Finding Canadian Growth Cities

[nepoez]

As "negative" as Jack is, I as a new investor also share the same fear regarding oil. Can the experts please provide some insight?
QUOTE (Jack @ Dec 24 2008, 06:53 AM) Not sure, yet, but I`m sure that there`s a city out there that will give me a better return over 5 years than Calgary. That`s what I`m trying to find. Do you not agree that with it`s deep ties to the oil sector, Calgary`s at a pretty significant risk for job losses and wage declines? And, if these do, indeed, happen, the next effect is probably more properties being listed, and people migrating outwards looking for work/life elsewhere. Certainly not everybody is predicting another run-up in the oil price to $100. And it`s only about 12 - 18 months until the Chevrolet Volt comes out - no gas needed for the first 45 KM`s of charging it (or something like that). Think that`ll at all be a growing trend in the next few years? Um, yes.

Politically, Obama`s also not a fan of the "dirty" oil of Alberta, certainly nor is the Energy Minister that he appointed, who`s really anti-oilsands.

These are all real risks that you need to consider when considering Calgary. And is the upside worth it?

 

[terri]

QUOTE (nepoez @ Dec 24 2008, 12:51 PM) As "negative" as Jack is, I as a new investor also share the same fear regarding oil. Can the experts please provide some insight?

Fear can be a good thing. I don`t know a lot about Western Canada, but I know that something to consider when analyzing an area is diversification of industry, ie. I seems to be a commom concept that you don`t invest in areas that rely solely on a single industry, like forestry for example. What else is there in the town that you are investing in besides oil?

 

[GarthChapman]

Read the book "A Thousand Barrels a Second" by Peter Tertzakian.

Peter has an undergraduate degree in Geophysics from the U of A, a graduate degree in Econometrics from the University of Southampton, U.K, and a Master of Science in Management of Technology from the Sloan School of Management at MIT. He is is the Chief Energy Economist and a Director of ARC Financial Corporation. If you know who they are and the history of the family behind Arc you will recognize the credentials and his background as about as solid as they come.

This book will give you a new perspective on oil and gas demand and capacity. What we are experiencing now is short term - this too shall pass.

Again, let`s stop fixating on the headlines of the day and focus instead on the the long term outlooks. By all means adjust your sails, but not by the minute.

 

[Jack]

QUOTE Again, let`s stop fixating on the headlines of the day and focus instead on the the long term outlooks.

IE, the Chevrolet Volt and other electric cars.

I wonder what Mr. Tertzakian`s take on that trend is?

 

[Thomas Beyer]

QUOTE (Jack @ Dec 24 2008, 07:53 AM) Certainly not everybody is predicting another run-up in the oil price to $100. ... electric cars ... Obama ..
indeed .. there are many more who think it will be well over $200 !!

with all the cutbacks in energy production (coal, gas, oil) due to low prices we will have a shortage of reasonably priced energy in 2-3 years again ! Indeed until 2010 / 2011 Alberta`s growth will be flat`ish .. but watch out for a sharp rise in 2-3 years, possibly earlier .. then the same lamenting as 2004-2006: labor shortage, high rental rates, steep house prices, low vacancies, gas is too expensive, we need smaller cars, we need more wind energy ... and comments such as "boy, I should have bought some real estate in 2009 or 2010 when it was so reasonably priced ..."

electric cars are great .. but here are some drawbacks:
a) someone has to produce the electricity .. coal fired plants perhaps .. is this cleaner than nuclear or gasoline derived from oilsands, for example ?
b) batteries are poor energy storage devices per pound of weight or per cubic centimeters .. much more energy is storable in gasoline per same volume .. thus more frequent re-charges or swaps
c) thus a huge infrastructure of swappable battery stations needs to be created .. plus standards on batteries sizes .. so for example: you drive from Canmore to Calgary, swap, then to Red Deer, swap, then to Edmonton, swap, then back .. 5 - 6 swaps for what is doable today with one tank of gas of an efficient gasoline powered vehicle ! all doable and all will be done .. but give it a decade or 3 .. and gasoline @ $10/gallon or $4/litre .. then an electric car makes sense
d) do they work well in cold weather at -30 ?
e) what to do with all those old batteries, how do you recycle all those dirty batteries full of dangerous metals like nickel, cadmium, acid ?

The one thing Obama should do to encourage green energy: raise fuel taxes massively so that a gallon costs at least $5 or better: $10. Likely he will not do that .. so why invest in wind energy or solar or batteries if the average American can drive a huge pickup truck @ $2/gallon with more comfort ??

Calgary (and Edmonton and Red Deer ..) will do just fine .. yes, there is a short term oil price drop for the next year or maybe 2 (although I doubt this long) .. a blip really in the grand scheme of things .. and yes, oilsands development will cost even more due to tougher environmental legislation in US and here and thus will need even more jobs in AB but will stretch out employment out for even more decades .. less spikes .. more long-term .. better for AB even with some (severe?) short-term pain !

