Real Estate Talk:
Marijuana and resale value

The legalization of marijuana brings about a change of attitude

By Joseph Marovitch

As of September 2018, Canada will legalize marijuana for recreational use. My pharmacist tells me people he never thought would use marijuana are coming out of the woodwork asking if he sells the product. This new legalization will have a widespread effect as many individuals who have never used drugs, will now try.

The real estate effect of legal recreational drugs can impact the sale of your home. When selling a property, we are required to complete a seller’s declaration or SD. The SD indicates the physical state of the house to the best of the seller’s knowledge. The SD asks six pages of questions and the answers are “yes”, “no” or “I don’t know”. One of the questions is “has marijuana been used or grown in the house?”

The real estate effect of legal recreational drugs can impact the sale of your home.

In the past, if sellers answered yes, this would have the effect of devaluating the property. A “yes” answer would indicate that the house was used for illegal activity, hosted shady characters and promoted violence. In some areas of town, this is still the impression neighbours and buyers have.

There has been a marked change in attitude towards marijuana as legalization occurs. Where once drugs were associated with and directly linked to crime and violence, now marijuana is considered a miracle drug with positive effects on mood, skin, epilepsy, muscular dystrophy, sleep and much more. With legalization, marijuana is no longer linked to crime and violence.

With legalization, the effects of marijuana are being closely studied for proof that there are positive benefits to its use and more and more people are curious and want to try the drug. Many others have already used marijuana and, without illegality and all the past stigma, those people are much more open about it. Therefore, the impression is that marijuana will no longer negatively affect the resale of a home.

As a matter of fact, recent studies of states and provinces that have already legalized marijuana indicate rising property values in areas where properties are in close vicinity to marijuana dispensaries. This means there is a market for property near a marijuana store but this does not mean it would be wise to use the drug in the house. Like cigarettes, marijuana can leave a constant smell in the home and most buyers do not want to purchase a home that smells like cigarettes or marijuana.

‘… recent studies… indicate rising property values in areas where properties are in close vicinity to marijuana dispensaries.’

In my opinion, the possession of marijuana in the house, in terms of resale value, will affect the resale in a negative way less and less until, in a short while, it will no longer be an issue.

As the demand for legal recreational marijuana grows, so to will the resale value of property that is close to stores that sell the drug.

In the not to distant future, the OACIQ will likely remove the question in the seller’s declaration that asks if marijuana has been used in the house. For the next few years, use of marijuana should be considered when purchasing a property as there is still belief that drugs and crime go together.

After a few years have passed with marijuana being legal and use becomes as normal as cigarettes and alcohol, marijuana will likely increase property value in terms of proximity to dispensaries.

Next week’s topic: Renting furnished country homes, advantages, disadvantages and is there a market?

Should you have questions or require further details, please feel free to contact me.

Have a great week.

State of the market

There is a growing demand for high end rental apartments. This demand is coming from families who are down-sizing because the children have moved out and from single and couple young professionals. As such, developers are searching for income properties across the city and from the suburbs, with the intention of upgrading these properties to create luxurious apartments for the growing demand.

This demand from developers to purchase older apartment buildings has a positive implication for landlords who are considering selling their income properties. This demand to purchase and upgrade, provides added value to the income property for sale, since the buyer is not searching for a 5 plus cap rate. The buyer is searching for a larger long-term gain by upgrading the building to a luxury status property with much higher rents. This means the buyer is willing to pay more for the property.

If you are an owner selling an income property in an affluent area of town, it would pay more to find a developer to purchase your building, rather than a buyer solely interested in your property as a current income property with a lower cash flow.

Image: Plant Perception

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