After a roller coaster ride of market events this year, including the banks increasing interest rates, the rise of cannabis, housing markets cooling down, new mortgage rules, and more; investors are now questioning where to park their money in 2019 and beyond.
If you are among the investors looking for the best potential long-term investments next year, you must start by building a robust and diversified portfolio. Investments always come with risks, but with a strong and diversified portfolio, you can mitigate risks and weather uncertain events. A performing portfolio requires a solid foundation but demands thorough knowledge and diligence.
A recent survey given to market advisors indicated that more than 56% of them are looking forward to a bullish outlook for Canadian equities. This survey is in comparison with last year’s Q3 study which recorded only 47% confidence. Here are some of the investment opportunities with bullish predictions among advisors and sophisticated investors heading into 2019.
One of the emerging investments for next year is liquefied natural gas (LNG), since the official signing of the U.S.-Mexico-Canada Agreement. The Business Council of B.C. forecasted a 2.5% provincial growth for 2019 from its current 2.3%.
Diversified real estate assets
Despite the ongoing challenges and higher prices in some markets, the outlook for the Canadian real estate is optimistic according to the 2019 forecast commissioned by PwC and ULI.
Many investors are acknowledging the necessity to create more value from the properties they own as cap rates compress given higher prices. Choosing the right location and strategies remain to be the primary objectives.
Applying a single investment approach will not work if you invest in Canadian real estate. Each local market is unique, so you will find different housing scenarios and economic growth among each. You may see a surplus in one area while an increasing demand with low supply in another.
Among the surveyed areas, Ottawa surprisingly shines a brighter light with Vancouver and Toronto tailing behind among much higher home to income ratios. Ottawa’s rental market has jumped from 170 units under construction back in 2007 to 1,856 as of 2017. Experts believe that rents will continue rising to all-time highs.
Office and industrial market
Although most real estate properties remain affordable when compared to prices in Vancouver and Toronto, Montreal is experiencing a high level of demand for office and industrial real estate. And, this is expected to rise over the next five years.
Industrial spaces are in higher demand, especially for warehousing, data centres, cryptocurrency mining facilities, and even cannabis production centres. Currently, the overall economic growth is projected to reach 2.2% in 2019.
There is expected growth in the “proptech” (property technology) or financial technology by 2019. Paving the way for younger buyers and investors, the rise of real estate investment apps or online platforms will provide extensive opportunities for investors to jump in on the latest trends and ride the wave of innovative currently going on real estate.
Drones, AI (artificial intelligence), autonomous vehicles, 3D printing, and VR (virtual reality), are the driving forces that can significantly impact the real estate scene next year.
Private lending market
It appears as though for the foreseeable future banks will be unstoppable in increasing interest rates. Further, new mortgage rules require homebuyers to take the stress test to verify their mortgage qualifications. Homebuyers and owners are finding it more difficult to survive these demands, especially those residing in the Greater Toronto Area (GTA) and Vancouver.
These rules and rising rates leave homebuyers with fewer choices like to purchase a less expensive home, stick with your current lender despite bad terms, or turn to alternative lenders.
There has therefore been a rise in consumer interest in private mortgage vehicles. Many investors are now switching focus to the private lending market. They see an overwhelming flow of homeowners turning to these private lenders to refinance their housing mortgages, renovate, and house repairs.
Private lenders typically take on mortgages with a slightly higher risk compared to banks, so they tend to charge higher interest rates of around 7-9% plus between 1.50-2.50% in first mortgage fees. Second mortgages may incur double-digit rates and costs depending on candidate qualifications. This provides for solid investment returns for anyone participating in private mortgage investments.
Another prominent group of borrowers heading to private lenders are real estate investors looking for ways to finance their property developments.
This increasing growth in private lending is notable in areas where there is strong investor presence. Generation X continues to be the top consuming group, reflecting their buying power, in almost every property and mortgage type. They prefer single detached houses which represent roughly 61% of all private lending volume in the GTA.
Generation Z, on the other hand, commences with 17% of the total mortgage value allocated to condos. There is a strong likelihood that the private lending market will continue to rise next year or so, as banks are trying to make every effort to increase interest rates and impose stricter rules. Thus, creating a broader investment opportunity for both new and existing investors.
Work with a private lender
Working with a private lender can be the best way to hedge market risks during turbulent times where the market may seem foggy. Unless you are prepared to devote a considerable time investment into understanding all the nuances of private lending, it is not only a time saver but also comes with less associated risk to work with a trusted private lender.
An experienced private lender like CMI has a track record spanning decades and having underwritten over $200 million in mortgages, sourcing and underwriting private loans becomes second nature. Another challenge with attempting to source deals on your own through a DIY approach is developing a steady pipeline of deal volume to flow your way in order to snag the most opportune deals.
Speak and consult with a private mortgage lending company to become familiar with the qualifications and opportunities.