Monday, June 30, 2014

Canadian purchases of U.S. property may decline

Canada, China, Mexico, India and the United Kingdom have been the main clients for the U.S. real estate market. With Canada on top of the list. But with rising U.S. housing prices and a weaker Canadian dollar, Alain Forget, the head of sales and business development at RBC Bank, is not sure Canada will retain its top position  in the rankings of international buyers of U.S. properties this year.

The data coming from the National Association of Realtors south of the border are expected to be released in early July. They will detail purchases between March last year and March, 2014.
“I am still confident that we will see Canadians in No. 1 or maybe No. 2,” Mr. Forget says. “But, for example, in South Beach and Miami, Europeans, Russians and Brazilians have been very active buyers of luxury condos over the last year.” 
The strong Canadian dollar which topped $1 US for much of 2011 and 2012 has weakened; and has recently been trading at around 93 cents. A weaker Canadian currency makes it less attractive for Canadians to buy properties in the U.S. And even many economists are expecting the loonie to slide below 90 cents the coming year.

The growth in U.S. home prices is moderating but still strong. For instance, housing prices in 20 major cities rose 10.8 percent in April from a year earlier, according to figures released in June from the S&P Dow Jones Indices.

Nevertheless, Mr. Forget points out that Canadian retirees can still buy cheaper homes in many southern locations than they can at home despite the increase in U.S. home prices undergone after the subprime mortgage crisis.

“I just received the statistics for the month of May for southeast Florida, places like Palm Beach and Broward County,” he says. “And the median price for a single home is $282,000. The median price for condos and townhouses is $135,000.” These are low prices compared to the $416,584 Cdn average selling price of an existing home in Canada during May.

According to the realtors’ 2013 survey, Canadians accounted for 23 percent of U.S. sales to foreigners, up from just 10 percent in 2007. That growth came as Mexico’s share fell from 13 percent to 8 percent, and the United Kingdom’s share dropped from 12 percent to 5 percent. China, meanwhile, rose from 5 percent of sales to 12 percent.

Foreigners bought about $68.2-billion US worth of existing homes in the U.S. in the 12 months leading up to March, 2013, down from $82.5-billion a year earlier, and accounting for about 6.3 percent of the total sales. Of the property sales to foreigners, about half were to people with permanent residence outside the U.S. while the other half were to recent immigrants or temporary visa holders.

Source: Business News Network.