Windsor ranks among top three Canadian cities for real estate investors

Thursday, June 18, 2015

The Windsor Star/Jesselyn Cook

A new report calls Windsor the third best city in Canada for real estate investment returns — topping Toronto and Vancouver.

Analysts at SpendTree, a Canadian start-up company, looked at residential investment returns for 34 Canadian markets between 2010 and 2015, considering both home appreciation and income potential from renting.

They determined that over the last five years, Thunder Bay, Oshawa and Windsor have been the best cities for real estate investors, respectively.

“There are a few really attractive things about the Windsor real estate market,” said Brian Rutherford, co-founder and CEO of SpendTree. “The first is with investment returns, the cap rates are significantly higher than what you’ll see in the rest of Canada.” He suspects the growing number of permanent jobs in Windsor could be a factor.

In a hypothetical investment scenario, SpendTree analysts determined that if someone had invested $100,000 in a Windsor home in 2010, rented it for five years, then sold it in 2015, the investor would have earned 27 per cent in returns. In Toronto, that number falls to 22 per cent, and in Vancouver, only 12 per cent.

The Windsor property would have yielded $132,099 in income, and $55,300 in capital gains, according to the report. The estimated pre-tax investment returns were based on the assumption that the investments carried a mortgage representing 80 per cent of the purchase price at an interest rate of 3.5 per cent.

Growing property prices in Toronto and Vancouver often overshadow the income component of returns in smaller cities like Windsor, or the potential income to be generated from renting, said Rutherford.

A Canada Mortgage and Housing Corporation report released last month indicates that local homeownership demand is expected to grow this year because of stable mortgage rates, slightly higher net migration, and job growth.

Housing starts will decrease to 780 units this year and remain stable at 785 units in 2016. Existing housing sales will reach 5,700 in 2015 and rise to 5,900 in 2016.

Figures released by the Windsor-Essex County Association of Realtors reveal a 12.08 per cent jump in residential sale prices last month compared to May 2014.

Last May, 531 properties sold in the region at an average price of $185,982. The number of sales climbed to 588 last month, and the average price soared to $208,441.

“If you’re an income-oriented investor, Windsor is a great place,” said Rutherford, who has been investing in local properties for three years.

“I have invested in properties that have cap rates well north of 10 per cent, which, if you talk to real estate investors, is almost unheard of,” he said. “It does exist, and you’re going to find it in places like Windsor.”