Loonie for Canadian Real Estate Heres Why



Most of the U.S. residential real estate market has been and will continue to see low inventory, higher prices, and more competition among buyers going forward. It doesn’t matter if you are looking for a primary residence or an investment property, opportunities are rare and becoming rarer.

Continuing to Look Forward at the U.S. Market

Now at mid-spring, the wide spread forecasts for a sellers’ spring market have proven almost fully accurate. Bold forecasters are now looking at long term healthy trends in U.S. residential real estate stretching out to the year 2020.  A few naysayers predict a dramatic market crash as soon as tomorrow. However, the majority, most trusted, and most reliable forecasts now predict the market will remain robust through 2020 and beyond.

Although risky and dependent on a slew of other economic factors, common long term predictions for the U.S. market are:

  • Average long term prices and rents will increase at an annual rate between 3 to 6 percent due to demand outstripping supply.
  • New construction will rise but remain below demand.
  • Mortgage rates will remain low to moderate, continuing to draw buyers into the market.
  • Millennial buyers remain in their main home buying years.
  • Government deregulation continues expanding.
  • The economy continues a slow but sustained growth.

If you already control all of the investment real estate that you want for the foreseeable future, your gravy train may have arrived. If you’re still in the market to expand your holdings, you may want to look at other markets. The Canadian market might be for you.

Currency Exchange Rates Create Investment Opportunities

There are many other parts of the world worth considering but based on risk, stability, and market familiarity, Canada looks to be developing a compelling real estate investment opportunity. Canada’s housing markets continue growing stronger, despite repeated market-cooling measures and a fragile economy. Major metro areas have seen prices soar more than 13 percent. This is the highest rate of annual house price rises in more than a decade.

Currency exchange rates can generate huge opportunities for investors. Currently, the Canadian Loonie (dollar) is worth $0.74 U.S. dollars. By the end of 2017, it’s expected to decline to 72 cents and to 70 cents going forward. Being consistently low and going lower means there are some real estate bargains waiting for you north of the border. Some more brazen forecasters predict the US Dollar will be worth $1.50 Canadian as soon as this summer. But…

The truth is that risk is risk. Buying Canadian real estate effectively converts your U.S. dollars into Canadian Loonies. The Canadian economy is heavily dependent on the U.S. economy. Currently, both are expanding annually at slightly above 2 percent.

It’s unreasonable to expect the major Canadian residential markets to continue appreciating at 13 percent. If the U.S. succeeds at retrenching economically by importing less, it will have a negative impact on the Canadian economy. The result would be the Canadian Loonie falling even further against the U.S. dollar. Today’s bargains in U.S. dollars could be worth considerably less in future Canadian Loonies. You could buy cheap today but find your holdings worth even less in U.S. dollars going forward. Or worth considerably more if the Canadian economy remains stable or even experiences a substantial upswing.

Please leave a comment if this article was helpful or if you have a question.

Author bio: Brian Kline has been investing in real estate for more than 35 years and writing about real estate investing for seven years. He also draws upon 35 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest. In the Olympic Mountains with the Pacific Ocean a couple of miles in the opposite direction.

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