Investment in Residential Property in Canada

Unlike most residential property markets in developed economies, which have seen sales and prices plunge, the Canadian residential property investment market so far has shown relatively smaller declines in sales and prices. Property investors from abroad have therefore seen their residential property investments in Canada outperform residential property investments in most other places. The outlook for Canadian residential real estate this year and the next is more optimistic than that for most residential property markets abroad, including the United States, United Kingdom, and Australia. This suggests that both home sales and prices will rebound in the coming year, albeit moderately, which could appeal to property investors from abroad. What should especially allure investors is that moderate increases in values of Canada's residential property investments in a deflationary environment may actually turn out to be high when compared to price performance of residential property investments in other nations. Canadian residential real estate thus offers exceptional investment opportunities, especially for property investors from abroad, in an otherwise generally depressed global market for residential real estate.

In most developed nations home sales and prices are expected to extend their precipitous decline this year into the next. Likewise, Canadian market for residential properties is expected to post substantial declines in sales activity this year. However, home sales, which dropped by 17.1 per cent in 2008, are expected to fall at a lower 14.7 per cent rate this year. This should not dent optimism about residential property investments in Canada. Given the better than expected sales turnover so far this year, this 2009 forecast is actually an upwardly revised forecast that reflects a rebound in sales volumes. In fact, this recent improvement in sales activity has prompted most forecasters to revise their home sales forecasts upward. The upwardly revised forecasts reflect the exceptionally strong bounce back in residential; property markets in British Columbia and Ontario. More importantly, home sales next year are forecast to rebound by 7.2 per cent to 397,000 units, driven primarily by an exceptionally robust recovery in sales in British Columbia and Alberta. This sales performance stands out compared to other countries, which should make Canadian residential property market appealing to property investors from abroad.

Even the earlier forecasts of substantial declines in prices of Canadian residential real estate in 2009, averaging about 8 per cent for the nation as a whole, have been revised to reflect the recently strong housing market activity. This has resulted in a smaller than initially forecast decrease in the average price of a Canadian residential property in 2009. According to the new forecast from the Canadian Real Estate Association, the improved outlook suggests that prices of Canada's residential properties will decline on average by 5.2 per cent in 2009. Next year, however, prices are expected to recover, rising on average by a modest 1.7 per cent rate. This modest growth looks exceptional when compared with an expected additional 40 per cent decline in the U.S. home prices over the next two years. Property investors from abroad should find this growth alluring.

The statistics above indicate that the market for Canadian residential investment properties may be characterized by an exceptional stability. This stability may look appealing to many real estate investors from abroad seeking alternative investments in order to diversify their holdings across asset classes and markets. Foreigners buying property abroad interested in making investments in residential properties or second homes may find many opportunities to park safely their money into Canadian residential property market.