The Canadian real estate market has been in demand for some time now with foreign investors playing a more active role in the sector. There have been a number of new regulations introduced in an attempt to dampen down overseas investment but this is expected to have limited impact in the medium to long term. There is now a growing belief that the Canadian real estate market will benefit from its perceived stability when compared to the likes of the US and Europe in particular. So, could Canadian real estate benefit from worldwide uncertainty?
Record year for commercial real estate
During 2016 a staggering $34.7 billion worth of commercial property changed hands in Canada which is a record for the country. This figure is expected to drop slightly to around $31.9 billion in 2017 although this may be a consequence of reduced domestic investment while overseas investment continues to grow. When you bear in mind that foreign investors accounted for more than 27% of all property sales over $10 million in 2016 and Chinese investors a staggering 71% of all foreign transactions this does start to give a clearer picture.
Sceptics might wonder why overseas investors would continue to chase Canadian real estate after such a strong year?
Europe in turmoil
There is no doubt that certain areas of the European real estate market are starting to offer extremely good value. We have the likes of the UK, about to exit the European Union, and the uncertainties surrounding this. We are also seeing the rise of nationalism/socialism across many European countries with French elections seen pivotal over the next few months. There are financial issues with Italy and while Greece has already received a massive financial rescue package there are rumours it is still struggling and potentially on the verge of collapse.
If you take a step back and look at the situation from a distance, it is easy to see why the European real estate market is perhaps one to avoid in the short term?
US real estate
US stock markets and real estate sectors have performed admirably since Donald Trump took up the position of president of the USA. There are high expectations that he will favour the real estate market – where he has the majority of his individual wealth and experience. We are seeing promises of protectionism, tariffs on imported goods and financial incentives/reductions in red tape for US businesses. There is no doubt that US investors have taken Donald Trump on his word with stock markets and real estate sectors flying high. However, many have identified America in relation to potential difficult political and economic issues going forward.
Donald Trump has talked the talk and now it is time to walk the walk. Will he be able to deliver to expectations?
It is a little far-fetched to believe that real estate investors will shun the US for Canada but there is no doubt that overseas interest will remain strong in the Canadian real estate market. There are issues with the USA, there are problems in Europe but Chinese investors will also be impacted by overseas investment restrictions going forward. There is no doubt that the next few years will be extremely interesting and a number of critical questions will be answered in due course. Will the UK retain its reputation outside of the European Union? Will Donald Trump deliver on his promises? Is the US real estate market expecting too much? Can the European Union survive with more talk of bailouts and disappointing economic performance?