Investment Properties Abroad

Two important factors, increasing immigration and travel industry growth, suggest that Canada’s real estate market, and thus investments in real estate, are likely to experience strong demand in the future. The strong growth in immigration and the expansion of the travel industry in Canada will boost the residential property market, supporting further home price increases. This should give more confidence to property investors from abroad considering buying properties in Canada. In the end, investments in real estate in Canada, which are expected to outperform investment properties abroad, should increase on the back of a higher housing demand induced by strong immigration rates and the growth in the travel and tourism industry.  

One of the key drivers of the underlying demand for housing in Canada and investments in residential real estate is the nation’s ever increasing population, especially that of immigrants. Canada has the highest rate of population growth among the G8 countries, which is a positive factor for growth of the Canada’s residential property market. Canada’s population growth averaged 5.4 per cent between 2001 and 2006, with the immigrant population contributing the most to the growth. In fact, Canada’s foreign-born population increased at an average 14 per cent annual rate between 2001 and 2006, which is four times the growth rate of the Canadian-born population. Estimates indicate that the share of Canada’s population growth coming from immigration could reach three quarters of the total growth rate in population within a decade. This suggests that the continued strength in demand for residential properties in Canada looks promising. Increased immigration will especially benefit the Canadian rental property and condominium market. Hence, this should be a signal for both property buyers at home and abroad to consider investments in real estate in Canada, especially in rental investment property. Given that most other developed nations will not have this boost to their housing, Canada’s housing market, and therefore any investment in its residential real estate, will likely outperform most developed markets and thus investment properties abroad.  

Another factor that will support demand in the Canadian residential property market, and especially its rental property segment, is the Canadian travel and tourism industry. According to the World Travel and Tourism Council, the Canadian travel and tourism industry ranks second in the world in terms of expected growth in the travel industry’s total economic contribution to the world output. The same applies to the total demand in the world’s travel and tourism industry, in which Canadian contribution will expand at the second fastest rate in the world. All this suggests that recreational demand as well as leisure-related demand for housing and investment properties in Canada will benefit from trends in Canada’s and the global travel and tourism industry. Likewise, investments in real estate in Canada will benefit from these trends, apparently to a larger degree than to which most investment properties abroad will benefit from the growth in this industry. Domestic buyers and international real estate investors should therefore consider making investment in real estate in Canada.

The two demand drivers for residential properties in Canada described above especially favor investments in rental real estate. Given that prices of rental properties have declined somewhat in the current slowdown, the cost of buying a rental investment property has dropped, while the potential for future income growth has remained intact. Investors from abroad should view these trends as opportunities to make investments in real estate in Canada that will ensure continued appreciation of their capital in the years to come.

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