City homes valuable investments
April 15, 2004
Mark McNeil
Hamilton Spectator
Hamilton is one of the best places in Ontario to invest in real estate.
A new study by the Calgary-based Real Estate Investment Network ranks the city fourth among 59 communities across the province. And the Conference Board of Canada yesterday said the Hamilton area economy was one of the strongest performing in Canada last year.
The Hamilton Census Metropolitan Area (CMA), that includes Grimsby and Hamilton, saw a 3.5-per-cent increase in gross domestic product (GDP, the value of goods and services produced in an area) in 2003, and the city was third of 18 cities surveyed behind Oshawa (8.9 per cent) and Kitchener (5.5 per cent).
The board’s Metropolitan Outlook Survey said: “Hamilton’s economy got back on track in 2003. The city’s largest and most important industry – manufacturing – enjoyed a banner year, while construction activity was also hot.”
The REIN group, which monitors real estate investment trends, rated Barrie and Orillia first, with Kitchener, Waterloo and Cambridge sharing second place. Brampton and Orangeville were third, ahead of Hamilton, which held fourth place by itself. Ottawa ended up in 9th place and Toronto, 10th.
The study, released yesterday, ranked the communities according to their expected return on investment in residential real estate. Data from various sources – such as Canada Mortgage and Housing Corp. and field interviews – was plugged into a computer program which produced the ranking.
The report, called The Top 10 Ontario Towns to Invest In, said Hamilton’s economy is “strengthening which will inevitably lead to increased housing prices and rental rates.”
Relatively low unemployment, high immigration and low rental supply are driving a high demand for rental housing.
REIN President Don Campbell said the computer program is designed to identify when communities are reaching a plateau with real estate values and rent prices. “It tells us when the local market is about to take a breath. In Hamilton, you are nowhere near that yet.”
The report is produced for REIN members to help them decide which communities they should be investing in.
The conference board tempered its Hamilton enthusiasm by cautioning that manufacturing sector woes and declines in construction are slowing gross domestic product (GDP) growth this year.
Growth is expected to slip to 2.3 per cent (to be ranked 15th of 18) in 2004 and then to rebound in 2005 to 3.9 per cent (7th of 18).
Generally, GDP growth of 3 per cent or higher is seen as a healthy sign for an economy. GDP is the estimated value of goods and services produced within an economy. By comparing one year to another, economists determine whether the economy is growing or shrinking. That’s an indicator of prosperity.
McMaster University economist Mike Veall says the board’s prediction of a slowing economy for this year appears to be coming true. He noted Statistics Canada’s monthly job survey found the Hamilton area lost 10,000 jobs over the last two months, which is typical for an economy that is slowing down.
The board said Dofasco Inc. had a “lot to do with the big turn-around, reporting record shipments for 2003. Conditions are expected to improve this year, thanks to strong industrial demand for steel. But Hamilton’s manufacturing sector will struggle nonetheless with the bankruptcy filing of Stelco Inc. – another one of Hamilton’s largest employers.”
Hamilton had a “wave of non-residential investment” last year that expanded construction output by 9 per cent. But most of the major projects have been completed. There are not many new ones to fill the void.
Housing starts declined by 12.4 per cent in 2003 and are expected to fall by another 6 per cent. The report also noted the city’s loss of the 2010 Commonwealth Games to New Delhi, India, was a setback to the local economy.
On a positive note, the report noted, the service sector is expected to strengthen in 2004. “The non-commercial services sector will lead the charge . . . thanks in part to the boost it received from the double cohort of students who entered McMaster University and Mohawk College last September.”
The REIN report said the average single-family house in Hamilton increased to $197,887 in 2003 from $183,769 the year before – a 7 per cent increase. The average rent last year was $778 per month compared to $765 in 2002. Hamilton’s vacancy rate is 1.6 percent, one of the lowest in the province.
Shawn Murray, the president of the Realtors Association of Hamilton-Burlington, said: “We’re an attractive investment in Hamilton. You certainly can buy more for your money here . . . If you bought something three or four years ago, certainly in the last four years it has gone up dramatically in value.”
