Hammer Time article

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Hammer time

Hamilton emerges from Toronto’s shadow

By Jered Stuffco

Photos courtesy of Tourism Hamilton

10 www.canadianapartmentmagazine.ca

While red-hot housing markets in Toronto and Vancouver regularly grab headlines, another Canadian city is starting to attract a growing share of attention.

According to industry insiders and observers, optimism and strong economic indicators are making Hamilton an increasingly attractive option for investors looking for lower prices and solid returns.

There was once concern that job losses could result in Hamilton joining other so-called “Rust Belt� cities in the unemployment lines.

But despite losing more than 30,000 manufacturing jobs in recent years, the future looks bright as education, innovation and new families come to the area.

According to Arun Pathak, property manager at Smar Holdings Limited, the optimism is everywhere.

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“The city centre is getting new developments, especially condos and hotels,” he said.

In particular, Pathak points to areas such as St. James Street North, which is undergoing a renaissance led by the city’s vibrant arts scene.

“There is more of a feel of optimism, growth, investment and general improvement,” he said.

Not only does the city occupy a central location at the corner of Lake Ontario—which puts it on the doorstep of the United States and the vibrant Greater Toronto Area—but its natural attributes offer a great variety of lifestyle options.

Likewise, prospective homeowners and real estate investors are looking to the city because of its affordability, location and amenities.

Want proof? Look no further than the stats.

The city of Hamilton lists several project applications for condos, hotels and rentals, including a 412-unit, two tower development at 150 Main Street.

A rental-specific building has been proposed for 275 King Street West, with 29 units.

Meanwhile, a 36-unit building at 50 Murray Street, a 60unit building on James Street North and a massive plan for 85 Robinson Street are also in the works.

In October 2009, the rental vacancy rate was 4 per cent. But in April of this year, that number had fallen to 2.9 per cent, according to the Canadian Housing and Mortgage Corporation.

Likewise, rents have been gradually increasing. Average rent for a two-bedroom apartment in the Hamilton area is now $876.

In 2009, that number was $831.

And according to CMHC projections, average rent will climb to $925 by the end of next year. By comparison, an average twobedroom apartment in Toronto is $1,210.

Big Smoke spin-off Though the prices are climbing in Hamilton, the market is attracting droves of young families, artists and investors from the Greater Toronto Area seeking value.

In fact, the city of Hamilton estimates that the population will swell to 660,000 by 2031, including a growth of 80,000 new households.

Sarah Fong, a senior CMHC analyst who studies Hamilton, agreed that the city is seeing a spillover from Toronto and its environs, but she said it’s coming into its own, as well.

“Hamilton has become more and more of a destination,” she said in a phone interview.

“There are a lot of new developments coming up, especially in the core.”

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Fong noted that for homes, the average resale price in the Hamilton area, which includes Burlington, is $363,000. For Toronto, the price is significantly higher at $508,600.

Not surprising then, that folks are looking to the Hammer.

“I’ve seen more changes in the past two-to-three years, with the downtown being revitalized, with new hotels and condos,” she said, adding that recent surveys have listed Hamilton as a top investment spot.

Fong pointed to a recent report from the Real Estate Investment Network, which listed the city behind Edmonton and Calgary as the third-best investment destination in Canada.

“That really sparked a lot of investors to take a look at what’s there,” she said.

Pathak, the property manager, said that the interest in Hamilton has stretched beyond Ontario and even Canada.

“There is definitely a similar trend in apartment buildings and there are a number of Toronto buyers who have purchased in Hamilton. Realtors are reporting a very high interest in people not only from Toronto but other areas of the country and also other countries,” he said.

While observers say the last two years in particular have seen a host of new projects, the seeds for Hamilton’s growth stretch back to 2001, when amalgamating the old city with a number of surrounding communities created the new City of Hamilton.

Though amalgamation pushed the city’s population over 500,000, many of the old communities have maintained their own vibrant downtown areas and have the feel of intimate village-type communities.

According to many locals, this community patchwork allows people living in these areas to have all the advantages of a smalltown lifestyle and the amenities of a large city.

(Just ask the art fanatics who took part in a recent art crawl through the St. James Street North neighbourhood.)

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Steal city?

Sure, Hamilton is known as the heart of Canada’s steel industry, but these days, the city is just as likely to steal your heart with its stunning surroundings.

Nestled between Lake Ontario’s parks and beaches and the stunning escarpment, locals have plenty of recreation options to choose from, including the numerous parks and conservation areas that follow the 900 kilometre-long Bruce Trail.

