Residential real estate has been a popular investment vehicle for both individual private investors and big institutional investment funds since 2008. However, new trends and regulations within the residential real estate markets, could push more investors to commercial property investment in 2017.
The Airbnb Crackdown
Local governments are beginning to push back hard against Airbnb. While the startup has gained great traction, it has also been blamed for the rocketing property prices, eliminating affordability, and driving out residents and keyworkers from cities. In Miami, Florida local real estate expert Kaya Wittenburg says authorities are trying to levy fines of as much as $30,000 per day for violations involving Airbnb.
In Ontario, a new 14-page court ruling gives new powers to condo buildings to ban Airbnb activity. This could limit the momentum of this recent Airbnb movement, which has resulted in property prices reflecting the ability to rent out units at the equivalent of daily hotel rates, or more.
BC to Subsidize New Home Buyers
With housing prices high in British Columbia, the local government has rolled out a new program offering interact and payment free loans to assist first time home buyers with down payments on properties up to $750k. It’s definitely a sign of how high prices have become, and could potentially have some impact on single family rental property operators who are competing for the same customers.
Higher Interest Rates
The US Fed just raised interest rates and plans at least three more rate hikes in 2017. Analysts expect the impact to roll over to Canada and increase costs here as well, which could influence a variety of expenses including mortgages.
The Benefits of Commercial Real Estate Investment
Commercial real estate could benefit as more investors restructure their portfolios, which could increase competition for income producing assets with good yields and capital appreciation potential. Of course, the best gains will clearly go to those who are among the early movers. However, the savviest will still seek assets which are priced right and have value add potential.
Things are changing in the residential real estate space, as new trends and rules could make it tougher for single family investors. This could add to the appeal of commercial real estate, as property values are poised to grow well in 2017, with the most to be earned by the earliest investors.