Investing in Windsor Ontario
There is a lot of economic development going on in Windsor right now, so I've started this thread to keep people up to date on all the latest news. As we all know, economic development is directly correlated with real estate prices; keeping track of the latest news should help all us be better real estate investors. Check back regularly for updates!
The government continues to tinker in the free market and their policies usually have a way of backfiring. Now they intend on developing policies to attack investors likely not understanding the potential fallout from doing so:
“You’re not going to find a lot of buyers who intend to move into a condo in four years; that part of the market depends on people with short-term horizons,” he said. “From that point of view, you need to tolerate that because it contributes to future housing supply. If we didn’t have buyers in the new preconstruction marketplace, we would have even less housing supply than we have, so in that area you need to tread carefully. Speculators play a useful function in the housing system, even though it doesn’t make us very comfortable to know that’s going on.”
The shift to EVs is well under way in Canada and Ontario is epicenter. Windsor is perfectly positioned to capitalize on billions of dollars worth of investment over the coming decades.
Young estimates those provincial measures will likely equate to between $8 billion and $10 billion in support this year. More money printing and social support = more inflation = higher real estate rents and prices.
The budget estimates that Canada needs to build 3.5 million homes between now and 2031 (good luck) while also introducing the ax-Free First Home Savings Account (TFFHSA) which will be similar to the RRSP (tax-free in and tax-free out). Most of the other details of the budget include accelerating development, increased densification, and banning foreign home purchases by non-residents (this excludes students which makes it almost pointless). Overall, this budget does little to address affordability in the short-term.
The central bank signaled more rate hikes are coming through the year to tamp down on inflation, which it now expects to be higher than initially projected through the first half of 2022. What impact do you think this will have on the market?
https://globalnews.ca/news/8757132/bank-canada-interest-rate-april-2022/
More big news for Windsor
The three initiatives involving Windsor companies — with $25 million worth of investments — are among 15 new projects across Canada.
Canadian Bank Regulator Confirms Investor Mortgage Reduction Coming Next Year
The Office of the Superintendent of Financial Institutions (OSFI), Canada’s bank regulator, confirmed new rules being rolled out in Q2 2023. These new rules will force lenders to apply a higher risk profile to investment properties which means they'll be forced to charge higher interest rates, or ask for more money down.
New standardized credit risk assigns a 30% risk weight to residential real estate. Next year income producing properties with a loan-to-value between 60% and 80% will have a risk weight of 45%. A bank will assume 50% more risk weight for an investor mortgage than an owner occupied home. i.e. owner-occupied mortgages with 20% down have similar risk to investor mortgages with 30% down.
There’s no direct translation of how that’s mitigated. They could want 10 points more for a mortgage, or they can offset risk in various other ways. Raising the risk premium on interest or lending less would be two methods to deal with it. None of those are particularly great for investors, now between 25% and 30% of home sales in Canada. It will slow demand though, which is probably needed.
https://betterdwelling.com/canadian-bank-regulator-confirms-investor-mortgage-reduction-coming-next-year/
More huge news!!
Stellantis ensured the future of its Ontario production plants in Windsor and Brampton by announcing it was investing $3.4 billion to retool the two facilities to produce electric vehicles.
https://windsorstar.com/news/local-news/stellantis-announces-3-4-billion-investment-in-ontario-plants
Most international students come to Canada on study permits because it's the path to permanent residency. Most students end up staying forever and absorb a significant amount of housing resale and rental properties.
International students who've graduated from Canadian post-secondary schools will be able to stay in Canada longer now that the federal government has offered a temporary program to help them qualify for permanent residency.
#windsorrealestateinvesting #windsorontario #windsor #realestateinvesting #students #immigration #realestate
Harder to slow the cheapest market in Ontario. Despite the recent hikes in bank interest rates, the demand for new homes in the Windsor area remains robust, and the rate of local home prices continues to outpace most other Canadian markets. Price appreciation is slowing, however, which could represent good opportunities for buyers or investors. The long-term fundamentals have not changed for Ontario real estate which continues to have one of the lowest homes per capita of any G7 country.
You can't get anything done in this country with all the red tape, that is the reason that, across the country, Canada will remain in a perpetual supply/demand imbalance.
An industry-wide shortage of planning professionals has hit London, knocking out about 15 per cent of staff in city hall's planning department, and slowing down approvals for much-needed housing, critics charge.
Looks like the 1000 job chem plant is still in play after being put on pause due to power shortage. There also appears to be a pipeline of supply chain participants looking at Windsor for the EV push:
He wanted to focus on the fact that beyond the LG Chem plant that they want to see come here, the pipeline is robust.
"Each potential client that we're dealing with that's considering relocating, supply chain companies or other, one of the first things they say is 'this is the electricity load we need, this our water requirements, this is our gas requirements," he continued. "We have the capacity."
https://www.iheartradio.ca/am800/news/invest-windsoressex-head-says-lg-chem-plant-still-possible-1.17872941
The Bank of Canada ran too long without raising rates, now they’re arguably raising rates too quickly with another half percent hike likely coming June 1.
NEW BATTERY PLANT TALENT RECRUITMENT TO BEGIN BY END OF 2022 OR EARLY 2023Yes, we are in a rising rate environment, but we also have 4-5 massive infrastructure projects bringing thousands of jobs to the city. Also, Windsor remains the most affordable city in Ontario.
LGES is looking for 500+ engineers, 400+ technicians, and 1,500+ operators as part of the 2,500 jobs that the plant is currently projected to create.
When I buy real estate, I buy it for 10-20 years and try not to focus on any one or two year period of time.
