How the rich are investing in real estate right now

I was catching up on a backlog of reading last weekend when I came across an interesting, if worrisome, article in The Economist. In it, the British newsmagazine suggested the Canadian real estate market is overvalued by 25 per cent or more, and is now "frothier" than the U.S. market was at its peak in 2008.

A provocative suggestion, one sure to make millions of Canadian homeowners a little concerned. For better or worse, real estate remains a significant asset for most Canadian families. If our real estate market is in bubble territory, the financial implications would be serious.

Now, by no means am I an expert real estate investor. I've owned each of the principal residences I've lived in over the past 25 years, and they've all done reasonably well for me. But real estate is not the focus of my portfolio, and beyond the old adage about “location, location, location,” I have little in the way of secret wisdom or guru-like tips to pass on to real estate investors.

The wealthy people I know, however, are quite another story. Many of the smartest, wealthiest people I have ever met have made millions in real estate. These people are shrewd investors. Real estate is something they talk about often, and when they do, I listen.

Based on these conversations, I would say high net worth (HNW) investors seem to be pulling back from the Canadian real estate market. Not exiting altogether, mind you. But instead of allocating new money by buying Canadian residential property, they’ve decided to invest in real estate in a different way.

Ontario power generators shell out $35M to get rid of surplus juice

OTTAWA — Ontario’s electricity generators have shelled out $35 million this year to get neighbouring jurisdictions to take surplus power off their hands and are helping to drive up the cost of power to consumers in the process.

According to the province’s Independent Electrical System Operator (IESO), electricity prices were negative — meaning sellers had to pay buyers in the U.S. or Quebec to take surplus electricity — a total of 95 hours in the first six months of this year.

That’s up sharply from the same period in 2010, when there were only 10 hours of negative prices at a cost of $4.2 million. However, it’s down from 2009, when there were 280 hours of negative prices in the first six months, and 351 for the year as a whole.