Although the Canadian property market was affected by the global financial crisis, house prices didn’t crash, and have now resumed their steady decade-long climb.
With US interest rates at a 60 year historic low, the bank of Canada has been forced to keep its interest rates at an even lower level. When you combine these factors with a relatively healthy economy, low unemployment and increased foreign investment in the country it’s easy to see why the Canadian dollar has appreciated. Unfortunately this is causing something of a headache for the Canadian government as Canadian exports account for around 30% of annual GDP, and over 70% of these exports are to the US.
It’s better news for real estate investors, as Rock Star Real Estate Inc., has estimated that positive monthly cash flows have increased from $150 per month on single family homes just outside the greater Toronto area, to $350 per month during the last three years purely because of falling interest rates. At the same time property values are increasing, as a single family detached home in Hamilton, Ontario sold for $215,000 in 2006, while the same property is currently selling for as much as $265,000 this year. Properties suitable for rental are often seeing multiple offers within days of being listed on MLS.
According to Tom Karadza, co-founder of Rock Star Real Estate with his brother Nick:
“The biggest problem with these good times is that smart investors know it can’t go on forever. Canada is a unique monetary and housing environment produced by the easy money policies of the US Federal Reserve’s chairman Ben Bernanke. For example, Canadians can get five-year term mortgages right now at 2.99%, or in some cases even lower.”
His brother Nick says:
“Investors still have to do their due diligence and choose the right property in the right community. There’s no getting away from following the fundamentals of real estate investing, but as long as you can stay away from some of the obvious bubbles these are very interesting times for Canadian property investors.”
It was recently announced that Canada is not expected to balance its budget in 2014 as had previously been expected, and there is talk of interest rates being lowered even further next year. That’s got to be great news for most Canadians, not just property investors.