The numbers speak for themselves. In the past four years, Edmonton has attracted large numbers of immigrants, fourth in the country after Calgary, Barrie, Ont., and Oshawa, Ont. The city, situated on the North Saskatchewan River, is a major centre for the oil and gas industry. This has led to one of the lowest unemployment rates of our top seven cities: 5.4%. Even lower unemployment is forecast for 2012. “We’re oil-driven here and we’re on fire,” says Adam Dirksen, a real estate agent with Re/Max Real Estate Centre in Edmonton, who says that 2012 promises to be an even better year than 2011. “There are good opportunities to make money here and people are coming in from all over the world to take advantage of them.”
It’s not surprising then that Edmonton earned its highest points for its economy, with a stellar grade of A+ in that category. Only Calgary and Victoria were able to achieve the same grade for economy. Edmonton also earned a solid B+ in value, with the average home costing $336,000, about $75,000 less than a similar home in Calgary. According to Dirksen, that will buy you a 1,200-sq-ft split-level four-bedroom home with double garage in Ozerna, a family-oriented neighbourhood just north of Edmonton.
The rental situation is good, too. The city has a fairly low vacancy rate of 3%, with rent on a two-bedroom apartment averaging $1,060 a month. “I don’t know why you’d rent, though,” says Dirksen. “With mortgage rates so low and incomes so high here, affordability is just incredible. There’s something for everyone.”
The Conference Board of Canada projects more good economic times ahead, with Edmonton’s economy projected to grow by 3.4% this year, thanks to strength in the manufacturing and services sectors. Despite the apparent focus on oil and gas, Edmonton’s economy is one of the most diverse in Canada. It boasts major employers such as IBM, Telus and General Electric, as well as a growing biotech sector. Home to the Edmonton Oilers hockey team, the Edmonton Eskimos football team and FC Edmonton soccer, it’s a sports lover’s dream that’s bound to keep people moving to the city for years to come.
#6. Thunder Bay
If forestry and manufacturing are the first things that come to mind when you think of the city of Thunder Bay, Ont., then you have some catching up to do. The city took the No. 6 spot on our list mainly because of a super-strong A ranking in the value category. With average household incomes of $71,360 and an average home price of $176,000, the city represents excellent value in its housing market. In fact, the buoyancy of the economy is starting to show up in the city’s home prices. For instance, this year alone, average prices are up 6%, the most of any city on our list. “Condos, detached homes, townhouses—everything is selling within 30 days of listing,” says Ronne Ferris, broker of record with Century 21 Superior Realty Inc.
As well, with a super-low vacancy rate of 1.5% and rents for a two-bedroom apartment averaging a relatively high $790 a month, more and more residents are seeking to buy into the market. That’s not a surprise since many of the city’s largest employers are in the well-paying public sector. The City of Thunder Bay, the Thunder Bay Regional Health Sciences Centre, the Lakehead District School Board and the Government of Ontario each employ over 1,500 people. And while the mining and forestry sectors have continued to thrive, the city plays an active role in promoting new knowledge-based industries, primarily in the fields of molecular medicine and genomics.
Some of the most popular areas for housing include new subdivisions inside the city where home buyers can get new 2,500-sq-ft houses for as little as $250,000. But some of the best deals are in updated older homes: A three-bedroom, two-storey 1,150-sq-ft brick home was recently listed for a very affordable $149,900.
#5. St. John’s
St. John’s, the oldest English-founded city in North America, grabbed the No. 5 spot on our list, up from No. 9 last year. Its biggest resource is the ocean, which provides St. John’s with its traditional fishing industry, and in recent years with an offshore oil sector attracting newcomers in search of work.
Last year, the St. John’s economy was projected to grow by 4.9% and saw the continued growth of an emerging metal mining sector. Construction was underway on the nickel processing plant near Long Harbour, a town about an hour west of the city. Though home prices have gone up almost 44% over the past four years, the average dwelling still costs an affordable $270,000. “There’s lots of people coming into St. John’s right now—oil and gas engineers and tradespeople, as well as the aging population who live outside St. John’s but now want to live in town to be closer to family and health-care services,” says realtor Larry Hann. “They all want housing.”
Investment in mining, oil and gas, utilities and the industrial sectors remains strong, with billions poured into projects such as Muskrat Falls, Hebron, and Long Harbour. The ongoing evolution and renewal of St. John’s is also having an impact. Just a few of many current developments are a $167-million expansion planned for the St. John’s International Airport, a $50-million office tower for downtown St. John’s and a $32-million hotel on Water Street.
All of this strong economic activity has had its effect on the housing market, with $500,000 to $700,000 properties selling quickly. “The high-end sector is insane this year,” says Hann. “Skilled tradespeople are coming in from as far away as Houston, Norway and Scotland. We can’t keep up with housing demand.”
Moncton, N.B., held down the fourth spot on our list—a respectable result, but down a few notches from last year’s No. 1 finish. This year both its value and momentum scores dropped, but with an overall A- score, it’s still an attractive place to buy real estate. Homes average $160,500 and household incomes a respectable $75,717. It would take just over two years of the annual household income for an average family in Moncton to buy a home—the second lowest on our list, just behind Windsor, Ont.
Young families are attracted to the large number of new homes. “The favourite thing in the housing market right now is a five-year-old home where the landscaping has all been done,’” says independent real estate agent Larry Estabrooks. “You just move in and get on with your life.”
And in Moncton, that life usually includes a decent job. While overall employment fell in 2011, with the service, trade and transportation sectors shedding jobs, the city’s unemployment rate remains at a respectable 7.5%. Jobs are still plentiful in this bilingual town, where the main industries include trucking, warehousing, health care, and education. Management jobs are also plentiful, with UPS, FedEx, Royal Bank and ExxonMobil all having offices here.
