Investing in real estate comes with its fair share of advantages. In addition to offering predictable and sustainable cash flow, real estate tends to appreciate in value, keep up with inflation, and provide a higher return on investment, compared to investing in stocks, bonds, or mutual funds. That said, when it comes to investing in real estate, location is one of the most critical aspects to consider.
Thanks to a series of strong fundamentals, the City of Toronto has long since been known as one of the top cities to invest in real estate in Ontario. It is also the priciest city to invest in, due to a decades-long housing supply shortage, fuelled by factors such as high immigration rates, low lending rates, attractive opportunities for academia, steady job creation, multi-generational wealth distribution, and the city’s budding status as a tech superpower.
Toronto’s vacancy rate was 1.5 percent in 2019. Due to the effects of the coronavirus pandemic, Toronto’s vacancy rate has risen to 2.8 percent, as urban dwellers migrate out of the city centre to the surrounding submarkets. And while home sales in the city rebounded as soon as June, from a lull in the real estate market engendered by the pandemic, the new norm of working from home has led many would-be urban dwellers to shop for homes outside of the city, where they are afforded more space and better value for their buck.
If you’re thinking to invest in real estate in Ontario, where you invest is just as important as what you invest in. Below, we explore the submarkets that will yield you the highest return on your investment and why.
Hamilton is an attractive city to own property in for a few key reasons, including Hamilton’s proximity to the GTA. As families are priced out of the Toronto market, they turn to the surrounding municipalities, rendering multifamily accommodations in Hamilton’s east and west ends in high demand. Hamilton’s appeal also has to do with increased GO Train service in the region, as well as its natural attractions, such as Lake Erie, Tew’s Falls, and Tiffany Falls Conservation Area—a selling point which has only bourgeoned due to the socio-economic effects of the pandemic.
Hamilton is also home to prominent post-secondary education institutions, such as McMaster University and Mohawk College, making it an attractive city for post-secondary students in need of short-term rentals. Hamilton’s rental market is also driven by high rates of immigration, thanks to a move by the Hamilton city council in 2014, wherein they declared the city a sanctuary for immigrants. The municipality’s east end is largely residential, making it a popular destination for first-time buyers and newcomers to Canada.
In a move to aid the city’s development and growth, the city of Hamilton has undertaken the West Harbour Redevelopment, the resurfacing of the Red Hill Valley Parkway, and the development of three new hotels. Moreover, in April, the Hamilton City Council approved the $28-million project to widen a four-kilometre portion of Rymal Road.
In general, Hamilton’s economy shows a great deal of promise, based on how it fared during the 2008 financial crisis and the 2003 SARS public health crisis. During both of these times, home prices and sales volume remained strong.
By the Numbers:
- One in four people in Hamilton was born outside of Canada, and 3,000 to 4,000 immigrants arrive in Hamilton every year. Hamilton is also home to about 5,000 international students.
- The average selling price for residential properties is $721,354. That number is up 3.8 percent from the previous month and 19.8 percent from the previous year.
- In September 2020, apartment sales jumped 37.6 percent and the average selling price increased by 15.4 percent to $467,883 from September 2019 to September 2020.
- Per one Hamilton-based broker’s own data, 46 percent of homebuyers are coming from outside of Hamilton.
- According to local multi-family investors and experts, the average cap rate in Hamilton is around 5 – 5.5 percent.
- The five-year annual ROI in Hamilton sat at 8 percent as of 2019.
- In 2019, rental rates increased 24 percent in Hamilton—the highest in all of Canada.
- Rents are appreciating in Hamilton by as much as 2.3 percent month-over-month and 8 percent year-over-year.
- Hamilton boasted a healthy vacancy rate of 3.9 percent in 2019, but this rate is expected to decline.
- To meet the demand for rentals in the area, 846 units are under construction in the Hamilton-Grimsby area.
- In 2019, construction activity in Hamilton topped $1.5 billion for the first time, with 2,700 new housing starts.
Niagara is one of Canada’s largest tourist hubs, teeming with wineries and home to the famed Niagara Falls. That said, an increasing number of permanent dwellers, including first-time buyers and newcomer families looking to own their first home, are flocking to the region in recent years thanks to the affordable cost of living. Niagara’s appeal is also owing to improved/improving transportation in the area, such as the fulfillment of GO Train service, which kicked off in January 2019, and the planned $10-million reconstruction of Drummond Road, slated for 2026.
