Bubble, bubble toil and trouble…or not!

Kiyoko Fujimura

Buzzbuzzhome Corp.
May 4, 2010

You know how everyone is freaking out thinking that sales are going to plummet and *$#& is going to hit the fan in the Canadian real estate market?

Well, the people with a lot of money in the market are not taking money out. They’re planning to put more in this year. In fact, 65% of Canadian investors plan to buy real estate here and 64% of global investors plan to purchase as well!

The overall sentiment with regard to the Canadian real estate market is “cautious optimism” according to Wayne Duong, Canadian director of research at Colliers International who conducted the survey. But doesn’t that seem obvious? I mean, what investor is going to say “I’m impulsively optimistic”?

The [2010 Global Investor Sentiment Survey] of more than 240 major real estate investors included 26 large Canadian institutional property investors, most of whom indicated they would be making Canadian purchases this year — 27.8% planned to buy in Toronto; 16.7% in both Vancouver and Montreal; 14.8% in Edmonton; and 11.1% in Calgary. Financial Post

Why are they focusing on domestic investment? Because, adjusted for risk, the Canadian real estate market still receives a higher return on investment (ROI) than our neighbours to the South given that much uncertainty remains in the US market.

But before that investment happens, sellers and buyers are going to have to have a meeting of the minds with regard to prices. The survey found that buyers think prices are too high right now and sellers think they’re too low. Prices have been soaring, but with very few properties for sale in the first quarter of 2010 deal flow has been relatively weak.

So while economists may have been correct that prices are fairly inflated, the real estate market likely won’t be completely barren. When prices level off and even drop a bit, investors will come to the rescue to buy up what home purchasers aren’t buying anymore. So it’s all worked out! What a happy ending!

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