The cliffs of the escarpment offer stunning views and have more than 100 waterfalls, which led to Hamilton’s title as the Waterfall Capital of the world.

Throw in the Royal Botanical Gardens, the Canadian Warplane Heritage Museum, the Canadian Football Hall of Fame and various historic attractions such as Dundurn Castle, and you’ll begin to see that there’s plenty to do and see.

The African Lion Safari Park is also a must see for visitors to the area.

For education, McMaster University and Mohawk College are renowned centres of learning, and the McMaster Innovations Park is now drawing tech companies to the region.

There has been considerable growth in Hamilton’s arts and cultural sector with new art galleries, recording studios and numerous TV and film productions taking up residence.

Celebrated Canadian musician Luke Doucet moved to the city from Toronto a few years ago and was so inspired that he wrote an album called “Steel City Trawler” about his new home.

There’s also a solid community of professionals, including a strong number of residential rental property owners and managers who are represented by the Hamilton and District Apartment Association.

With a membership of more than 250 property owners, managers and suppliers to the industry, the association has a strong municipal voice that is illustrated in its ability to connect with the Federation of Rental-Housing Providers of Ontario and the Canadian Federation of Apartment Associations.

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Integrated region and economy While it’s only 80 kilometres from Toronto, regional officials are working to improve transport between the two cities as the region becomes more integrated.

“The Hamilton market is still more affordable than surrounding areas both for ownership and rentals and the purchase of rental units. This also creates demand from people who work in the Toronto direction, be it Burlington, Oakville, Mississauga or Toronto,” said Pathak.

“Currently there is only morning and evening Go Train service to Hamilton, with bus service connecting in Burlington during other hours. There are plans for all-day Go Train service and when they come into effect, this will increase the interest in Hamilton from Toronto residents.”

As Hamilton’s vacancy rate has been dipping, those numbers are mirrored in unemployment figures, which have fallen from 8.4 per cent in 2009 to 6.3 per cent in 2012.

Nationwide, it’s part of a larger trend.

In the CMHC’s Spring 2012 rental market report, the average rental apartment vacancy rate in Canada’s 35 major centres fell from 2.5 per cent in April of 2011 to 2.3 per cent a year later.

A jobless rate better than Toronto’s (6.9 per cent unemployed compared with a rate of 9 per cent in Toronto), in conjunction with new migrants coming to Canada’s major centres, are factors that are supporting rental demand in Hamilton.

“

Hamilton has become more and more of a destination. There are a lot of new developments coming up, especially in the core”

“Immigrants, as well as young workers, usually tend to rent first and then move to homeownership,” said Pathak.

In a report last year, city officials said Hamilton lost 758 rental units since 2001, representing shrinkage of 1.2 per cent of the rental stock.

While 1,489 apartment units were approved for condominium conversion, the Canada-Ontario Affordable Housing Program added an additional 731 additional units.

In an action plan in June, the city said that it needed to create 377 new affordable rental units annually to meet projected growth.

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12-04-09 5:29 PM August 2012 13

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“This annual target is not being achieved, and any loss of rental housing to condominium conversion will compound this deficit,” said a previous housing report that called for even more apartments.

Interestingly, Hamilton is big on rentals—it has a bigger rental market than Calgary, which has nearly twice the population of Hamilton’s 519,000.

In the 2005 census, Hamilton had 61,645 rental households, which represented 31.8 per cent of the total—a larger proportion compared with the provincial average.

While stats suggest that 48 per cent of renters live in secondary rental housing markets, the city has admitted that almost no purpose built rental housing is being created.

According to Pathak, the shortage is also driving up prices—which isn’t technically a bad thing for owners and managers.

“There is a shortage of apartments for sale and prices have been pushed up by that. It is anticipated that rents will continue to increase, allowing for a further increase in apartment building values,” Pathak said.

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Along with the shortage of traditional rental units, the CMHC’s Fong noted that many renters are looking to condo rentals because of amenities like gyms.

Still, the city reports that one in five renters pays more than 50 per cent of their income on rent, and that 18 per cent live in poverty.

Likewise, there is some possibility that the city’s bargains may not last, according to Derek Lobo, CEO of Rock Apartment Advisors Inc. “More and more investors are realizing the untapped potential (and low prices) in Hamilton,” he said.

“The word is getting out as there’s less and less good quality inventory.”

Still, for investors, the city is a stable, long-term bet.

“Hamilton’s market already has risk priced into it compared to Toronto and some other markets,” he said. “So for people who are looking for steady income and not huge growth, Hamilton is a good, stable bell-whether market.”

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