Last year, Niagara Region Public Health opened a new 21,500-square-foot facility, replacing a facility that was only a third of that size. In addition to more health services, the facility has also afforded new job opportunities to residents of the region. Moreover, planning for a brand new state-of-the-art hospital—the Southern Niagara hospital—has commenced and constructed is slated for as soon as the fall of 2022.
Niagara’s housing prices are rising faster than anywhere else in Canada. This is due to low historically low-interest rates coupled with high demand and lacking supply in the region. New stock is currently underway in the region, including large retirement and affordable-housing projects, as well as several upscale condo developments.
By the Numbers:
- Niagara-on-the-Lake was ranked the second-best community for new Canadians in 2019.
- According to the most recent census in 2016, there were 67, 190 immigrants in Niagara, accounting for 16.9 percent of the population.
- Residential home sale activity in September 2020 increased by 57.1 percent from the previous year, with the composite benchmark price sitting at $491,100, up 15.7 percent from the previous year.
- Per one St. Catharines-based broker’s own data, 20 percent of her business in 2019 came from outside of the Niagara region.
- Vacancy rates in the region sit at 2.3 percent. This low vacancy rate is just one indicator of a significant rental shortage in the region, particularly in the multifamily segment.
- The average cost of rent is $1,028, which is up 4 percent from the previous year.
- The five-year annual ROI in St. Catharines-Niagara sat at 8 percent as of 2019.
- The upcoming Niagara Falls Renewable Natural Gas plant, which is expected to be completed by the end of 2021, will create 50 jobs during the construction phase and more when open for operation.
Greater Sudbury touts one of the most affordable real estate markets in all of Canada. Thanks to factors such as increased livability, expanding job diversity, and an affordable cost of living, Sudbury has become a prime spot to settle for students, families, and newcomers to Canada. Speaking further to livability, the city is constantly reengineering its neighbourhoods, which involves adding things like dog parks, green spaces, and cultural and art centres. Sudbury is also one of the cities participating in the Rural and Northern Immigration Pilot, which encourages and assists skilled foreign workers to achieve permanent residency.
One major factor that bodes well for the future health of Sudbury’s economy is its repute for being one of the world’s most significant nickel centres, with prominent companies like FNX Mining and Vale operating out of the region. Additionally, nickel mines operating out of Greater Sudbury are contenders for a major contract via Tesla Inc. Though Sudbury is known for its mining industry, the region is making important investments in other industries, including education, health, and retail.
Sudbury’s low rate of vacancy means increased demand, increased rental prices, many prospective tenants, and a healthy return on investment as a landlord. This bodes well for those looking to invest in the region’s fast-growing real estate market and expanding supply in the multifamily segment, where the demand is quite high. It’s also one of the few remaining cities where it’s still possible to achieve significant cashflow.
By the Numbers:
- Between 2017 and 2018, Sudbury welcomed 189 immigrants, along with 47 people who migrated here from other provinces. This number has been steadily rising since 1981.
- The average price of homes sold in September 2020 was a record $339,439, rising 27.3 percent from the year prior.
- Overall supply levels are currently sitting at the lowest level in over 30 years.
- Average rents in Sudbury went up by 5.6 percent to $1,024 on a year-over-year basis.
- Sudbury has a low vacancy rate of 2.1 percent, which translates into 21 out of 1,000 apartments being available to rent.
- Sudbury’s mining companies employ approximately 6,000 people and support a 300-company mining supply and service sector cluster that employs a further 10,000 people.
In spite of the uncertainty ensued by the pandemic, home values and sales in Quinte are on the rise. Quinte’s “seller’s market” status is due to low-interest rates coupled with lacking supply and steady demand, as former urban dwellers migrate to submarkets surrounding the GTA. As a result, the Quinte area has seen steady increases in the sales of all property types compared to 2019.
In more recent news, Ottawa-based real estate developer, Bruce Firestone, has purchased a three-story building in Belleville, with plans to re-develop it into one- and three-bedroom apartments. In an interview with INQUINTE.CA, Firestone said he believes sprucing up this historical building will be a big catalyst for drawing more people into the town. To add, plans to revamp Belleville’s Memorial Arena into a marketplace are slated for fall 2021. The Memorial Marketplace is currently seeking vendors and the spot is envisioned to be a hotspot for the city.
Finally, the tech sector is also growing in Quinte. This is, in part, due to participation from the province and the recent formation of the Quinte Technology Association (QTA), which provides an avenue for local technology firms to network and share information, ideas, and best practices.
By the Numbers:
- Residential unit sales rose to 512 in July, which is up significantly from 343 in 2019, registering a growth rate of 49.3 percent.
