The Bank of Canada, which had initially underestimated inflation in 2021, is now admitting that it’s a real problem as inflation is predicted as inflation is expected to hit an eye-popping 8% for the middle quarters of 2022. Bruce Strebinger, who has spent his career in real estate development, offers insight to help Canadian real estate investors make smart business decisions during this trying time.
Strebinger notes that inflation is putting off some potential investors who want to wait things out. This means that those who do jump in on the market will have less competition than in times past. What’s more, real estate investors can, thanks to inflation, turn a higher profit than in times past if they know which properties to buy. Strebinger recommends residential real estate as it is likely to be in demand even as prices and mortgage interest rates rise. After all, everyone needs a place to live, and rental prices can be steadily raised year-on-year to keep pace with rising inflation rates. Luxury real estate can also be a profitable investment, but buyers should not expect such investments to turn an immediate profit. Strebinger Vancouver pointed out in late 2021 that the luxury real estate market was already beginning to cool and sellers were compelled to provide additional amenities and perks to buyers in order to make sales.
Furthermore, Bruce Strebinger also points out that some forms of commercial real estate investment could be highly profitable in this market as well. Industrial properties can be a good buy, and real estate investment trusts (REITs) are also performing well. Mall real estate and real estate to be leased to small stores, on the other hand, is best avoided. Small businesses may struggle to lease such space and/or decide to set up an online-only venture in order to maximize profits, leaving an investor with an empty property. Property development is also a risky investment as inflation combined with persistent supply chain shortages pushes up the price of construction materials needed to complete development projects.
As a seasoned investor, Bruce knows that dealing with rising inflation rates can always pose challenges. It affects many real estate investments negatively by lowering values and decreasing demand. However, he encourages investors to look for the upside in the market, as inflation can also boost the profitability of certain investments. Investing in residential real estate and renting it out can be quite profitable in the current environment. Industrial real estate is also in high demand, and REIT profitability is growing steadily alongside inflation. There are also long-term investment opportunities, such as luxury real estate, that could turn a significant profit as long as the buyer is willing to wait for market conditions to improve. Bruce Strebinger urges would-be investors to consult experts in their chosen market, including local agents, real estate attorneys, lenders, and contractors, in order to accurately determine how much money to invest in any given project and to identify the best possible investment opportunities in any given area.
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