KW is Ontario's 'economic Alberta'
April 12, 2007

TONY WONG
BUSINESS REPORTER

The Kitchener-Waterloo-Cambridge area is the top place in Ontario to invest in real estate, with the most potential for future price appreciation of any area in the province, according to an investment study released yesterday.

Canada's technology triangle is the "economic Alberta of Ontario" said analyst Don Campbell, head of the research and education firm Real Estate Investing Network.

The area, home to the University of Waterloo and companies such as Research In Motion Inc., maker of the popular BlackBerry wireless devices, is rated one of the most competitive regions to do business in North America, he said.

More than 60 per cent of Canada's population and 40 per cent of the U.S. population is within 800 kilometres of the area, where the average price of a two-storey, three-bedroom home in 2006 was $215,000.

"We are looking for places in Ontario that are poised to go forward, that haven't reached their potential yet, and that still have good upside for investing," said Campbell, a prominent real estate investor who is based in Vancouver.

In the study's second spot is the Barrie-Orillia area, followed by the Durham Region towns of Whitby, Pickering and Ajax. Markham comes in fourth, and Hamilton and Brantford are fifth.

The Kitchener-Waterloo-Cambridge area beat out Barrie, last year's winner, because K-W and Cambridge are rapidly transforming from a manufacturing base to a more diversified jobs base, representing a buying opportunity, Campbell said.

"You have a wide range of potential renters, anywhere from students to retirees, and continued strong job growth in the Kitchener-Waterloo area.\"

Campbell, the author of Real Estate Investing in Canada, uses 13 key factors for each area to help him determine rankings.

He looks at whether the average income and population are increasing faster than the provincial average, if there's more than one major employer, and if major transportation improvements are in the works. The $400 million-plus Red Hill Valley Parkway in Hamilton that's due for completion this year fits with that criteria, he said.

"Transportation drives future value more than just about any other factor,\" Campbell said. "Distance isn't the issue, it's time. No one says I'm 12 kilometres from Toronto, they say I'm 30 minutes from Toronto. It's about shrinking the commute."

Toronto, representing a more mature market, ended up in eighth spot. The economic capital of Canada continues to produce jobs, Campbell said, but certain neighbourhoods will do better than others.

Areas outside the core have been showing the highest appreciation and Campbell feels neighbourhoods such as Scarborough, where the average three-bedroom home costs $325,000, have an upside.

"I've bought in neighbourhoods before that had poor reputations that they didn't deserve – and have done quite well,\" he said.

He also likes the Armour Heights neighbourhood in North York and the Junction neighbourhood near High Park. He doesn't like condos as an investment.

"The new condo market is a cautionary tale and best avoided due to the huge expected increase in inventory, the sky-high rents necessary to make the property carry itself and the anticipated flooding of the market as soon as the pre-built purchases are completed," Campbell said in the 81-page report.

"Although demand may currently be high, this market is not yet considered a good medium-term investment."

A Canada Mortgage and Housing Corp. report released yesterday said housing starts, particularly for condos, were down significantly in March.

Multiple family starts are down 34 per cent year to date in the Toronto area. However, based on record levels of pre-construction sales over the last two years, the CMHC said it expects starts to ramp up significantly in the second half of the year. More than 11,000 condos are scheduled for completion this year and next in the Greater Toronto Area.

Some of the other Top 10 spots according to Campbell include:

Barrie and Orillia: A young community with a population expected to grow by 60 to 70 per cent in the next 10 years. Close to recreational areas, but housing values are less than in Toronto, which is a one-hour commute. A study earlier this year by ReMax Ontario Atlantic Canada said the average Barrie residence appreciated 372 per cent over a 25-year period – the most of any major urban market in Canada. The average price for a three-bedroom, two-storey home in Barrie last year was $288,400.

Durham Region – Whitby, Ajax and Pickering: While a traditional bedroom community for the Toronto area, the region is attracting an increasingly diverse list of local employers involved in automotive, aerospace, plastics and pharmaceuticals. Rental increases are poised to be above the provincial average. The average price of a Pickering home was $300,522. In Ajax it was $267,500 and in Whitby $293,000.

Markham: A strong, consistent performer. Continues to attract employers looking for a more liveable area to relocate. There are more than 900 advanced technology and life science companies in the town. The average price of a three-bedroom home is $425,000.

Hamilton: Steel town is undergoing a revitalization of key areas and showing an entrepreneurial spirit with the start of a major high tech industrial park. Redevelopment of commercial, residential and industrial areas is ongoing, and a new highway this year is a big plus. The average price of a three-bedroom home is $229,670.

Brantford: Joining the list at No. 5, Brantford looks to benefit from the spillover of the opening of a new Toyota plant in nearby Woodstock. A strategic location with affordable housing should see strong growth. Average house price of $294,000.

Brampton: Has the third largest population and the third largest number of workers among the GTA's 29 municipalities. A diverse economy is growing faster than the infrastructure. Average price of a three-bedroom home is $300,000.

Ottawa: When compared to other major centres, Ottawa has one of the most affordable housing stocks in the country. Low vacancy rates for condo apartments suggest rents could see a dramatic increase over the next several years. A three-bedroom home goes for about $403,000.

Oshawa: The area went through economic shock after the announcement of automotive sector layoffs. Downtown re-development will put the spotlight on underperforming areas of the city.

Whitchurch-Stouffville: Low vacancy rates, no substantial increase in rental units planned for the future, and a rising demand for country in the city lifestyle makes it poised for growth.

...And sometimes 'They' don't allow cut and paste.
Shankracharya, are you there?

-Ben

Very informative article.

Keep it up Hemang.

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