RSM Capital – There has been a lot of buzz recently in regards to the Canadian real estate market. Some still calling it a bubble and some (mostly the government and the banks) are introducing “measures” to try to control the direction where the market is headed. What would a smart investor do in this climate that the media is full of contradictory news? Should you buy, should you sell, or perhaps should you even consider other investments? I am going to give you some advice so that you can make your decision more easily.

I remember when I first arrived in Canada in 2004 as an international student. Back then, the market was completely different and at least Montreal, where I have lived for the past 13 years, looked completely different. I remember walking in downtown Montreal when I had just arrived and wondering why buildings all looked old. To be honest with you, I was a bit surprised to see very small buildings in the downtown area of a North American metropolitan city. However, now that picture has changed since in the past 5-7 years the city is booming and there is rarely a neighbourhood that you drive by and you don’t see high construction cranes. Besides private companies and private investment, even the government is spending a lot in the city to update all of the infrastructure from sewage system, to highways and roads, and to the most famous one which is the new Champlain bridge that is currently under construction and surprisingly even ahead of schedule. I believe the fact that a lot of money is being spent in this city is a strong indication that investors, companies, and the government all have a very positive forecast for the years to come and that’s why they are spending that much. Now, let’s talk about the so called “bubble”.

Since 2004 that I am in Canada I have been hearing that the Canadian real estate market is becoming a bubble and it will burst at any time. I’m sure it was in the news even before 2004 but I can’t really say it since I was not here. Thirteen years later we are still hearing the same comments almost on daily bases whereas the numbers and statistics show a different reality. The fact is that in Canada we have it completely different than the US. The crisis that happened in the US in 2008 was not just one wrong prediction; it was more like a combination of factors each one big enough to destroy the housing market. One huge difference is in Canada banking system is regulated by the government whereas in the US that is not the case. So, people would buy a house in the US and if they were interested the banks or other financial institutions would finance their purchase sometimes by 120%! Yes that’s not a typo I mean 120 percent. People would buy a house with zero cash down and they would get even 20% more than the value of the house if they “needed” the money for some renovations or even for furniture. Therefore, when the market collapsed, the house was worth less than what they had paid for it and they also had to pay back the loan for the furniture! On the other hand, today in Canada the government is introducing a lot of tough measures to control the housing market a bit and to try to cool the market so that it does not get out of hand.

In Canada we receive many immigrants per year and most immigrants are either from the skilled workers program or investors program. Both groups come to Canada with a relatively healthy financial background and of course one of the first things they do is buying a house. There are many international students and international investors also who purchase real estate in Canada as an investment. Regardless of how much we complain about certain issues in Canada, I’m sure we can all agree that Canada is a great country to live in and it is very stable economically, socially and politically. So, that equals a relatively stable environment for investing and these days there are very few places in this world that you can invest your money with that much peace of mind. So, the money will come into Canada from different sources and the government has also introduced many regulatory measures to ensure that we are not in danger of a collapsing housing market. Naturally, a lot of people are still hesitant but as we all know in business decisive investors are usually the winners! Rich/successful people make decisions fast and they rarely change them, unsuccessful people rarely make decisions and if they do or when they do, they change them frequently!

All I am trying to say is that despite all the negative news and speculations in the air, the people who bought a property in Vancouver and Toronto 10 years ago are now laughing at those who didn’t. Now even if we assume that there would be a crash, I am sure they have made money and their properties are worth much more than what they bought that even with a price adjustment, they would still be winners. Even in the US, all the markets that were affected in 2008 with the housing crash have now bounced back and prices are going up again. So, another lesson in real estate is that short-term investment in real estate is not the same as other investments. In real estate, you always have to buy and hold for a long time in order for you to see profits. In very few markets we can see our investment doubled or tripled in 1-2 years and as we have seen in Vancouver, soon there will be actions taken to control that growth.

In summary, I still believe real estate is one of the best investments and despite all the negatives that the media and the government are trying to echo in the society, it will always pay off in the long term. You need to know where to buy, how to manage it and for how long to hold it in order for you to make money. You also need to use the services of professionals. I am not saying that just because I m a real estate broker. You need to work with a good real estate broker, good mortgage broker, good accountant, etc. in order for you to make a wise and calculated decision with your real estate acquisitions. I believe this is the case with any investment and all the investments have their own risks so why should real estate be any different? Well, it isn’t. Like any other investment if you take the time to educate yourself about it, plan it well and manage it well, you should not have anything to worry about.