Home Sweet Investment

Funny how often the conversation gets around to real estate. After all, everybody lives somewhere. And buying or selling a house is a significant life experience, one that can affect both your quality of life and your net worth. Thanks to a recovering global economy and low interest rates, house prices have grown steadily in many markets, and skyrocketed in some. Wherever you live, real estate trends and prices are of consuming (no pun intended) interest.

Real estate professionals work in this hectic world, helping people find the home of their dreams or the investment that will deliver a plump ROI. It’s a job that requires a complex set of skills. “There’s usually some sort of life change going on when people are buying or selling,” says Joanne Renfer, MBA ’85, a realtor with Sotheby’s International Realty Canada. “I think it’s really important to be compassionate and empathetic, yet at the same time to have really sound financial analysis skills.”

Red-Hot West Coast

Renfer lives and works in Vancouver, one of the world’s most over-heated real estate markets. She is clear about what has driven prices up: “Vancouver is totally driven by foreign investment now.” Investors from China, South Africa, India, and elsewhere have driven prices out of reach of first-time buyers. They have also created a windfall for baby boomers, who purchased their family homes 30 years ago and can now sell and enjoy lavish retirements in lower-priced markets. “What it does to a community is not great because people leave,” says Renfer. “And we’re not seeing young people moving into the community.” Even the provincial government’s 15 per cent tax on foreign purchases created only a minor blip in the upward trend.

But Renfer says it’s not a bubble about to burst. “Vancouver gets rated in the top three places to live in the world. People with money have a choice of where to live and they choose Vancouver. As long as that’s happening, I can’t see the market dropping.” As for Renfer herself, she’s staying put in her beloved West Vancouver neighbourhood.

Growing Demand in Canada’s Largest City

Canada’s other notoriously over-heated real estate market is Toronto, where the average house price in the 416 area code is now over $1.5 million. That’s where Nathalie Lalonde Goldhar, MBA ’86, and partner Janice Mitchell operate under the brand “The Key to Your Neighbourhood” as part of Royal LePage Real Estate Services Ltd. The partnership enables them to offer clients a personalized experience that has included helping an elderly seller find new owners for her collection of books and records.

House prices in Toronto moved up very quickly in February and March 2017, and then hit a speed bump in April when the Ontario government put in a series of measures to cool the market, including a 15 per cent “non-resident speculation tax.” The measures, combined with a flood of new listings, stabilized the market, says Lalonde Goldhar. But she is confident that the bubble isn’t about to burst. “Toronto is a phenomenal city in a country that is economically, financially, and politically stable. We’re seeing some 120,000 immigrants moving into Ontario every year, with the majority in Toronto, so there’s huge demand for housing that other cities aren’t seeing. If there’s an adjustment, it will be slight.” In addition to demand, she says low interest rates are fuelling the strong market. “The one dynamic that could impact the Toronto market significantly would be higher interest rates.”

Free Money

Paul Taylor, EMBA ’14, agrees. “Money at a two per cent interest rate is basically free, so home buyers can much more easily afford the interest carrying costs,” he says. Taylor is President and CEO of Mortgage Professionals Canada (MPC), the national association for mortgage brokers. Not surprisingly, Taylor is a cheerleader for the broker role in home buying. “Mortgage brokers are definitely the best people to talk to you if you want independent sober second counsel on your decision.”

Taylor has been with MPC since January 2016, and has spent most of his time dealing with the fallout from changes to mortgage regulations brought in by the federal government in October. The regulations include more stringent stress tests for buyers and restrictions on mortgage insurance. Taylor says the stress test, designed to “protect consumers from themselves,” has had a dampening effect on house prices outside Southern Ontario and B.C. Toronto and Vancouver-area markets continue to be “incredibly inflated,” he says. “They’re not adding new home capacity in those markets at anything like the rate of immigration and people moving to the cities for jobs.”

NYC: Always Humming

If you think Vancouver and Toronto are tough markets, consider New York City, where Caroline Burton, HBA ’02, works. Burton is Senior Director of Strategy for StreetEasy, an online real estate listing service that is part of the national Zillow Group network.

New York is a unique market where most people live in apartments or condos, and 70 per cent are renters. “The rental market is hyper competitive,” Burton says. “You have to be ready to pounce at any time, but then be patient if the listing you’re interested in disappears before you’re ready.” Unlike other markets, most renters pay a fee to their real estate agent – up to 15 per cent of their annual rent – before they even move in.

