Affordability is a serious issue in Canada’s housing market. In Toronto, the average Canadian family would have to spend 45.9% of its income to cover the cost of home ownership.
Many Canadians are heading south or abroad where housing markets are more affordable.
Between April 2016 and March 2017, Canadians spent $19 billion on real estate in the United States. Experts say the exorbitant housing prices in popular cities like Vancouver and Toronto have driven many Canadians to America.
Much of the investment activity is taking place in Florida, California and Texas. We’re also seeing Canadians investing in South Carolina in cities like Myrtle Beach, which offers 60 miles of beaches, and Charleston, which is a booming market overall for investors.
Lack of inventory has pushed housing prices in the U.S. higher, but prices have increased more quickly in Canada. The market is reaching a point where real estate in the U.S. is competitive.
Canadians purchasing real estate in the U.S. spent, on average, $560,844 on property in 2017. The median purchase price also increased to $288,615 last year, up from $223,310 the previous year.
More high-net-worth Canadians are taking their real estate investments overseas. A survey from Sotheby’s International Realty found that 80% of high-net-worth clients owned at least two properties, and one-in-five owned property outside of their home country. That statistic holds true for wealthy Canadians.
Wealthy Canadians are looking to achieve long-term capital appreciation and steady yields from rental income.
Along with the United States, Canadians are buying real estate in Europe and other parts of the world. London is a favorite city for investment, although prices have increased by double-digit percentages in recent years.
Brexit has some investors fleeing the London market for more favorable areas, like Geneva or Berlin. Real estate prices in Berlin increased by 10% in 2016.
Portugal has quickly become a popular investment destination for wealthy Canadians. Villa prices have increased by almost 4% year-over-year and rental yields have exceeded 5%.
Some Canadian investors are turning to Turkey, where a penthouse apartment can be purchased for $200,000 in Istanbul. An authoritarian government and political instability may turn off some investors, but others are finding the reward is worth the risk.
In the eastern Caribbean, investors are buying properties in St. Martin, St. Barth’s and Anguilla. The Dominican Republic is another favored spot for investment, but it’s still a developing nation with “improving infrastructure.”
Turks and Caicos offers a solid high-end rental market, and is a popular destination with Canadian travelers.
Investors with even higher budgets are moving further south to South America. Panama’s stable real estate market attracts many wealthy investors.
Outside of Panama, the gateway to South America, Chile offers Canadians more for less. While the country’s currency has fallen significantly in recent years, it’s capital city of Santiago is clean and modern.
While some investors are venturing out into these higher-risk markets, experts say that most wealthy Canadian investors are sticking to tried-and-true markets, or choosing new ones based on business or ancestry.