How does Canadian Real Estate Fair?

With all of the economic question marks throughout the world, investors are baffled on where to put their hard earned money. Stocks in general are liquid in most cases but are not providing the returns that investors are looking for. 30 year US bonds are doing okay (if you purchased 5 months ago), but where is energy, or the precious metals? What about real estate? The sub prime issue in the US left a bad taste in everyone’s mouth, but how has the Canadian market been performing?

It is important to note that one cannot paint Canada or even the GTA with one brush yet with a long-term outlook, great deals still exist. With historically low rates to borrow, savvy Real Estate Investors can do quite well here. On a macro scale, long-term real estate investments look favourable in Canada for a few reasons:

Home Prices continue to trend up in Canada:

Despite the economic uncertainty in Europe and the US, Canadian home prices continue to rise. Some factors to consider are unemployment is relatively low, GDP growth is up and also GDI is looking good. An article in the Globe and Mail highlighted historic highs in GDI growth.

IMF gives Canada positive reviews for the future:

There is a direct relationship between Real Estate appreciation and GDP growth. Canada is one of the few G20 countries that has exhibited any positive growth. “The IMF expects that Canada, on a total government basis (including the federal, provincial/territorial and local government sectors), will be one of only two G-7 countries, along with Germany, to return to budgetary balance by 2016. This would allow Canada to maintain by far the lowest net debt burden among G-7 countries”.

Canada’s Finance Minister Dismisses rumours of a bubble:

Jim Flaherty, Canada’s finance minister has made it tougher for investors to get mortgages. Changing the length of mortgages and the risk model has taken many buyers out of the market. As a result, he is not concerned about where the market is today and dismissed any rumour of a housing bubble.

Appealing to the Common Sense:

When reading the paper on a daily basis it seems that everything is in flux. The stock market is volatile and most of Europe and US have a negative outlook for the coming years. With this in mind, it is not a leap to assume investors are going to be seeking stability. China has demonstrated this by investing heavily into Vancouver and Toronto Real Estate and the rest of the world will follow. Not only will foreign investment in Canadian real estate continue to increase, but so will migration. If I lived in Greece, Spain Portugal or Italy, I might seriously consider relocating. This infusion of investment and migration will undoubtedly contribute to the increase of real estate profitability in Canada and the GTA.

With the right team (I.E Mortgage Broker, Lawyer, Real Estate Agent, and Property Manager) in place and a long term strategy, a real estate investor can do quite well in the Canadian market.

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