A New Advantage for Real Estate Investors

With interest rates rising and sales of new homes dropping along with their prices, you might be thinking of selling the property you own. But here is something new you need to consider.

Building a new home or rental property is becoming difficult, if possible. Strict regulations and the inability to get financing and pricing for materials and labour have meant fewer homes are being built yearly. In Canada, some 45,000 construction workers LOST their jobs in July alone.

Fewer homes are being built and it’s getting harder to build them.

If you own a building that people live in, you have a huge advantage now. It’s called a barrier to entry.

For someone else to start today, to try to own the building(s) you own would be almost impossible.

It can take 3-5 years to get building approvals in most cities and some small towns even longer.

People talk about needing more affordable housing, but no one wants it in their neighbourhood.

Banks are making lending even more difficult because they don’t care who you are or your history with investing. They simply make it known that certain sectors are no longer without excessive risk and stop loaning out money. Mortgages for rental housing are becoming one of those areas.

The government lending arm, CMHC, recently announced that they are experiencing delays in approving mortgages stopping developers in their tracks. They attribute it to “unprecedented” demand, but I suspect it’s due to the lack of productivity of working from home, juggling a mortgage application with a dog and two-year-old on your lap.

The barrier to entry is now a key advantage to owning real estate. It’s going to get much worse. Eventually there will be more demand than we have supply as just over 200,000 homes are built in Canada each year, but over 500,000 new Canadians are welcomed in. Where will they live?

Governments are ensuring that this barrier to entry stays with us for decades. They are confused about approving development land as it is believed that this conflicts with environmental protection. Government rent controls have also resulted in uncertainty in the industry and a greater barrier to entry to rental properties with market rents.

The barrier to entry is the new changing factor increasing the value of real estate as an investment today.  What a great random event for real estate investors.

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