Canadian Rental Investment Property

Investing in the Canadian rental investment property may prove to be one of the best property investment decisions an investor can make. Why? Because investments in residential rental investment property with fixed-term leases can provide investment income and secure capital returns in both good and bad economic times. Property investors from overseas should therefore consider buying Canadian rental investment properties, which currently represent one of the most resilient investment property classes on the market.

The economic downturn and the financial crisis in the world’s major economies have wracked havoc on most property markets around the world. For instance, the U.S. and U.K residential property markets have seen both sales volumes and prices fall across the markets’ different segments. Moreover, with foreclosures climbing through the roof to record highs in the United States, homeownership has been negatively affected by the current housing crash. While this usually benefits the demand for rental investment properties and other types of rental housing, an increased supply of rental investment properties in the United States has hurt the market, leading to higher vacancy rates and falling rents nationwide. However, Canada has been able to buck this trend, which makes its rental investment property market one of the outperformers in the current downturn.

In Canada, vacancy rates on multifamily rental investment properties and other types of rental housing have been on a downtrend, while rents have been increasing. This is so because the increase in demand has taken place against a limited supply of new rental properties. The market environment that favors rental investment property owners has supported continued rent increases. In Canada, for many families considering homeownership, the rising unemployment and falling incomes have offset the gains in housing affordability this year, making those families opt for renting a property as opposed to owning a house. Even though the gap between owning and renting a house has been narrowing, the adverse market conditions have worked in favor of the rental property market. As a result, some places in Canada have seen double-digit rent increases this year. This exceptional rent performance makes Canada’s rental investment property one of the world’s best investment property classes and Canada one of the best locations for making rental property investments.

On the other hand, even during the good economic times, when employment and income are growing, and consequently more households opt for homeownership, owning a rental investment property in Canada still turns out to be a good investment. When the supply of rental properties is kept under control, an increased demand from the ever-growing population of immigrants and young graduates entering the labor market secures rental income while rising rental property values over time accumulate capital gains on investment.

Therefore, notwithstanding the state of the economy, when the supply of new rental properties to the market is kept under control, rental investment properties in Canada may prove to be quite a lucrative investment venture. Compared to alternative property investments, rental investment property’s fixed leases, usually not shorter than six to twelve months, ensure that returns on rental investment property in terms of rental income are safeguarded from volatile swings in market conditions, which is usually the case with some other investments such as equities. At the same time, medium- to long-term holding of rental investment properties guarantees that investment returns in the form of capital gains are realized as well. As a result, foreign investors buying rental investment properties in Canada should be able to benefit from their property investment in any market environment.

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