 

[GarthChapman]

QUOTE (Jack @ Dec 24 2008, 02:36 PM) IE, the Chevrolet Volt and other electric cars.

I wonder what Mr. Tertzakian`s take on that trend is?

Read the book and you will learn how he sees it. These other products are coming and he does a good job of fitting all the pieces together to help you to understand how it will likely evolve.

 

[housingrental]

Ontario = Waterloo to Binbrook to Newmarket to Scarborough

Kingston is great, but why settle you know?


QUOTE (Jack @ Dec 23 2008, 09:19 PM) January 2007. Calgary. It hasn`t done well.

Reason for investing? Had some money, always liked real estate, probably over-confident from a similar purchase in Calgary in August of 2005 which did very well (as did everything).

Adam - what`s your take on Kingston? You say "Ontario", are you talking Waterloo only?

 

[Jack]

QUOTE Calgary (and Edmonton and Red Deer ..) will do just fine .. yes, there is a short term oil price drop for the next year or maybe 2 (although I doubt this long) .. a blip really in the grand scheme of things ..

Thing is, if you run the numbers, it`s not really a "blip". It`s a killer to your yield.

So if values in Calgary have gone down 10% YOY, and if we all agree that things will be basically flat for the next two years (small drop in `09, maybe a small raise in `10), you`re still down 10% and you`ve held the property for 3 years. So if the market goes up 5% in `11 and 5% in `12, congratulations, your property is now worth what you paid for it 5 years ago. In other words, all you`ve gained is mortgage paydown, and maybe a small amount of cash monthly, both of which are quite easily offset by selling costs.

This means that if you`ve done a JV, you`ve essentially worked for free for 5 years. Good deal?

 

[Jack]

QUOTE Kingston is great, but why settle you know?

So, you`re saying that Waterloo is the place to invest in Ontario?

 

[21krunner]

Well presents wrapped ...... just checking on the conversations. And let me say that the phrase "some assembly required" may be among the most misleading of all time.


There is a school of thought that many secondary/tertiary cities in Ontario will outperform the larger centres over the next 5- 15 years (in terms of appreciation). The concept being that as the baby boomer generation become empty nesters and retire they will both downsize and migrate to less expensive regions as a mechansim to unlock the equity they have built up in the primary residence. If I recall correctly the article was pro Niagara, Barrie etc. Obviously less so for the GTA, Ottawa/Kanata

I also think the centres with larger student populations relative to the general population (London, Waterloo) would never be a horrible choice since that implies a somewhat steady stream of new renters to consume the lower end etc.

Comments

 

[TodorYordanov]

I think that after 100 to 200 additional posts to this discussion we may come up with the top 10 towns for Ontario.
Don`t be surprised if they are the same as the ones already researched and published by REIN. Why reinvent the wheel?
Are the top 10 towns not enough, or do we doubt the fundamentals and findings?
Does anyone have any better suggestions for beginners?
Yes Waterloo is fine and so are 9 more cities and towns.

I think I am done with investing and posting here.....



for 2008.

Off to a ski vacation in la belle province of Quebec.

Merry Christmas all and much health and success in 2009. Thanks to all for your help in 2008. All who have posted here have somehow helped in my success and I thank you.

 

[Jack]

QUOTE There is a school of thought that many secondary/tertiary cities in Ontario will outperform the larger centres over the next 5- 15 years (in terms of appreciation). The concept being that as the baby boomer generation become empty nesters and retire they will both downsize and migrate to less expensive regions as a mechansim to unlock the equity they have built up in the primary residence. If I recall correctly the article was pro Niagara, Barrie etc. Obviously less so for the GTA, Ottawa/Kanata

Makes perfect sense, to me. Well said, and seems perfectly logical. Equity in real estate probably even becomes that much more important for them to cash out and downsize elsewhere, given the great losses in their RRSP`s/mutual funds in `08.

Question is - does Canada have the mass amount of baby-boomers that the U.S. does? By "mass", I mean relative to the entire nation`s population. If I`m not mistaken, about 1/4 of Americans fit in that category, which is huge.

How much of a phenomenon is the baby-boom generation in Canada? Anyone know?

 

[wealthyboomer]

QUOTE (Jack @ Dec 24 2008, 11:01 PM) Makes perfect sense, to me. Well said, and seems perfectly logical. Equity in real estate probably even becomes that much more important for them to cash out and downsize elsewhere, given the great losses in their RRSP`s/mutual funds in `08.
Question is - does Canada have the mass amount of baby-boomers that the U.S. does? By "mass", I mean relative to the entire nation`s population. If I`m not mistaken, about 1/4 of Americans fit in that category, which is huge.

How much of a phenomenon is the baby-boom generation in Canada? Anyone know?
It`s HUGE! (10 million born between 1946 and 1966)
It is the largest portion of our population, and one that is aging fast. Within a decade senior citizens will outnumber children.
In 2011 the first baby-boom cohort (born in 1946) reaches the age of 65.

