Real estate markets in Waterloo Region weathered 2020 in far better shape than many initial projections would have suggested. For example, who else remembers that now-infamous CMHC report from last spring which forecast a drop in average sale prices of as much as 18 percent? In reality, average sale prices in Kitchener-Waterloo increased over the one-year period between December 2019 and December 2020 by an astounding 14.4 percent – astounding given the circumstances, that is.
While I viewed last spring’s CMHC report as a bunch of baloney when it was first released (and said as much here), the one niche market that I was prepared to hedge against somewhat was the student housing market. This is a market in which I have been deeply involved for well over a decade now, and I pride myself on this specialization and the advice I’ve been able to give to clients over the years on how to make investing in student housing a profitable decision for them. While I knew that an overall imbalance in available inventory versus buyer demand was sure to keep our broader residential housing market in the black, the sheer uncertainty surrounding which approach our major local post-secondary institutions would take in tackling COVID-19 made many people justifiably worry that student housing could be in for a very rough year.
After all, with in person learning all but shut down, why would most students want to pay out of pocket to live away from home, simply to sit in front of a computer screen in their own bedroom for eight hours a day? But now, nearly one year on in early 2021, I’m relieved to be able to look back and say that everything went much better than expected on the student housing front, too.
Fortunately for investors, human nature can be a resilient thing – and it turns out that for a vast majority of student renters, COVID-19 wasn’t about to stop them from enjoying their university years to the fullest. For as much as 80 percent of this demographic, that meant holding to their leases and returning to live in Waterloo to study with their roommates. I believe the social aspect was a prime motivator here, but so too was the reality that leases in prime areas of Waterloo can be difficult to pin down, even in a pandemic. Choice rentals move quickly, and in many cases where groups or individuals want to lock in multi-year leases, the uncertainty of one year wasn’t worth losing their spot for all four years.
As I write, rentals are continuing to fill up quite quickly for the 2021-2022 season – something I’m witnessing first-hand with my own investments. For those who are looking to cash out, there’s more good news in the sense that even while there’s less student housing inventory to sell, what does become available is continuing to move reasonably quickly.
Finally, it would seem as though both schools and developer/investors have not lost sight of the long game. COVID-19 won’t have these effects on the post-secondary education industry forever. Universities are powerful political forces in their own right, and you can be sure that they’re doing everything they possibly can to lobby a reopening of in-class education as soon as it’s safe enough to do so – potentially as early as the fall term of 2021. The money foreign students in particular bring with them is incredibly lucrative, as is also evidenced by the continuing construction of purpose-built residences in the most popular student areas of Waterloo. There clearly remains a strong market for student housing here, and it’s one that I am confident will continue to be a profitable one for investors for decades to come.
If you’re interested in the student housing market and would like to learn more, I’d encourage you to reach out to me directly. As I’ve said, it’s a specialty of mine, and I’d be happy to share my insights with you in more detail!
