According to the most recent study released by the National Association of Realtors, Canadians made up the largest share of foreign purchasers of US real estate, accounting for 24% of all international sales, surpassing China (11%) and Mexico (9%) combined. In total, international buyers purchased $82.5 billion in US real estate during the year ending March 2012, up from $66.4-billion in 2011.
“The Canadian real estate market has performed well since the recession, “said Jason Mercer, senior manager, market analysis at the Toronto Real Estate Board. “Save for a short period of price decline during the economic downturn in 2009, many markets across the country have experienced year-over-year price growth, including Greater Toronto, Canada’s largest metropolitan area.”
The strong Canadian housing market
According to The Bank of Canada as well as the latest report from the Canadian Real Estate Association, house prices in Canada have experienced a steady annual increase for more than a decade, with the Home Price Index increasing 5.2 % from April to May 2012 with Toronto and Calgary taking the lead.
This increase, coupled with historically low interest rates compared to pre-crisis levels of 2008, encourage buying.
According to the Bank of Canada:
- The 1-year mortgage rate has fallen to 3.2 percent in May 2012, from 6.15 % in May 2008.
- Interest rates on 3-year mortgages have decreased to 3.95 percent in May 2012, from 6.15 % in the previous four years.
- The 5-year mortgage rate has fallen to 5.34 % in May 2012, from 6.65 % four years earlier.
So even though the ripple effect of the US economic downturn can still be felt, the Canadian Real Estate market seems to have paused momentarily and bolstered confidence in the Canadian banking system. This has motivated Canadians to invest in not only in local markets, but boldly abroad as well.
Given these current market conditions, coupled with the downturn in the U.S. economy which caused plummeting property values there, goals of ownership in the US are not only more achievable, but are advantageous for Canadians looking for the opportunities of lower U.S. prices while realizing appreciation on their principal homes in Canada.
Currency exchange: the loonie gaining steam
“The value of the Canadian dollar has been high relative to the US dollar in recent years” Mr. Mercer said. “It is reasonable to assume Canadian households have taken advantage of the high Canadian dollar to purchase goods and services south of the border, including real estate.”
The Canadian dollar, has appreciated over 5 percent in value over the US dollar, the Euro and the British pound in the last few months. Other than the Mexican Peso, the Canadian dollar has gained more from the US dollar than it has from any other currency. According to the National Association of Realtors, the Canadian dollar is going strong.
Not since April of 1974 when the Canadian Government’s announcement that it would allow the Canadian dollar to float has the currency risen this sharply. A Canadian dollar to US dollar reached a high of U.S. $1.0443 in the 1970’s. Currently, according to the Financial Forecast Center, the Canadian to U.S. Dollar currency exchange is 1.0009.