 

[GarthChapman]

QUOTE (Jack @ Dec 24 2008, 11:01 PM) Question is - does Canada have the mass amount of baby-boomers that the U.S. does? By "mass", I mean relative to the entire nation`s population. If I`m not mistaken, about 1/4 of Americans fit in that category, which is huge.

How much of a phenomenon is the baby-boom generation in Canada? Anyone know?

Baby Boomers in Canada are a larger portion of our population than anywhere else in the world, including the US, at about 30%. So the demographic influence of boomers here is greater than there. Pretty much all the books on the subject are by US authors but they fit Canada well.

 

[housingrental]

Seems to be but I`m sure you can make money in lots of places - Why not Waterloo?


QUOTE (Jack @ Dec 24 2008, 08:21 PM) So, you`re saying that Waterloo is the place to invest in Ontario?

 

[Thomas Beyer]

QUOTE (Jack @ Dec 24 2008, 06:20 PM) Thing is, if you run the numbers, it`s not really a "blip". It`s a killer to your yield.

So if values in Calgary have gone down 10% YOY, and if we all agree that things will be basically flat for the next two years (small drop in `09, maybe a small raise in `10), you`re still down 10% and you`ve held the property for 3 years. So if the market goes up 5% in `11 and 5% in `12, congratulations, your property is now worth what you paid for it 5 years ago. In other words, all you`ve gained is mortgage paydown, and maybe a small amount of cash monthly, both of which are quite easily offset by selling costs.

This means that if you`ve done a JV, you`ve essentially worked for free for 5 years. Good deal?
that happens if you buy at a temporary peak (such as in mid 2007) !

neither a stock nor real estate goes up in a straight line .. who told you that ?

Real estate with ongoing, monthly cash-flow is a more steady, more reliable, inflation protected REAL asset .. and what we experienced the last 6-7 years from late 90`s to 2007 was just unusually fast and furious .. so the pace will moderate somewhat after a necessary and expected re-calibration of prices down to more normal levels .. just bad timing if you bought mid 2007 and have to exit 3 years from now ... think back 10 or 15 or 20 years from now and think "wow .. is was cheap back then in 2007, 2008, 2009 ... I wish I had bought some more "

 

[terri]

QUOTE There is a school of thought that many secondary/tertiary cities in Ontario will outperform the larger centres over the next 5- 15 years (in terms of appreciation). The concept being that as the baby boomer generation become empty nesters and retire they will both downsize and migrate to less expensive regions as a mechansim to unlock the equity they have built up in the primary residence. If I recall correctly the article was pro Niagara, Barrie etc. Obviously less so for the GTA, Ottawa/Kanata

I`ve also heard the opposite to be true as well, that many empty nesters are moving back (and/or) to Toronto from suburbs or small towns because they want the lifestyle: lots of activities/galleries/theater/ tons of things to do that can be accessed easily by walking or public transit, eliminating the need to drive anywhere or even own a car.

 

[mar]

Has anyone here been to Kingston? Who wouldn`t want to retire there? It`s smaller than a city yet bigger than a town. Traffic is almost never an issue. It`s postcard perfect with many heritage buildings balanced nicely with a cool youth vibe from Queen`s University. There are many excellent restaurants and bars offering exceptional food and great prices. It has relatively mild winters and caters to many tourists in the summer with festivals almost every weekend. Health care is top notch and accessible. All this just a 2 hour VIA train ride from Union station and real estate is very affordable (in most areas of the city). I`ve never met anyone who has been to Kingston that said they wouldn`t love to live there.

I have already placed my bets there...5 of them, with more to come.

Marcus

 

[mrembecki]

QUOTE (Jack @ Dec 25 2008, 01:01 AM) Makes perfect sense, to me. Well said, and seems perfectly logical. Equity in real estate probably even becomes that much more important for them to cash out and downsize elsewhere, given the great losses in their RRSP`s/mutual funds in `08.

Question is - does Canada have the mass amount of baby-boomers that the U.S. does? By "mass", I mean relative to the entire nation`s population. If I`m not mistaken, about 1/4 of Americans fit in that category, which is huge.

How much of a phenomenon is the baby-boom generation in Canada? Anyone know?


Hello Jack,

In regards to baby-boomers I wouldn`t necessarily focus on the idea of them downsizing, at least financially that is. I feel that there will be a large # of boomers who will be buying luxury type homes, in established, conservative neighbourhoods. I say this b/c Canada is a country where it takes a longer amount of time to build wealth (Due to tax, lending restrictions, cultural reasons, etc.). Therefore, I would look for established neighbourhoods in Oakville, Burlington, Etobicoke, Mississauga South, Caledon, Orangeville, Newcastle and Port Hope (if you like the East) to do well. Your going to be dropping more coin, but I feel that these homes will ultimately produce great appreciation w/n the next 8-10 yrs. as opposed to just good.

 

[housingrental]

I strongly disagree with the above post. Aren`t wealthy baby boomers are comfortably equipped and not looking to up size? Why the West side GTA bias? Why anticipate greater appreciation in lorne park than lawernce park?