Paul Eviston

Real Estate is still a great investment

How would you like to own an investment that increased in value more than five times over the past twenty-five years? That's what would have happened if you had bought a home in Greater Vancouver in 1975. The average sales price of $57,763 is now worth an estimated $330,000.

As any Realtor can tell you, population growth has driven price increases in the Vancouver area. And while Vancouver's real estate boom has slowed since 1994, population growth and changing demographics will continue to drive price increases in the next quarter century.
The numbers point to promising prospects. British Columbia will be the fastest growing area in North America, according to David Baxter, head of the Vancouver-based Urban Futures Institute, which studies land use and community change.

Baxter expects the population of the metropolitan Vancouver region to grow by 58 per cent to 3.3 million people over the next 25 years. That's 1.2 million more people than are here now. "While most of this growth will be in the 45 and older population, all age groups will grow," says Baxter.

The baby boom generation now aged 32 to 51 makes up about one third of our population. Their ageing will result in a surge in the over-55 population of 145 per cent by 2026, who will eagerly "move out of the suburbs and back into the urban environment," according to Baxter.
As well, Vancouver will remain an internationally recognized magnet attracting a higher percentage of immigrants than other provinces because of our mild climate and strategic location on Canada's Pacific Rim. Asian immigration is expected to continue, particularly from Hong Kong, Taiwan and Mainland China.

For real estate investors prices can only go up, since housing demand is forecast at 29,600 new housing units per year.

Single family homes will remain the most preferred housing type. But as the population ages, lower maintenance, higher density homes such as townhouses, apartments, and small lot, single family homes will become popular.

High density will be a fact given that Vancouver is geographically constrained by the Gulf of Georgia, the North Shore Mountains and the Canada-US border. This results in high land prices and limited land available for development.

For real estate investors, now is the perfect time to buy to take advantage of the slower real estate market. Real estate is cyclical, with the average cycle lasting six years, during which time prices fluctuate depending on interest rates, the economy and migration. But the overall value of homes continues to increase over the long term.

Vancouver prices are at or near cyclical lows. If you take the opportunity to invest today, twenty-five years from now you'll be looking back on a great lifetime investment

Owning versus renting - which is best for you?

For many renters, owning a home is a lifelong goal. It's also an important lifestyle and investment decision. If you have ever wondered whether you would be further ahead owning rather than renting, you're not alone.

If you're thinking of buying home a good place to begin is by comparing renting and buying costs using the mortgage calculator on www.realtylink.org. Using a set criteria comparison, the "rent vs own" section allows you to calculate what average annual increase in home value must be achieved to reach a financial break-even point. Keep in mind that buying a home is more than just numbers, it's also an emotional decision. You should buy a home with careful analysis just like you would any other investment.

As a short term option renting almost always outpaces buying, because buying costs such as transfer taxes, legal fees and closing costs take time to recover. If you are in a situation that requires you to move in the near future or on a frequently basis, renting offers greater flexibility by allowing you to pick up and move with just a month or two notice.

But renters can also expect to pay rents that will move upward at roughly the rate of inflation, so their costs for accommodation never really decrease. Moreover, renters can't ever recover any portion of their monthly housing costs; once in the landlord's hands, rent paid can never be recovered.

In contrast, when buying a home, the equity, or the value of the home minus the debt owed, increases with each monthly mortgage payment made. This means that over time your equity grows until you own your home. Over the long run, more and more of your monthly payments become recoverable since the payments are actually paying down the principal. A long term decision to own also provides you with the opportunity to recover improvement and maintenance costs. For instance, homeowners who maintain their home by ensuring it is in good repair or remodel will often see an increase in sales price when it comes time to sell.

What if the economy is in a decline when I want to buy a home?

Renting can be an option in a poor local economy and when interest rates are high. But in an improving economy like Vancouver's where prices have shown little movement and mortgage rates are at historically low levels, owning a home is a sensible option. The real estate market moves in cycles and, while prices do fluctuate, over the long run, housing prices have always increased.

Home ownership is a personal and sometimes emotional decision but it can also be a profitable one. When making a choice whether rent or buy your home consider this rule of thumb: If you plan on living in your home long enough for price appreciation to cover buying and selling costs, owning is a better alternative to renting.

Renovating with an eye on resale value

Before spending thousands of dollars on renovations, it's a good idea to find out whether you'll recover the cost when you sell your home. Start by consulting a knowledgeable local Realtor to determine what types of renovations are likely to offer a good "return on investment" in your neighbourhood.

Many Realtors suggest following these guidelines if you want to renovate not just for comfort and style, but for enhanced resale value:

1. Don't "out-renovate" for your neighbourhood. Housing prices are largely driven by location. If you live in a moderately priced neighbourhood and renovate your home with a luxurious spa bathroom and upscale gourmet kitchen, you are not likely to recover your costs. Compare your home to others in your neighbourhood, and don't renovate far beyond the area standard. The proverbial "best home on the block" is often the hardest to sell.

2. Stick to classic styles and avoid trendy renovations. In the 1970s the popular style was wall-to-wall shag rugs and avocado green appliances, in the '80s it was mirrored walls, chrome track lighting and pastel colours. Both types of interiors that are now very hard to sell! Your best bet for resale value is timeless interior finishings - neutral carpets or hardwood floors, classic wood cabinetry, and white appliances.

3. Investigate zoning bylaws and permit requirements. For major renovations such as adding a deck or garage, or converting a basement to an in-law suite, you will need a building permit from your municipal city hall. Some types of renovations may be restricted depending on the zoning for your property. Renovations completed without proper permits can cause serious problems when it comes time to sell your home.

4. Expensive doesn't mean better. Sometimes the most expensive renovations are the ones that pay off the least. Swimming pools and hot tubs require a lot of maintenance and take up a lot of space - these can sometimes detract from resale value. Air conditioning and central vacuum systems are expensive to install and often don't pay off as much as cheap renovations such as fresh exterior and interior paint, new carpets and new kitchen cabinets.

5. Get the job done right! The quality of the renovation work directly impacts your resale value. Buyers are increasingly knowledgeable and will look closely at workmanship and the quality of materials, in addition to having an inspector examine the home from top to bottom. Unless you are a very skilled handy person, don't take on major projects such as upgrading plumbing and electrical systems.

6. Do your homework. Before starting any renovation project, carefully investigate material costs and product options, suppliers and professional contractors. Check references for all contractors and get all agreements in writing. The Internet is a great resource when you start planning. Some of these sites below offer cost/value charts estimating the return-on-investment for renovation projects; however, these vary widely by neighbourhood, so the best resource is a knowledgeable Realtor.