Right now, the real estate scene is slow, quiet, and things can be confusing and can get all mixed up. Buyers and investors are making all sorts of crazy moves, but all in all, we’re calling 2023 “Sleepy 23” for our fun and fearless forecast. This year is going to be a sleepy year—for real estate in particular, not the entire economy. As the “big drop” has already happened in 2022, much of it will not pour over into 2023. And while certain properties have come down, NOT ALL property types have and that’s for sure.
So, what’s in store for the coming year?
We see the market slowed drastically because interest rates went up so quickly. Amongst investors as well as homeowners, there is a lot of fear, especially for homeowners who have mortgages coming up. They’re looking at even almost double payments or significant increases in payments.
It is important to keep in mind that interest rates are the biggest and is one of the top driving forces in the market. There won’t be a lot of action unless there is a need to move for reasons such as new jobs, divorce, death, and others… But if you don’t have to move in 2023, given interest rates, you’re just bearing down and the spring market will be very flat. We believe the bulk of the massive rate hikes have already happened in 2022.
The cost of living has gone up, oil prices went up then came down, disposable income has gotten very thin, and do not forget the increase in taxes! All of these things are eating away at that disposable income. Because of this, inflation is a topic that is here to stay. Inflation increases have started slimming out and we believe inflation is still going to be a topic of conversation although not the whole narrative of 2023 unlike how it was for 2022.
Immigration and the Rental Market
In 2022, upwards of 750,000 immigrated to Canada and the demand isn’t going down any time soon. This is part of what drives inflation because as people are coming in, they need a place to live. Because of this, the rental market is going to be strong and is a market investors should consider. However, keep in mind that if you’re if you’re a landlord or a rental housing provider, rents won’t be going up in a big, big way because there’s only so much those rents can go up.
Knowing the Fundamentals and Building Your Smart Premium
Going back to your economic fundamentals in order to become a sophisticated investor is imperative. Here are some important nuggets of wisdom to keep in mind:
- If people don’t have reason to sell, they’re not going to sell. When the inventory stays low, people aren’t going to sell because they don’t want to sell and walk into a higher interest rate. This will backstop real estate values
- Understand your market cycle and economic fundamentals. From there, pick a tactic that matches your market cycle and economic fundamentals based on your particular region.
- Real estate doesn’t fail us; we fail real estate. There’s always a great tactic to apply, if you understand your region, if you understand your market cycle.
This year, sophisticated investors are going to be making very calculated moves in order to progress their real estate portfolio in a big, big way! Focus on obtaining your “smart premium.” These are investments where these factors are present: great tenant, a great location, in a great neighborhood.
There are opportunities where investors could command that premium if they do real estate right by:
- Being thoughtful about how they’re going to attract those deals
- Finding opportunities and knowing when to take action
- Spending time with an investor focused team like Visture Property Management