Canadian Real Estate Investors
Canadian Real Estate Investors Are a Force to Be Reckoned With
As more focus goes toward the number of Chinese real estate investors buying up property in the US, it’s easy to lose sight of the fact that this is just one of myriad factors. There are plenty of other international real estate investors out there. Europe and Australia are both heavily involved in the American real estate industry. However, you need to look closer to home to find the second largest such group – Canadians were, until very recently, the number one buyers of US real estate. Today, they’ve slipped to second place, but they’re still playing a major role.
Canadians Investing in Commercial Real Estate
One of the high points for Canadians investing in US real estate is the commercial property sector. According to a November 2014 story from Reuters, “Canadian investment in US commercial real estate is on track to hit record levels this year, once Canada’s second largest pension fund closes a $2.25 billion deal to buy a landmark Manhattan property.” The first three quarters of the year saw almost $8 billion funneled into the US economy from Canada through commercial real estate. Buyers aren’t limiting their purchases to the Big Apple, though. Other hot spots include California, New England and other highly populated areas. The key to their strategy is buying multifamily properties, but other commercial real estate is on the table as well.
Canadians Also Investing in Residential Property
Canadian real estate investors aren’t limiting their efforts to commercial property alone. Residential real estate is also hot, particularly in highly urbanized areas. A Vancouver couple recently purchased a Brooklyn brownstone with three units, and plans to rent all three to different tenants. The rent payments on the brownstone are expected to be enough to cover the Brooklyn property’s mortgage, as well as the payments on the couple’s home on Vancouver’s Upper East Side.
Why Do Canadians Invest Internationally?
So, why are so many Canadian’s turning to their southern neighbor for their real estate investing needs? Really, it comes down to prices. Canadians are able to get into the market for less, and are then able to realize higher profits on rent than if they kept their money at home. It’s really a win-win for everyone involved. Capitalization rates are another big factor here. Business Vancouver reports that the typical capitalization rate in the US is up to 7.5%, while Canadian rates have decreased from 5.3% to 5.1%.
A Lack of Options at Home
One element that’s pushing Canadians south of the border is the fact that there’s a lot of available property in the US. That’s not so in Canada, where the majority of the property is tied up with domestic pension funds, limiting the availability of property on the open market, and forcing investors to look elsewhere to grow their wealth.
As with any other international real estate investing scenario, the Canada-US trade is subject to change at any time. A slipping Canadian dollar is one element that many experts expect to start putting the brakes on the situation, although it has yet to slow things down at all.