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The Market is Changing – Is Real Estate Still a Good Investment?

Tuesday April 19, 2022


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Browse any major newspaper, and an article about the real estate market nearly always pops up. Why is this such a hot topic lately? Housing prices have soared at an astounding rate, yet more people are trying to buy a home than ever. Homeowners aren’t selling, either, as indicated by the historically low availability of properties for sale. 

Recent legislation and rising interest rates have started to change things. As the interest goes up, the high cost of borrowing may deter some potential buyers. This means more properties are available for those still in the market, along with a drop in housing values. The provincial government has also raised the foreign buyer’s tax from 15% to 20% in an attempt to discourage speculation in the housing market. 

This combination of events may start to impact the market later this year. Nevertheless, there is a burning question many people are asking: 

Is real estate still a good investment in 2022?

The days of wild price increases seems to have come to a close, for now. There are more interest rate hikes to come, which will make it more expensive to borrow money to finance investment purchases. This means risky ventures like house flipping may become less profitable. However, there are still many opportunities for long-term investors. 

There are many pre-construction projects in the works, which represent a unique opportunity for the right kind of investor.
Find out everything you need to know about assignment sales here.

Here are other types of investments most likely to succeed in 2022 and the years to come:

Home Equity Renovations

Unlike other real estate investments, renovations won’t provide immediate cash flow. However, they are a great way to grow your equity. Some upgrades don’t cost much but can add significant value to your home. The natural appreciation of value over time combined with value-added renovations are a simple and relatively risk-free way to build your net worth. If you keep the house, your equity will continue to grow over time, expanding your borrowing and purchasing power. If you ever decide to sell your home, you stand to see a significant return on investment, and you will be well-positioned to buy a new property.

What upgrades add the most value to your home? Find out more here.

Rent a Room in the House

Do you have an extra bedroom in your home that no one ever uses? This extra space can generate a monthly income stream for you without much work or expense to prepare. With rental prices going up, many people are looking for lower-cost solutions. Of course, renting a room to a stranger isn’t for everyone, but you can always try to get creative. Perhaps an extended family member is attending a nearby college or university and needs a place to stay. Renting to someone you know might feel much more comfortable. This income can pay down your mortgage faster and help build your equity.

Build a Secondary Suite

If you have a finished basement, you can make some upgrades to turn it into a completely separate apartment. For a unit to be legal, it has to meet provincial requirements, including:

  • Meet fire code standards and a second means of escape
  • Have a ceiling height of at least 1.95 metres
  • Heating, cooling and electrical that has been approved by a licensed electrician

We recommend having a home inspector or fire prevention officer visit the home to ensure all codes are met. In addition, you’ll want to make sure you have all of the required permits before renovating. The to-do list of building a legal unit may seem like a lot, but it can pay off very well in the long term. A house with a separate apartment will quickly rise in value, and the rental income will cover all or most of the cost.

Build a Coach House or Garden Suite

New provincial laws make it easier than ever to generate rental income through a secondary suite right on your lot. A garden suite has many advantages over a basement apartment, including more natural light, reduced noise and increased privacy. Plus, these suites are modern looking and just plain beautiful! 

You couldn’t add a garden suite in the past unless you had laneway access. However, now you just need enough yard space to build a 400-600 square foot permanent residence. 

The upfront investment is significant, but the combination of rental income and equity growth will pay off in the long run. Another advantage is you can always rent the unit out to a family member or older relative who is downsizing.

Tap Your Equity to Purchase a Second Home

Buying a second property is quickly becoming one of the most popular investments in Canada. In fact, it’s estimated that up to 20% of new home purchases are by investors, not residents. How can you break into this market? 

If you have equity in your home, you can borrow against it to fund the down payment of a second property. What are the risks? Carrying two mortgages can be taxing if you cannot find a renter for your property. However, the high cost of purchasing a house means more people are renting, making it easier to find long-term, high-quality tenants.

Is it Time to Cash in Your Investment?

Housing prices have soared in the last couple of years. Still, all signs point to a stabilization and possibly even a slight cooling in the market. What does this mean for you as a homeowner? If you bought your property even a few years ago, you’re in a position to see an excellent return should you decide to sell. 

Want to know more about selling in the current market? Here is some food for thought:

Are you ready to get started as a real estate investor?
We are here for you and happy to answer any questions you may have.


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