Real Estate is a Proven Tool to Fight Inflation

Real Estate is a Proven Tool to Fight Inflation

By Condo Culture

Pictured above: An exterior rendering of The Jake in Waterloo.

So, what exactly is inflation? Simply put, inflation is the rate at which the value of a currency is falling in relation to the rising prices of goods and services. Every economy experiences some level of inflation on a consistent basis, and everyone is taking notice of the rapid rise these days based on the impact on our daily lives (i.e. the price of gas).

Inflation is Top of Mind For All of Us

High inflation is everywhere you look and prices are going up across the board as a result, from groceries, fuel for vehicles, durable goods such as furniture, and everything in between it seems like. In fact, in April of this year, Canada’s inflation rate rose to 6.8% which is the highest in some 31 years.

So why exactly has inflation dramatically increased in recent months? High demand for goods and restricted supply. During the pandemic, the Bank of Canada made it easy and cost-effective to borrow money, and even provided money to large amounts of people through programs such as the Canadian Emergency Response Benefit. Lockdowns limited what people could buy and many households ended up saving more than usual. In parallel, the pandemic and lockdowns also forced factories to shut down and disrupted supply chains - impacting the supply of items that people wanted to purchase.

As we return to our normal lives with pandemic restrictions easing, we are seeing more regular office commuting happening, dining out again, going out to social events, purchasing new cars, flying to the destinations we love, and essentially sparking pent-up demand for all types of products and services which unfortunately squeezes supply and drives up inflation.

Real Estate Works Well With Inflation

It’s well documented that real estate has performed well during periods of inflation. Not only does real estate have intrinsic value (value of the land + replacement cost/construction costs) but rent and property values tend to appreciate with inflation. Home prices tend to organically rise over time and that lowers the loan-to-value of any mortgage debt. Demand for homes will always exist, and as populations increase over time, so too does pricing. With increasing uncertainty and confidence in the current economic system, we see that more people are looking at trending options including real estate investments, cryptocurrency, and others.

If you own properties and bring in rental income, the rapid price increase in homes directly translates into being able to get a higher rental amount for each unit. If your mortgage payments remain the same over a few years but you’re able to increase rent every year, then your cash flow steadily improves. Real estate investments are a solid addition to one’s overall investment portfolio, and financial advisors are recommending this asset class increasingly more to their clients.

Unit 1104 at 181 King Street Circa 1877 Waterloo

Pictured above: Unit 1104 at Circa 1877 in Uptown Waterloo.

Rental Income Continues Rising

Some people who had intentions of buying a home have gotten squeezed out of the market over the past year or two due to sharp price increases. It’s no wonder then, that we have witnessed the rental market skyrocket in the KW area with one-bedroom condos now exceeding $2,000/month. Supply on both the resale and rental side is minimal while demand for both is high, so it has driven up pricing across the board.

We are now seeing record levels of demand and vacancy rates are very low, so expect to see strong rental growth for the foreseeable future - especially from the Millennial and Gen Z demographics. Rental income is strong for investors, volatility is historically minimal, and real estate has typically had low correlations with stocks and bonds. Financing is readily available for resale properties and pre-construction projects, and mortgage rates are still quite low compared to decades past.

Station Park exterior rendering in Kitchener Pictured above: Station Park DUO - phase 2 of the Region’s Premier Condo Development.

The economics and fundamentals of real estate signal that investments in these products can help protect against rising inflation. We recommend having a balanced portfolio and increasing your exposure to real estate is worth considering, but we do recommend that you consult with your financial advisor so you can learn how it fits into your long-term strategy.

Unlock Investment Potential

There are numerous investment opportunities out there to explore right now on both the new development and resale side to help offset inflation.

In terms of great value and strong upside appreciation, two of the best local projects are Moda and The Jake where units can still be purchased for under $500K. Purchasers can take advantage of 15% deposits spread out over a number of months and not have to come up with the final 5% until after the buildings are built, all the while taking advantage of market appreciation during construction.


Moda Waterloo Interior rendering

Moda is a fabulous mid-rise luxury building in Waterloo’s highly sought-after Westmount District. These units are well priced and make for outstanding value plays - even the gorgeous lofts can be purchased for under $600K in addition to the 2 bedroom condos, and the 1 bedrooms start in the mid 400’s.

This building will offer a co-working space, bike maintenance and cleaning, a pet wash station, underground and surface parking, an electronic parcel room, and lockers for those who need additional storage.

The stunning structure will reside just five minutes from Uptown Waterloo, so quality restaurants, bars, cafes, and shops are all nearby.

The Jake

The Jake Waterloo Interior render of living room and kitchen area

Another intriguing pre-construction project to take a close look at is The Jake in North Waterloo. 1 bedroom units can be purchased in the mid $400’s - offering great value to investors. The building will feature a Peloton studio and a luxe lobby lounge.

The location here is solid with the LRT just a 6-minute walk away, St. Jacobs Farmers Market, Starbucks, State & Main, The Crazy Canuck, Sobeys, Rexall, the Laurel Creek Conservation Area, Pinebrook Park, and so many other public amenities are within the immediate area.

109-338 Albert Street

109-338 Albert StIMG 33498

If you’re looking for a positive cash flow investment opportunity RIGHT NOW, then unit 109 at 338 Albert Street will be of interest to you. Less than 5 years old, this townhome has 1,600 square feet, 3 bedrooms plus a den, 3 bathrooms, a private balcony, and an exclusive parking spot. The unit comes FULLY FURNISHED, and offers a turnkey opportunity for positive cash flow. This home at IVY Towns is steps to the University of Waterloo and Wilfrid Laurier University, so it’s an ideal location to attract the interest of prominent students looking for a nice place to lease, along with young professionals and families also.

Do you own a unit(s) that needs tenants? Then be sure to leverage Condo Culture’s tenant placement service to help find the perfect tenants and secure top rental values.

Work With Condo Culture to Succeed

We are condo experts in the Waterloo region and beyond, and have helped countless clients thrive by making lucrative purchases and investments. We would love to work with you and help you achieve all of your amazing condo goals - reach out online or visit our Uptown Waterloo store at 191 King Street South to have a conversation with our insightful team.

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