Quote:
Originally Posted by Cyro
Yes, I'm familiar with the many projects you are listing and the amount of sales/vs. occupancy of the units available.
We do agree, I believe as I mentioned in my post, that time will tell, if the summer/fall of 2014 will see an increase in sales in the "Winnipeg Market", for these types of developments or the so called downward spiral we see in many other Canadian Cities.
We'll see how the market reacts in 2014/2015. A larger sample is needed.Softening may be the case, but you seem to paint such a negative picture in your posts ? Are you an Investor? This would explain some of your trepidation and worries reg: almost every post you make here? You provide much detail and facts in your posts, but a extremely negative view of the Winnipeg Market.
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Ha! Does it come across that way? Honestly, I'm just not much of a cheerleader. I have my doubts about the Winnipeg marketplace like I would have my doubts about any marketplace that was heavily leveraged and running on such narrow margins.
Keep in mind that I'm not being overly-dire about the city itself, I'm only concerned about the financial metrics underlying the investments. Sometimes it helps to remember these are all somebody's investment so we can just pay attention to the economics of everything and leave aside the fact that these buildings do contribute significantly to the landscape and well-being of our neighbourhoods.
Most rental buildings are built at below a 6% return and most REIT purchased buildings are purchased at around a 4.75% return. Most money borrowed on these builds is somewhere around 3.25-3.5% depending on the quality and the caliber of the developer. This leaves narrow margins. If somebody isn't heavy equity on their property, we're looking at margins that could disappear overnight if rates ever increased even to still historically low levels like maybe 4.5-5%. Of course, those numbers may not matter if you can keep raising rents, but there's a limit to that too. Incomes in this province have stagnated, personal debt levels are climbing, and vacancy continues to rise. We're up a full .5% over last year in vacancy to 2.5% and that doesn't account for availability. Availability - which is what we *should* be looking at - is at 4% right now. Those are units that somebody would make available if only they could break their lease. That's up a full 1.5% over last year. Rents also climbed 4.7% last year and 3.4% the year before; that obviously can't continue without a significant additions to our economy. There are hundreds if not over a thousand units in the pipeline right now. Our vacancy rate actually climbed a half a point last year even with 198 *fewer* units in the apartment rental universe! Something's amiss here and it likely has to do with the fact that net migration hasn't favoured the province. We're almost always going to have a negative natural growth rate so if Saskatchewan and Alberta continue to be better options for immigrants, we may continue to see declines there as well.
I don't know. The condo market is difficult to predict because it's mostly noise and little signal. Almost 15% of condos are bought strictly for the purposes of being rented and the sales figures on new projects are extremely murky because of what I had noted in another post. They move well in the 'burbs but they're completely stagnant in the city centre, and that goes for both existing and new.
I just don't see any fundamental economic upswing that justifies these disproportionate increases in value of all multi-unit or single-family real estate. I see low rates and I see a general hesitancy to be involved in the securities markets as a carry-over from 2008, but I don't see positive migration, I don't see significant increases in incomes, and I see a middling service-based economy at the centre of it all. This isn't Vancouver where we see some of the lowest incomes in the country and the highest real estate values. Nobody can prove it's foreign investment there, but it's generally understood that because Vancouver is world-class city within relatively close proximity to Asia, it attracts a lot of that investment. Winnipeg isn't like that...
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