Large historical home

In a world struggling with managing unprecedented debt levels and economic upheaval, Canada enjoys complacent stability. Its real estate markets following along are in a seeming state of near equilibrium, at least compared with other volatile regions, including most obviously the United States. As uncertainty continues around the globe, Canada sits in a sweet spot of low interest rates with the benefit of a natural resource/commodity based economy.  When you have natural resources, it makes it easier to attract investors be it in real estate or capital. People live under the assumption that they have a profound safety net which provides confidence that things won’t go upside down.  That’s the description of “a perfect world” and we all know there is no such thing.  This sounds harsh but it’s true. From Vancouver’s Pacific gateway and Alberta’s oil sands in the west to Toronto’s global financial center and Halifax’s shipbuilding in the east, Canada is well positioned to sustain its economic consistency.

The rest of the world has taken notice. U.S. retailers are expanding into the dependable Canadian market, immigration is igniting growth in housing and condominium sales.  Foreign investors try to gain footholds (most unsuccessfully) in property sectors against difficult odds (Canadians tend to buy and hold long term). But “cautiously optimistic” Canadians also struggle against complacency and must remain focused on the reality of how the world’s tenth-largest economy can be dragged down by everyone else. The huge deficit of the largest trading partner, the U.S., will restrain growth; energy markets and the resource sector will slow down. In other words, Canada cannot assume they are immune from the gray cloud hovering over the world’s major markets. For 2013, a balanced outlook is expected. Compared to other markets, Canada will do very well, but growth trends will be mediocre.” It’s safe to say that mediocre should be viewed as the new normal. Leading to real estate players scaling back expectations.

Canadian economy in 2013

Some concerns threatening the Canadian economy in 2013 is that commodities can get beaten up, especially the natural gas sector. Household debt has increased to near-record levels, and home valuations are level or have declined in some places. A property appraisal, from an expert property appraiser like Abbe Edleman located in New Jersey, provides valuations to any area selected. Canada’s real estate market is nowhere near a U.S. style meltdown, but higher interest rates could create problems. The housing slowdown affects the construction industry and retailers.  Consumer buying quiets down from recent peaks. The government is also winding down stimulus and is trying to make fiscally responsible cuts. Growth will depend on the private sector alone. As a result, the unemployment rate hovers upwards of 7 percent in Canada and wage growth has been limited but still better than most global competitors. Call the economy and job growth slow and steady. There is an apparent disconnect in job opportunities and employee resources, as increasingly new jobs are concentrating in the commodity.

Interest Rate Benefits

As long as interest rates hold near rock-bottom lows, commercial real estate will continue to prosper: It’s an attractive alternative to residential real estate. If someone put dollars in the bank, they’ll get next to nothing, and bonds, not much more, so they’ll load up on real estate and get a 7 to 8 percent return in markets that are generally not oversupplied. Real estate experts expect rates to increase only marginally, heavily influenced by U.S. and European central bankers who engage in further monetary intervention to help their ailing economies, which need to produce more jobs.

Markets to Watch

Canada’s real estate market has an appetite for real estate transactions, but it is difficult to find deals. Even during a questionable global economy, the Canadian commercial real estate market continues to grow and attract capital. Real estate concerns are reducing, even with global economic uncertainty. Even with that attitude, investors still have their eyes wide open on struggling U.S. economy. In 2013, Canada’s stable economy, job growth, and alluring assets will continue to be an attraction to both domestic and foreign capital. Equity is in abundance, and debt for acquisitions looks to be in balance. Investors need to allocate this capital, and “instead of keeping

cash, they look for great assets—real estate.

Overall Results

Even with a possible need to change investment strategy, trends in 2013 real estate surveys results for investment, development, and homebuilding prospects managed to improve for most metro areas. Of the nine markets covered for commercial/multifamily investments, one was ranked “good,” six were “modestly good,” and two were “fair.” This performance is far better than 2012, when markets were basically split between modestly good and fair. The average rating value for all markets improved as well with only three markets seeing declines. The top movers were Montreal and Winnipeg, a primary and a secondary market. The larger markets such as Toronto, Montreal, Vancouver, and Calgary prevailed but still showed a decline from last year. This is a modest indicator that investors are ready to make some moves into secondary markets.