Several headlines examining global real estate trends have loudly cautioned of an impending crash or at least a major correction to Canada’s hot residential real estate market, most notably ‘The Economist’s’ article from 2012 and a follow-up piece this spring.
Moreover, the sudden plunge in Canada’s dollar, the petrodollar and worries about the overall economic outlook for the country has some would-be real estate investors nervous to purchase income properties in ‘The Great White North’. After all, the Fannie and Freddie debacle of 2008 had international consequences, the effects of which the global economy is still feeling from.
This dazzling climb in real estate prices is similar, isn’t it? Shouldn’t Canada answer the wake-up call of its overvalued real estate market?
The story, however, is never simple. These headlines don’t account for Canada’s highly regulated banking system. Banks are very stable and government regulation staves off the kind of volatility that affects the US market.
Additionally, homeowners — even more true for foreign investors — must have a sizeable amount of equity in their homes as a condition of purchase. In these ways, Canada is very fiscally conservative.
Looking at historical data, this is an unusual real estate climate for Canada. But this climate is primarily the result of the introduction of low interest rates that are likely to hold given the state of the global economy.
Might there be a slight correction? Possibly. Will there be a bubble bursting? Not in my estimation, and not in key markets like Toronto.
Perhaps the best news is for foreign investors with US-dollar accounts. What amounts to dreary news for Canadians is the foreign investor’s security net — the currency play.
The current 30 per cent uplift in the currency exchange more than covers any possible correction. It really does make this the time to buy into Canada’s robust Toronto market — if you’ve got US dollars to spend.
If you’re unfamiliar with Toronto, its Canada’s largest city — bustling, dynamic, urban and multicultural. It is one of the largest immigration destinations for newcomers and the country’s hub for finance, higher education, arts and culture, in addition to its reputation as the safest large metropolitan city in all of North America.
It’s a big city, the fourth largest in North America, and consistently ranked a top liveable city internationally. This makes Toronto one of the most culturally diverse places in the world, creating a vibrant, inclusive and safe place for all to call home.
And Toronto’s real estate market echoes its stellar reputation. We are seeing unprecedented rises in residential real estate value, an upward trend that has been rising for nearly a decade. With higher gains in this market than the national average, for both single-family homes and condominiums, we don’t see real estate losing value provided you know where to buy.
Where to buy is key. Toronto is a great city overall, but it is also a city made up of very unique neighbourhoods. Indeed a walk through the city can feel like a walk across the world.
As with any city, some neighbourhoods are better than others. Factors that make some regions more attractive include school district, walkability, safety, amenities, green space and access to local transit.
As a foreign investor, it’s vital that you work with a real estate professional with deep knowledge of Toronto’s many neighbourhoods to best identify properties where value will continue to climb.
Some of Toronto’s neighbourhoods have seen nothing but increases for more than a decade. These highly coveted districts won’t suddenly become less desirable.
Added to this is the low vacancy rate for Toronto’s rental market. Renting out investment properties helps create stable revenue that covers the costs of ownership during the holding phase.
So for expats and foreign investors, there’s no better time to buy. With a currency exchange cushion, there is money to be made either when the Canadian dollar increases in value or when your property does.
And with luck, timing and the right real estate professional, hopefully, these factors will work in your favour once it’s time to sell.