Wednesday, 17 June 2015

How Canada Compares to Real Estate Markets Around the World Now



Context. It sure can offer us some perspective. It let's us see ourselves in relation to our surroundings, sometimes with a whole new point of view. In some ways it tells us how we stack up. So, to mix things up a little, I'm NOT going to focus on Toronto as a city or a neighbourhood in Toronto or something about the culture and practices of Toronto real estate. Today I'm going to look at Canada in the context of the rest of the world to see how it compares in 2015 with regard to its real estate market. I do believe that real estate does function primarily at a local level, but if we look at the big picture, we can see how some ideas and misconceptions about our country's real estate markets hold up.

In the past few years in this country, there has been quite a bit of anxiety around foreign investment in Canada. In some ways this fear stems for a sense of the unknown because the Canadian government does not make a point of taking any records of foreign investment. I think this has been a bit of a mistake, though there has been other companies that have tracked foreign investment. Though there is nothing wrong with some foreign investment per se, there is some concern that cities with a great deal of foreign investment in the real estate sector can lead to higher prices for those locals who live in a given city or lead to a crash in real estate prices if foreign investors left all at once. Some argue that Asian money has caused Vancouver prices, for example, to go beyond where they should go. Toronto's foreign investment is much more diversified than Vancouver. It has investment from Asia, but also the Middle East, the United States and Europe. In some countries like Australia, there has been laws passed to curtail foreign investment. In Miami, there is concern about a lot of foreign investment from South America and Canada.

Now, Canada has no plans to curtail its foreign investors at the moment like Australia has done. Yes, there are no numbers available to tell us just how much foreign investment has officially been conducted here, but if we put Canada in the context of countries like Australia and cities like Miami, one thing becomes clear. We're a lot colder. And yes, that means there is a lot less foreign investment. Why? Well, let me put it this way: From a large country like Brazil, how many Brazilians do you think would like to retire in Canada? Probably not too many. But, we can argue that Canada is safe place for foreign investment because of our stable economy. That's what really brings the investors here, particularly when many parts of the world had very rocky real estate markets in the past ten years.

So, let's talk about those rocky real estate markets because they do have a lot of draw for foreign buyers in 2015, including foreign buyers from Canada. Since the recession in 2008, there has been more foreign investment in Canada because it has been seen as a stable real estate economy when few other countries were looking stable. In 2015, we are still receiving interest from foreign buyers, but since our real estate market didn't crash, our properties are not exactly bargain basement prices any more. You know where it's cheaper? Cities that have had their real estate markets crash in the double digits year after year since 2008 before stabilizing. Think Dublin, Athens, Las Vegas or Barcelona. That's where the foreign investors are now. They are seeking out deals in real estate markets that are showing signs of recovery that have sunk to rock bottom prices. After such a tumble from the top, what investors could resist this deal? Stable just isn't as appealing as cheap. Yes, Canada is still seen as a stable place to invest, but it hardly takes the lion's share of foreign investors in 2015.

In fact, in terms of real estate appreciation over the last year, Canada is healthy but hardly at the head of the pack. The top 5 go to Ireland, the UK, Peru, Sweden and Chile. Canada comes in further down the list between Germany and Thailand. According a Global Economics report, Canada and the United States remain steady performers with single digit real house price increases to go along with their moderate growth.

Now, I'm always suspicious of trying to group all the real estate of one country together. Canada is a broad sample. Toronto and Vancouver are certainly outperforming the rest of the country, especially in comparison to the oil producing provinces right now. Still, it does say something that Canada is not an overheated mess with runaway prices full of foreign investors who threaten to lead prices higher and potentially destabilize the real estate market across Canada. At least that's the case right now.


Context. It does give perspective.


1 comment:

  1. "Soft market" is a term that gets thrown around a lot in the financial sector, though if you've never before heard of such a thing,
    it's nowhere near as arcane as it might sound. You may be more familiar with the concept when it's referred to as a "buyer's market."
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