The Bank of Canada is hell-bent on raising rates to fight inflation, the problem is, much of the inflation has nothing to do with interest rates. Other factors such as massive fuel price increases (thanks in part to heavy Canadian carbon tax) as well as global wheat shortages, labor shortages, and material shortages, cannot necessarily be fixed with higher rates.
Initial rate hikes of 25 basis points in March followed by 50 basis points in April have already had a cooling effect on Canada’s housing market as rising mortgage rates keep more buyers on the sidelines.
Unfortunately, the feds got it wrong again, underestimated inflation, let it run too long, and are now overcompensating. The market will likey be in an "adjustment period" for months or years as higher rates impact housing affordability.
https://globalnews.ca/news/8883112/bank-of-canada-june-1-decision/
Production of the company's new STLA Large platform will be built in Windsor, with the current models of Chrysler 300, Dodge Charger, and Dodge Challenger at the Brampton plant ending in 2024, when the factory will begin retooling and modernizing toward the company's electric vehicle future.
The move to switch auto production to Windsor comes after a $3.6-billion investment for upgrades to both the plants, announced last month.
Soccer coming to Windsor?
The Drive Magazine reports that here are approximately 10,000 players registered in the Windsor-Essex region, which is where Clanachan’s expansion rights are eligible. Having zeroed in on Windsor specifically, it remains to be seen whether the city can sustain a professional soccer team in the country’ top flight league.
https://northerntribune.ca/canadian-premier-league-windsor-timeline/
Cities province-wide continue to conduct "studies" in order to try and improve the dire housing situation. The problem is, however, that they never address the slow and cumbersome process of ever getting anything approved.
The study found that, in recent years, most of Windsor’s population growth happened on the city’s eastern, western, and southern boundaries. Presented with ways to promote infill instead of sprawl, members of the development and heritage standing committee supported the study’s recommendations unanimously.
All of these ideas sounds great in principle, but in general, the government wastes time on study after study but never addresses the true problem: bureaucratic bottlenecks at every single turn.
Real estate is increasingly being concentrated in the hands of the wealthy. Hedge funds and pension funds are catching on that single family residential homes are one of the best risk-adjusted assets in the world.
Institutional investors like hedge funds and pension funds have been buying single-family homes and other residential properties for quite some time, and one firm has now increased its efforts in Canada. Blackstone Group is expanding from sizable warehouse investments to other real estate sectors like residential and commercial property. It's opening a new office in Toronto to support those efforts.
My personal opinion is that home ownership for the average Canadian will be increasingly rare over the coming decades.
https://www.forbes.com/sites/jacobwolinsky/2022/06/07/hedge-funds-eye-canadian-real-estate-investments/?sh=1ac2db9e43da
MOVE COULD WORSEN HOUSING COSTS, BUILDERS WARN
It's almost as if they're trying to make housing as unaffordable as possible 🤷
Statistics Canada says the economy added 40,000 jobs, driven by a gain in full-time jobs as the labour market continued to tighten
https://www.cbc.ca/news/canada/windsor/windsor-unemployment-rate-may-1.6484191?fbclid=IwAR3UKKF_syC-9Kqe0UxKAzwQ_Ke-eI3u1cd0YJG8G-SuRQOsvTw4CJM0VHw
Now is a good a time as any to own cash flowing rental properties. The housing crisis is well in effect.
“As we head into the summer, the demand for rentals in the Canadian market has grown substantially as the most expensive cities hit rent price highs last month,” the report says.
While the average Windsor rent cost climbed to $1,270 a month for a one-bedroom unit, the good news is that number remains a relative bargain. Windsor was only the 18th priciest city on the list.
“In Vancouver, one-bedroom rent reached $2,240, which is an all time high (since we started tracking Canadian rent prices in 2016),” according to Zumper. “In Toronto, one-bedroom rent settled at $2,000, which is a 19-month high (since October 2020).”
Not all recessions are created equally. They vary in length and depth, but they all have one thing in common: declining economic activity for an extended period of time. It is important to note that, while painful, recessions don't last forever. The typical length of a recession is 11 months which could be looked at as 11 months of opportunity for the shrewd investor.
HOW LONG DO RECESSIONS LAST?
Recessions generally do not last very long. According to Capital Group’s analysis of 10 cycles since 1950, the average length of a recession is 11 months, although they have ranged from eight to 18 months over the period of analysis.
DEVELOPERS COULD CANCEL APPROXIMATELY 5,000 NEW CONDO UNITS AS CONSTRUCTION PRICES RISE, INDUSTRY OBSERVER SAYS
Estimates show that Ontario is 1M homes short over the next decade. With building costs, development fees, and now cost of capital (rising interest rates) all out of control, we can expect to see tens of thousands of units canceled. Further, developers are unlikely to pursue as many projects as they would in a low-rate environment which will put a hard cap on new units being built.
He said building costs that are up approximately 20 per cent year-over-year are now rising “much faster” than real estate, which could result in some projects “no longer being economically feasible to proceed with.”
It is not just the 5,000 units that are already in the market that could cancel, it is all of the projects that should have launched over the next little while that are no longer going to be entering into the market. So that puts the supply squeeze not only on today but years down the line when these projects ultimately get delivered.”
In short, with 400,000-500,000 new immigrants coming into the country every year, we have almost no chance of keeping up with housing demand over the next decade.
Greater Toronto Area (GTA) rents skyrocketed by 16.5 per cent year-over-year last month, leaping from $1,998 in May 2021 to $2,327 in just one year. This should serve as a reminder that the housing shortage in Canada has NOT been corrected, despite declining prices due to rising rates.