Where to buy now? Are there are any bargains left in Canadian real estate? You bet there are. Moneysense reveals which cities offer the best value for real estate investors.
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.
MoneySense’s “Best deals in real estate” is built on just that kind of system. For four years now, we have fine-tuned a unique, scientific approach that allows us to dig deep into the numbers and come up with the cities that hold this year’s treasures for real estate hunters. We’ve worked hard to perfect a rating system that’s logical and easy to use.
To arrive at our list of winners, we start by looking at homes that are priced reasonably (our “value” score), but are still increasing in price (our “momentum” score). In addition, we looked for markets that have strong economies (our “economy” score), so we could be reasonably sure that prices will continue going up. Once we’ve sifted through these numbers, we assign a letter grade to each city for value, momentum and economy. Top-of-the-class cities earn an A or B in each of those categories, and only a select group make it to our list of finalists. That was a tough order this year: only seven cities made the grade—all of them with a solid overall mark of A-.
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.
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.
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.
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.
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.
Read the whole story at http://www.moneysense.ca/2012/05/29/where-to-buy-now.