“StreetEasy is laser-focused on NYC,” says Burton, “so we’ve developed features, tools, and information for both consumers and agents in a way that is tailored for this market.” The site provides up-to-date data on building amenities, costs, nearby transportation, schools, and more – all on a mobile-first platform. The company is exploring the use of virtual reality and 3D tours, although Burton says technology will never fully replace in-person visits.

“The NYC real estate market is always humming and in high demand,” she says. After several years of short supply in both the sales and rental markets, she says there has been a slight softening in rentals, the result of new developments – luxurious buildings with the amenities millennials are looking for – underway in Brooklyn and outer boroughs. Burton is typical of many New Yorkers: she started out with a five-storey walk-up with a distant view of the Empire State Building, later married and moved to Brooklyn, and now lives in a custom-built house in Westchester.

Helping Investors Make Good Decisions

Of course, not everyone is interested in finding a cozy family nest; some are looking for investment opportunities at a time when interest rates are low. Colin Bogar, HBA ’05, MBA ’08, saw that as an opportunity. His company, Property Passbook, is headquartered in Shanghai, where Bogar has lived since finishing his MBA.

Property Passbook provides a platform for people who want to invest in international real estate. It serves Asian and international expat investors at several stages in the process, from identifying markets and projects in which to invest, to negotiating the best price and managing the property through a rental-guarantee program. Property Passbook is paid marketing fees by developers, receives referral fees on mortgages and other services, and charges management fees. Launched in early 2016, the company is now selling real estate in more than 40 countries and growing.

Bogar is bullish about the global real estate market. “Once upon a time people put their money into bonds and other instruments that paid interest,” he says. “Today you can get the same yield, even setting aside price appreciation, on real estate in mid-sized cities as you would from junk bonds. And if you think real estate is over-priced, just look at the stock market!” Among the most promising markets for investment, Bogar says, are Montreal, Manchester, Berlin, and Bangkok.

Working for Buyers in Europe

Adrian Devos, MSc ’12, is also in the business of helping other people invest wisely in real estate. Devos is Co-Founder and Managing Director of BuyerSide, a company based in Brussels.

In Belgium, there are generally only selling agents, unlike Canada and the U.S., where there are agents working both for the seller and the buyer. Devos is changing the game. BuyerSide works on behalf of buyers to research, thoroughly analyze and value properties, and then negotiate a price. Part of the company’s compensation is based on how much below asking price the buyer pays.

BuyerSide serves both Belgian and foreign investors (mostly French citizens living in Belgium to avoid wealth taxes). It took some time for the concept to catch on, but the business has taken off in the past two years. Devos would like to expand beyond Belgium, but has to go slowly to ensure that the right people are in place to provide high-quality service.

It’s not surprising that Belgium, home of the European Council, is a hot market. Devos says there is very strong demand for studios and small apartments, driven in part by immigration. At the other end of the spectrum – large apartments, villas, and houses – demand is steady, but hasn’t fully recovered from the financial crisis.

What fuels real estate professionals like Devos, working in fast-moving, volatile markets? “One file is never like the other,” he says. “It’s continuous learning. And when people live in the properties we’ve bought for them, they really recognize our contribution.”

Adds Nathalie Lalonde Goldhar, “Every day is a different adventure and every transaction brings its own set of challenges. We just love it when we show a property and see our clients’ eyes light up.”

Advice from the Pros: How to Buy a Great House

• Know what you need and want in a house.
• Be patient. Do your homework, and don’t expect to find something immediately. But be ready to move fast in hot markets.
• Try to see past ugly paint and wallpaper to the diamond in the rough. Invest in good bones, rather than glitzy renos.
• Looking online is a great way to start, but it only gives you part of the picture.
• Go with “location, location, location.” Look for proximity to services, downtown, transit, and good schools.
• Look for natural light and a floor-plan with good flow. You can always move a couple of walls, but you don’t want to move everything.
• Work with professionals. Real estate agents, mortgage brokers, and other experts have knowledge and experience that can save you money and stress.

Photo (Street): Getty Images
Photo (Nathalie): Nation Wong
Photo (Caroline): Ike Edeani
Photo (Colin): Xu Jin
Art Direction: Greg Salmela, Aegis