- Monthly dollar sales for residential listings increased by 83.2 percent in July 2020, compared to July 2019.
- The residential average selling price for July 2020 was $450,651, up from $367,267 in the year prior, registering a growth rate of 22.7 percent.
- The average rent in Belleville, Quinte is $1,068, up 5.3 percent from the year prior.
- The vacancy rate in Belleville, Quinte has increased to 3.3 percent.
- As of 2019, there were 84 tech businesses in the area.
- On the whole, Quinte’s tech sector employs more than 1,000 people.
Located in Northern Ontario, Timmins is an important economic hub with an economy that’s driven by natural resources, including base metal mining and gold. As gold prices increase, Timmins’ economic success is expected to as well. Timmins is home to one of Goldcorp’s largest projects: The Hollinger Open pit. Goldcorp also discovered a new 5.4-million-ounce resource of ore within the (previously closed) 105-year-old Dome Mine last year.
As such, Timmins attracts those looking for job opportunities, in addition to business and real estate investors. To add, the medical facilities, regional transportation, and recreational options are improving and expanding within the region, making it a popular locale for tourists and prospective residents. Timmins is also one of the cities participating in the Rural and Northern Immigration Pilot, which encourages and assists skilled foreign workers to achieve permanent residency. In the coming years, migration into Timmins is expected to result in a decreased vacancy rate.
Because of its ties to gold, Timmins is expected to fare well in the face of economic turmoil, as it did during the global financial crisis in 2007 and 2008. During that time, gold prices remained high and so the downturn had little negative effect on the health of Timmins’ economy.
By the Numbers:
- In Timmins, 4.1 percent of the population is foreign-born.
- In September 2020, sales reported totalled 178 units, setting a new sales record for the month. That’s an increase for 41.3 percent from the year prior.
- There were 209 new residential listings in September 2020, which is an increase of 24.4 percent, year-over-year.
- The average price of homes sold in September 2020 was $195,835. That’s an increase of 18.9 from September 2019.
- As of January 2020, the average rent for an apartment in Timmins is $1025, which is a 34.15 percent increase from the year prior, according to data via Rent Jungle.
Kitchener-Waterloo is home to prominent post-secondary education institutions—including University of Waterloo and Wilfrid Laurier University—and is experiencing significant growth in the arenas of tech, health care, and public infrastructure. Speaking to the latter, the region has plans for a GO train expansion, which will add more trips and new stations.
One of the most influential factors that will impact the Kitchener-Waterloo housing market is its burgeoning tech start-up scene, which began to gain momentum around the time Blackberry was incepted in the region. Though the pandemic certainly took some toll on Kitchener-Waterloo’s job market, technology jobs have fared well, rendering the region’s job market healthier than many other Canadian cities.
In addition, a new Highway 7 will be built to connect Guelph and Kitchener, improving access to Ontario’s innovation corridor for people living in Guelph and working in Kitchener-Waterloo. The project, which will also include the addition of new bridges over the Grand River, could begin as early as 2021. To add, the Region of Waterloo plans for forge ahead with all 46 of its major construction and road projects slated for 2020, in spite of the effects of COVID-19. These include Fisher-Hallman Road reconstruction and the King Street reconstruction.
By the Numbers:
- From mid-2018 to mid-2019, Kitchener-Cambridge–Waterloo observed the strongest population growth by CMA of all metropolitan areas in Canada, at 2.8 percent. This number is driven by both international immigration and interprovincial migration.
- According to the most recent census in 2016, there were 118,615 immigrants in Kitchener-Cambridge–Waterloo, making up about 23 percent of the region’s population. Between 2011 and 2016, the region welcomed 13,975 immigrants.
- Approximately one in ten homes sold in the Waterloo region are either flipped for profit or leased out, with the most short-term sale and investment activity observed in Kitchener.
- 758 residential homes were sold through the Kitchener-Waterloo Association of Realtors in September, which is the most ever recorded for the month. This number represented an increase of 8 percent compared to August 2020 and 41.6 percent compared to September 2019.
- Most notably, sales of condominium apartments were up 127 percent compared to the year prior.
- The average sale price of all residential properties sold in September increased by 17.5 percent to $637,691, compared to the previous year.
- As of September, Kitchener sat at the highest rent appreciation in the country for apartments and condominiums, with one-bedroom spaces in Kitchener increasing by 12.8 percent since last year and two-bedroom spaces increasing by 18.8 percent.
- Kitchener-Cambridge-Waterloo’s vacancy rate sat at 2.1 percent in 2019.
- The five-year annual ROI in Kitchener-Cambridge-Waterloo sat at 8 percent as of 2019.
