Real estate investment market requires stability

Viewers of the Business News Network, or BNN, are becoming more familiar with the Real Estate Investment Network (REIN), as its president, Don Campbell, is emerging as a well-informed regular commentator. Campbell has built up an organization that now boasts over 3,100 members across the country with total real estate investments of over $3 billion. 

Campbell is an astute follower of the investment real estate market and does significant research to back up his commentary. He matches his network’s research with other players in the market, which is why he approached WinnipegREALTORS® to share with different chapters of his national network why our city deserves consideration as an investment market. 

Similar to other researchers across Canada, he has noticed Winnipeg’s strong real estate market performance over the last decade. Even in 2009, at the depth of the world-wide recession, WinnipegREALTORS® set a new MLS® dollar volume sales record.

During a recent interview with Winnipeg Free Press business reporter Martin Cash, Campbell said opportunities in larger Western cities are not that easy to find. Moreover, he said many investors are looking for less volatile markets in which to invest. He told Cash that Winnipeg’s diverse and resilient economy fulfills this requirement by delivering stability for investors, who prefer a less bumpy terrain than the booms and busts of other markets. 

“There is a lot of interest across the country in the Winnipeg real estate market,” he said. “It does not go through the gyrations the majority of other major centres go through. After this last roller-coaster ride that occurred in Calgary and Vancouver, many of our members are saying, ‘Maybe I don’t need this much excitement.’”

In the same article, WinnipegREALTORS® president Claude Davis told Cash  about Winnipeg’s impressive immigration numbers and our good fortune to provide job opportunities. At the end of April, Manitoba had the lowest unemployment in the country at 4.9 per cent.

One thing Campbell likes about markets similar to Winnipeg’s is that they perform well over a sustained period of time. He said that an investor has to take into consideration long-term trends covering at least a five-year period.

“Look for long-term fundamentals and where they are pointing,” Campbell said. “Look into the future, not the past. Look for a region where migration, jobs and incomes will be strong.

“Look for major transportation changes that will give better access to neighbourhoods. These are factors that really drive real estate markets.”

“It is all about homework, or as Mark Twain said, ‘The trouble with the world is not that people know too little, but that they know so many things that ain’t so.’”

His bottom line when giving advice to would-be real estate investors is to manage their expectations and base their decisions on economic fundamentals — not beliefs. “Do your homework!” he stresses.

The REIN membership has to date purchased nearly 27,000 properties when looking for cash flow and equity-building opportunities. The fact Winnipeg is now on their radar is significant, since reinvestment in our residential rental stock can only help provide better accommodations for people already living here or moving to the city. 

New investment in our community provides economic-spin-offs and jobs. Canadian Real Estate Association research over the last few years shows any house purchase in Manitoba generates $40,000 in economic spin-offs. For a multi-family unit or apartment building, the spin-offs can be significantly higher than this amount, depending on the renovations undertaken.

At a British Columbia REIN event held last week, a number of its members approached WinnipegREALTORS® representatives about Winnipeg’s investment opportunities. Some of the REIN members already own rental properties in Winnipeg, while one couple was heading to Winnipeg later in the week to search for an investment property.

Of course, Winnipeg has a bit of an image deficit, since some potential investors still mentioned our mosquitoes and cold weather. 

Don White, the chair of WinnipegREALTORS®’ commercial division, who summed up Winnipeg’s residential and commercial investment opportunities to the B.C. investors, gave a spirited defense of Winnipeg and all it has to offer in terms of quality of life.

However, Don Cook, the chair of WinnipegREALTORS® civic and legislative affairs committee, recently told local media outlets that Manitoba’s full-blown rent control regime is a stigma that hampers investment in the rental market.  

Currently, groups in Winnipeg are calling for a moratorium on converting apartments to condominiums, since no one is building new rental  units, despite the large immigration numbers we have witnessed over the last few years.

According to WinnipegREALTORS®, such a measure does not provide an incentive for private developers to build new rental projects in our city. Instead, it compounds an already aggravated situation resulting from rent controls. More government control and intervention in the economy is not the answer, which is a message being received from out-of-town investors.

“As much as I like what is happening in Winnipeg,” said Russell Westcott, a veteran Canadian-based real estate investor and general manager of REIN, “I have real difficulty coming to grips with the idea of investing my money in a province where they have rent controls.”   

During a similar presentation in Calgary last January, the same sentiment was expressed to Winnipeg presenters by a number of Alberta investors.

When you hear about more government intervention in the real estate market, whether it is at the provincial or municipal level, so-called government solutions often end up costing you significantly more in taxes. At the same time as your taxes increase, the imposition of more regulations drives potential investors away from your city.