As an individual in his middle years, I have to confess to a somewhat dubious history of investment. My occasional dabbling in the stock market achieved results varying from mediocre to miserable. Undoubtedly, there are people who have had considerable success with stocks, but invariably they admit it takes time and dedication to stay current with market trends.

Looking for capital growth from bank accounts is only for the ultra-conservative. Rates are so low, you often feel like the proverbial tortoise in a race against the hare of inflation, and the hare is winning!

I have had some success though. Looking back, my first big capital gain came from the sale of a home I bought when I got married. A few years later this was followed by another healthy profit from my second house. Then, some years later, I again picked up another lump sum from my third house. Now I think you know where I’m going with this, so let’s talk some more about investing in real estate. After all, it seems to work for most of us… or does it?

Nearly 20 years ago I was living in Vancouver. During a conversation with the manager of the company I worked for, he stated bluntly that he would never again purchase real estate. He had lost money on a home he sold during the 1980s and was as negative about purchasing property as it was possible to be. Looking back, I sometimes think it would be interesting to visit with that individual again and get his thoughts about the following 20 years of soaring Vancouver house prices.

Certainly, as with any commodity, real estate prices can go down, but historically, it has been proven that prices usually double every 10 years. My parents bought the UK house I grew up in for a little over $6000; today that house would be worth over $600,000. So I think we can all agree on one thing – real estate appreciates and is a good solid investment in the long term.

When my clients ask if it’s the right time to buy, I tell them it is always the right time to buy, especially if you are buying your primary home. The more important question is when to sell. If we are talking about the home you live in, the issue is largely out of your hands. You will sell when you get a job transfer, need more space, or want to downsize. The prevailing market conditions are important only when you are trying to move up the ladder. Presumably, you will then want a more expensive home, so in an appreciating market, it makes good sense to move before the gap widens between your existing property and your dream home. The situation is a little different for those investing in real estate solely for a profit.

If you have an aversion to risk, then you won’t get far in life, at least financially. It doesn’t matter whether your first entrepreneurial venture involves starting a humble hot dog stand, or a high flying international airline, there is no guarantee of success. In fact it is common knowledge that four out of every five new business ventures fail within a couple of years. However, with real estate investing, there is no logical reason why you should fail at all. Most people want a quick flip and there is nothing wrong with that. But if the market softens, you may have to wait longer before finding a buyer. Your profit may be reduced, but ultimately, all houses sell.

The worst case scenario is that the obtainable selling price does not exceed the purchase price. What to do? Well, in this case you have the option of Plan B. You change hats, and become a landlord for a year or two. People have to live somewhere, and if they are not buying houses, they have to rent, which in turn creates a reduction in rental property and pushes up rental prices. You may well find yourself with a nice little profit over and above your mortgage costs.

Time will bring the market back, along with the value of your investment, as it always does. It is just a matter of patience. This can not always be said when playing the markets. That red hot mining stock you bought could fizzle and die, along with your money, but your real estate will always be there. It is a tangible asset and for most of us, the best investment we will ever make.

If you are interested in buying or selling real estate, or would like to search Lethbridge MLS homes for sale, please view, or contact Allan Miller of Sutton Group Lethbridge at (403) 329 0479.

Published in: on March 17, 2008 at 7:42 pm  Leave a Comment  

Calgary Approaches $500,000

The average sale price of a single-family home in Calgary will flirt with the half-million dollar
mark this year, according to the Calgary Real Estate Board. In its 2008 forecast Wednesday, real estate board president Ed Jensen said the MLS average will increase by five per cent this year to $495,800 while condominium prices will rise by six per cent to an average of $335,300.

Total sales will dip by five per cent for both the condo and single-family markets, to 7,700 and 17,500 respectively, compared with 2007. “Two thousand and eight will be a good year and a year of opportunity for serious buyers and sellers,” said Jensen. “Seeing a solid Alberta economy, strong employment, predictions of movements to past levels of net migration, I see the Calgary market moving closer to normal market conditions — as normal as Calgary can be.”

According to the real estate board, single-family homes in the city averaged $472,230 in 2007, up 17.94 per cent from $400,398 in 2006. The average sale price of a condo was $316,370, an increase of 19.98 per cent from $263,684 in 2006. Single-family sales in 2007 were 18,438, down 3.5 per cent from the 19,113 recorded in 2006, while condo sales dropped by 1.9 per cent to 8,236 units compared with 8,396 the previous year.

Lai Sing Louie, senior market analyst in Calgary for Canada Mortgage and Housing Corp., said the organization’s forecast for 2008 is similar to the real estate board’s. “We’re looking at about 5.5 per cent moderation in MLS sales and our price growth is in the same ballpark. We’re looking around the 3.5 to five per cent level, too,” said Louie. “There is a lot of supply out there. Going into the last part of the year we saw demand ease off. Some of that was because of the higher prices, but also there is a lower level of net migration that we’re seeing coming to Alberta.”

Several different real estate reports in the latter part of 2007 predicted average price growth in Calgary ranging from zero to 12 per cent. Jensen said the resale real estate market in 2007 came in like a lion and went out like a lamb. In the past six years, the city has experienced one of the hottest real estate markets on record. But in that atmosphere speculators and flippers have also come into the market and impacted its direction. “A portion of the real estate market has always had an investor component where most adhere to an invest-and-hold program,” said Jensen. “This type of investor is great for the marketplace, but investor flippers don’t care about the community and can create an artificial demand, which contributes to an artificial price increase situation.”

The Calgary market overheated in the past couple of years, setting records in nearly all areas and straining affordability, he said. But a change happened in the past few months. The city moved from a seller’s market, where the sellers could name their price, to a buyer’s market where there is a better supply of homes giving buyers better choice. “We’re just coming off two record years,” said Jensen. “Obviously, there’s lots of speculation with a lot of outside investors coming to the economy and I believe that artificially created new listing environments.”

The real estate board forecast for acreages and recreational properties indicates listings and sales will both decline by five per cent in 2008. The average sale price for rural properties will jump by five per cent to $875,600. For surrounding towns, sale prices will rise by five per cent to an average of $396,000.
Source Calgary Herald.

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Published in: on March 1, 2008 at 12:23 am  Comments (1)