As families are priced out of the GTA, multifamily offerings in Windsor pose a cost-effective alternative for those looking to rent or own. In addition to affordable housing prices, Windsor boasts a strong rental market.
In recent years, the city has seen major growth—in part, due to large infrastructure projects. This extends to include the construction of the Gordie Howe International Bridge, which will connect Windsor to Detroit, and the proposed Windsor-Essex Hospitals System. This kind of development speaks to the strength of Windsor’s market in the years to come.
Last month, Windsor realtors proposed a land transfer tax holiday, which will render the housing market more affordable for buyers. In an article in the Windsor Star, Damon Winney, president-elect of the Windsor-Essex County Association of Realtors, says, “I think that land transfer tax holiday as well as maybe the increase in the rebate will allow more people to move through the chain and increase demand at the lower level so we can get more first time home buyers into the market.”
By the Numbers:
- 1 in 4 residents in Windsor-Essex is an immigrant. The total newcomer population in Windsor-Essex is 21 percent.
- Windsor was the top Canadian city to buy real estate in 2019.
- In 2019, Windsor’s average price of a home at $313,000, and its five–year annual ROI was 11 percent.
- Sales activity in September 2020 increased by 44.2 percent from the same time last year.
- The average price of homes sold in September 2020 was a record $419,711—up 29.6 percent from September 2019.
- There were 1,034 new residential listings in September 2020. This was the largest number of new listings added in the month of September in more than a decade.
- Cap rates in Windsor are at a high of 5.5 percent for A-grade apartments, and 6.25 percent for B-grade apartments.
- The average rent for an apartment in Windsor was $1856 in September 2020. That number is 6.25 percent increase from the year prior.
- The vacancy rate in Windsor dropped from 13.9 percent in 2008 to 2.6 percent in 2019.
- The proposed Windsor-Essex Hospitals System will generate more than 12,800 new full-time jobs. To add, the project will contribute $1.73 billion to Canada’s GDP, with more than $1.57 billion accrued in Ontario alone.
London is home to the University of Western Ontario, Fanshawe College, and Westervelt College, which pose attractive opportunities for academia and employment. Meanwhile, the region’s hospitals boast nation-wide prominence and provide opportunities for employment, residency, and volunteering. For example, between 2019 and 2020, the London Health Sciences Centre accommodated nearly 15,000 staff, physicians, students, and volunteers.
London also boasts repute for being bourgeoning a tech hub, with a special focus on the digital segment. Large players from the tech space, such as Autodata Solutions, Start.ca, InfoTech, Voices.com, and Mobials have been drawn to London for reasons ranging from great space options, lifestyle amenities, and a lower cost of living.
The city’s thriving tech scene is to credit for much of the construction and infrastructural improvements underway in the city, particularly in downtown London. London currently has 17 major construction projects underway, and another 17 upcoming.
The cost of living in London is lower compared to other cities in Southern Ontario, which makes it a feasible alternative to living in Toronto, particularly for families and first-time buyers. In London, the demand for affordable rentals is high, particularly in the multifamily segment, as homeownership costs continue to rise across the board.
By the Numbers:
- From mid-2018 to mid-2019, London observed a 2.3 percent population growth by CMA. This number is driven by both international immigration and interprovincial migration.
- In 2019, 3,330 immigrants settled in London, which was the highest number in the last five years.
- September 2020 achieved a record for residential sales: 960, up 25 percent from the previous year.
- Though the market is still recovering from the effects of the pandemic, the average price for homes sales sat at $521,883 in September 2020, up 20 percent from the previous year and 98 percent from five years ago.
- Cap rates in London are at a high of 5.5 percent for A-grade apartments, and 6.25 percent for B-grade apartments.
- London saw a 6.4 percent increase in rents for one-bedroom units (year-over-year), as of October 2020. For two-bedroom units, the year-over-year increase was 20.8 percent. A high number of listings from new purpose-built rental apartment projects in the region pulled the average rent up.
- As of June, average monthly rents for one-bedroom units had risen by 3.4 percent compared to the previous month and 21.1 percent compared to the previous year. For two-bedroom units, rents rose by 3 percent compared to the previous month and 18.4 percent compared to the previous year.
- The vacancy rate in London has been steadily dropping since 2009. As of 2019, it sat at a record low of 1.7 percent.
- London’s digital sector includes more than 300 companies and employs more than 9,000 people. Last month, London added another 4,200 jobs to their local labour force, according to data from Statistics Canada.
- Since June, London has added more than 22,000 jobs.