The city offers a wide range of housing, including three-bedroom, two-storey semi-detached homes in all three of its main communities—Moncton proper, Dieppe (which is 95% francophone and has a population of 25,000) and Riverview. Residents boast one of the lowest commute times in all of Canada at under five minutes, even if you live in the suburbs. At the same time, just 20 minutes down the road on New Brunswick’s Northumberland coast, you’ll find the warmest beaches north of Virginia. Two national parks—Fundy National Park and Kouchibouguac National Park—are both within a one-hour drive of the city.
For the past two years, Winnipeg has been on an economic roll. From manufacturing and government, to agriculture and education, this diversity protected the city from the more drastic effects of the recession. The city, which ranked No. 3 on our list, has an average home price of $250,000, an average annual household income of $81,897 and an attractive affordability rating. “A few years ago prices were very low,” says Jeff Douglas, a real estate agent with Century 21. “But our economy is diversified, consumer confidence is good, and mortgage rates are low. That’s a good combination for a robust housing sector.”
Economic diversity also provides Winnipeg with a stable workforce and low unemployment rates. Last year, that rate averaged a rock-bottom 5.8%. And housing affordability remains high. It takes just a touch over three years of household income to buy a home here.
The south side of the city has traditionally been the most popular, particularly with families. Neighbourhoods like River Park South, Linden Woods, Whyte Ridge, Island Lakes and Sage Creek all boast top schools and facilities—as well as solid resale values.
Sales last year were strongest in the $150,000 to $250,000 price range, with the lion’s share of activity in the southwest and southeast areas of Winnipeg. Many older factory-style buildings have been renovated into loft-style condos along the waterfront and are gaining popularity. But downtown revitalization remains an ongoing process with a new baseball stadium, the Forks, and the MTS Centre providing a solid base for further development. As well, rental apartments are in demand. That’s because the vacancy rate in Winnipeg is a slim 1.2%, while average rents for a two-bedroom apartment are priced at $900 a month, making the return on such rental properties very appealing for real estate investors.
Fredericton came in at No. 2 on our list this year, and for good reason. The average household income is a respectable $80,500, which may not sound like a lot to folks in big cities. In Fredericton, however, homes are hugely affordable, with an average price of only $175,500. That means it would take just over two years of average income for a local family to buy a home. (Compare that to Vancouver, where it takes more than nine years.)
Home prices have made healthy gains of 15.3% over the last four years, but what really stands out is the city’s low 6.4% unemployment rate, one of the 10 best among the 36 cities we surveyed. “A family’s dollar stretches further here,” says Jake Evans, a real estate agent with Exit Realty Advantage. “Sure, you can go out to Lloydminster, Alta., and make twice the income, but housing and everything else is a lot more expensive there, too. We have good jobs and affordable house prices. That’s what young families want.” In fact, suburban homes in Fredericton are flourishing as younger families seek out more spacious homes with quality upgrades that are still reasonably close to the downtown core. The average price for a brand-new 2,000-sq-ft home with two-car garage and nice backyard? An affordable $320,000.
Geographically, Fredericton is bisected by the Saint John River. This has created two distinctive regions of the city, namely the Northside and the Southside. The Southside contains the downtown core, which includes provincial government departments, historic buildings and various businesses, banks and law firms. East of the downtown core are newer, more affluent neighbourhoods such as Poet’s Hill, which is only a five-minute commute into town and boasts larger, more energy-efficient homes that sit on one-acre lots. Prices range from $180,000 to $500,000. West Hills on the Northside is a 450-acre subdivision of upscale homes with a golf course and new strip mall nearby.
Over the past four years, Regina’s home prices have increased by an impressive 24%, making it one of the fastest growing housing markets in Canada. This year, Saskatchewan’s capital nabbed the coveted first-place spot on our list thanks to top marks in both value and momentum—an unmatched A in both categories. This helped it solidify the No. 1 spot—up from No. 2 last year. While the city received only a B- in the economy category, sectors like oil, potash, uranium, gold, diamonds, forestry and farming are booming and Regina continues to have the lowest unemployment rate of all the 36 cities we ranked, coming in at a rock-bottom 4.7%.
Much of the growth in the real estate market is thanks to healthy migration to the province, which aims to let in 5,000 newcomers in 2012. “Ever since 2008, it’s like a switch got turned on and the motors of the city started moving again,” says Jason Kostiuk, a realtor with Re/Max Crown Real Estate Ltd. “The province has over 10,000 job vacancies and we’re not just talking flipping burgers at McDonald’s. These are well-paying jobs—electricians, plumbers, carpenters. We just can’t keep up with demand.”
Despite recent price gains, the average home is still a reasonable $285,000. But more and more higher-priced homes are also being built in some parts of the city. The Albert Park neighbourhood is a much-desired residential area in the southwestern part of Regina. There is a roughly equal balance between young families and seniors, and average prices are about $390,000 for a detached home and $250,000 for a two-bedroom condo.
The economy is projected to continue doing well. According to the Conference Board of Canada, Regina’s economy grew by more than 5% in 2011, and is projected to grow by a healthy 2.9% in 2012. With large-scale projects such as the downtown City Square and the ongoing activity at the Global Transportation Hub—a one-million-sq-ft logistics facility for trucks to drop off goods—Regina is well on its way to becoming a new Asia-Pacific gateway for trade. “Our economy doesn’t hit the really big highs like Calgary does, but we seem to avoid the super lows,” says Kostiuk. “That’s all good news if you’re a prospective home buyer here.”