Why Canadians Are Buying Properties Abroad

Do you remember, about five to ten years ago, almost all HGTV shows featured British couples buying property abroad? Every time I turned on the HGTV channel,  up popped a British couple buying property in Portugal, Spain, Costa Rica, Argentina, Thailand and even Albania. We were left with the impression that British people are culturally programmed to buy properties outside of their own country.

But is this just a cultural thing? Sure, the British like to travel, and have a history of roaming (and invading) many parts of the world. I think, however, their lust for foreign real estate investment has more to do with the prices at home. London, where a whole lot of British people live, has always been expensive. If you think Toronto is expensive, try taking a look at the listing in a city like London. Owning a house, or a condo here is almost a luxury. So, many people rent in the city, and buy cheaper properties abroad. And for those British who did buy property at home, their homes have increased in value to the point where they have built up enough equity for a second vacation home in an often warmer country where things are less expensive than in their homeland. And in the case of the UK, that would be almost every other country. The recession, and the dip in real estate values around 2008, certainly slowed this process down, but properties values are back up in the UK and the hunger for foreign property purchase is back.

But why am I, a Toronto real estate salesperson, going on about the British buying properties abroad? Because Canadians share a lot in common with the British these days. From a purely geographical perspective, both countries do not have a warm, tropical or Mediterranean vacation location to go to within their own borders. Winter may be milder in Britain, but you certainly can't relax on the beach during the cold months. It's not like the U.S. or Australia or France where you can go south and be in more tropical, summer-like locations without a passport.

Also, as in Britain, Canadians have built up a lot of equity through their real estate purchases so they have the funds to buy abroad. Canada, for example, is the biggest foreign real estate investor in Florida. This may seem obvious to some, but you have to remember that Florida has become a huge destination for foreign investment from South America, Europe and China. Even in a place like Australia, Canada, after the British, is the biggest foreign investor in real estate, ahead of the United States, a country with nine times the population of our country.

So, what does all of this say? Well, I'm not trying to encourage people to buy abroad, though it is a great idea if you have the money and if you plan to spend some time in a warmer climate. But I am saying this: In the past 20 years, real estate in the UK and Canada has allowed many people to increase their wealth. Will the real estate market always be like this? Probably not. Prices rise and slip, but in places like Toronto, the long term direction is up. For long term real estate investment, Toronto ranks as one of the top cities in the world to buy real estate because of its diversified economy and its stable governments. So, if you would like to buy a cheap condo in Ecuador for a fraction of the price of a Toronto condo one day, to retire to or spend a few months during the year, then you may want to build some equity at home first.

Home Ownership in Canada: Some Surprising Stats

I think most Canadians can admit that we are a little home ownership crazy. People like to talk about out-of-control bidding wars and neighbouring properties that never sell like they do about Miley Cyrus on the MTV video awards. Not quite as titilating, maybe, but certainly more impactful to our lives.

But just how does Canada stack up with the rest of the world? Well, it's pretty high up there. Of the 196 countries in the world, Canada is ranked 16th, slightly ahead of the U.S. and slightly behind the U.K. As of 2006, 68% of Canadians own their homes. Some believe that number may have cracked 70% since then.

Many believe that North Americans love home ownership more than Europeans because they have a history of land ownership that dates back centuries. Immigrants once came to the Canada and the U.S. where they were offered land for practically nothing, and if they were lucky a free mule was thrown in. In Europe, land ownership was often geared around the upper class. Peasants would rent from the gentry. As you can imagine, this model does not hold up as well nowadays.

Today, home ownership has a lot to do with the policies of the government, of a particular nation and the culture of that country. In Europe, for example, Germans are super keen on renting. They are a bit more cautious by nature, and the federal government does not make purchasing easy. Taxes are much higher in Germany and a buyer requires a 20% down payment. In addition, the increase in property values across Germany has not increased a great deal in value over the past 10 years compared to other European countries. That is why places like Berlin have a 90% rental rate. Financially, it may be easier to just rent. The UK is quite different. Despite their drop in property values since the recession, the value of their properties have doubled in the past ten years. And when Brits can't afford to buy in expensive cities like London, they go to Croatia and Spain and other parts of the EU to hunt for properties. They see a good return on their investment and they want to own property, even if it's a big commute on a plane or train.

Canada may be slightly lower than the UK, but we prefer home ownership as well. Since 1971, home ownership rates in Canada have plateaued for a short time, then rose steadily.

Some argue that home ownership rates may be peaking now in Canada. The government is making it tougher for first time buyers to qualify. Prices in cities like Vancouver and Toronto are making it costlier for people to get into home ownership, even thought the cost of renting has increased substantially as well. That is why home ownership rates have declined among the lowest income earners in Canda in the last ten years.

In Canada, home ownership also has a lot to do with whether you have children. Even single parents have a higher rate of home ownership than couples with no children. Of course young families with kids are most likely to be owners. The biggest change in Canada, though, has been the fivefold jump in home ownership with unattached youths. From 1971 to 2006 the rate of home ownership jumped from 13% to 60%.

At the end of the day, the question usually becomes: Is home ownership worth it? Well, if you live in Germany, maybe not, but if you live in Canada or the UK in the past 10 years, it's definitely worth it, or at least nearly 70% of all Canadians think so.