- The five-year annual ROI in London sat at 9 percent as of 2019.
The economy of Brantford is driven by its manufacturing and distribution industries. Brantford’s film, television, and digital media sector is also growing.
In 2018, a year-end economic update report revealed that Brantford added 15 new industrial firms—a move that created 194 new jobs. Also in 2018, the Brantford-Brant Business Resource Enterprise Centre conducted 876 business consultations with new entrepreneurs and existing small business owners, which resulted in 246 new business start-ups and the creation of 397 new jobs. That same year, Tourism Brantford hosted 112 different sporting events, which drew 34,000 attendees to the city, contributing roughly $5.9 million to Brantford’s economy.
On the housing side of things, meaningful supply is underway to keep up with the rising demand for affordable housing. The city’s 10-year capital plan includes housing builds over the next three years at 170 Trillium Way in Paris (50 units) and at 346 Shellard Lane (70 units). Additionally, a project on running from West Street to Charing Cross to Galileo, headed by Zahlco Developments and Amuka Developments, is in the works. The project will add 160 to 200 housing units and at least 100 rental units.
This year, Brantford has issued permits for alterations and improvements to a number of manufacturing plants, warehouses, apartment buildings, medical clinics, and public works buildings throughout the city.
By the Numbers:
- Brantford was ranked the third-best Canadian city to buy real estate in 2019.
- The municipality boasts a 10-year growth rate of 12.8 percent.
- The municipality’s advanced manufacturing industry employs over 2,100, while its food and beverage manufacturing industry employs approximately 2,300. Brantford is also home to over 40 warehouse and distribution companies servicing major cities across Canada and the United States, which employ approximately 1,500 workers.
- According to the most recent census in 2016, there were 16,465 immigrants in Brantford, accounting for 12.5 percent of the population
- The average price of homes sold in September 2020 was $532,267, which was an increase of 23.1 percent from the year prior.
- Sales of all property types hit 255 units in September, rising by 42.5 percent from the previous year.
- For the first seven months of this year, the city of Brantford issued 678 building permits valued at $158.8 million. That number is above last year’s total of $114.2 million (700 permits) for the same period.
- So far this year, 25 building permits have been issued for industrial projects, 220 permits for single-detached homes, 12 permits for multi-unit homes, and 359 permits for residential improvements.
- Brantford has a vacancy rate of 2.4 percent. The average rent in the city is $1,046.
- The five-year annual ROI in Brantford sat at 9 percent as of 2019.
Sault Ste. Marie – “The Soo”
Sault Ste. Marie touts an affordable cost of living, owing to factors such as their affordable rental market and local sources for water filtration and electricity. The Sault Ste. Marie area generates most of its electricity from clean, renewable sources like solar, wind, and hydroelectric generation. The region also boasts excellent connectivity to other destinations through rail lines, waterways, the Trans-Canada Highway, and an international airport.
In terms of employment in the region, many people in Sault Ste. Marie are employed by the provincial and federal governments. Some examples include the Ministry of Natural Resources, the Ontario Lottery and Gaming Corporation, and the Canadian Forestry Service. Other prominent and growing sectors include agriculture, the arts, and technology.
Entrepreneurship in Sault Ste. Marie is also strong, supported by the Sault Ste. Marie Innovation Centre’s incubator. The centre accommodates projects in the areas of alternative energy, bio-products, water, agriculture, invasive species, video gaming, community geomatics, health informatics, and technology business development. Notable employers include PLATO Testing, Essar Steel Algoma, Algoma Games, Algoma University, and Sault College.
Sault Ste. Marie is also one of the cities participating the Rural and Northern Immigration Pilot. In October, two skilled immigrant workers in Sault Ste. Marie were the first in Canada to receive permanent residency through the program.
By the Numbers:
- The average price of homes sold in September 2020 was $209,785. That’s an increase of 23.4 percent from the year prior.
- As of September, sales of all property types totalled 266 units, rising by 43 percent from the previous year.
- Sault Ste. Marie has a vacancy rate of 4.9 percent.
- The average rent in Sault Ste. Marie was $849, as of October 2019. As of February of this year, the average rent in the city increased to $1,063.
If the promising conditions of real estate in the GTA and surrounding submarkets have piqued your interest, I recommend moving fast on those fleeting investment opportunities. At Crescendo Equity, we identify and research hundreds of properties, using data models and extensive personal experience to secure opportunities that demonstrate solid long-term fundamentals and attractive relative pricing. Get in touch to learn how our team of dedicated senior real estate investors can help you secure the right investment opportunities for you.