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Home prices are rising faster in Canada than they are in the US, and the National Association of Realtors (NAR) says more Canadian buyers will snap up stateside vacation properties as a result.
The American real estate trade group’s prediction is based on the idea that current Canadian homeowners will free up some of their increased equity gained from appreciating property values and put it towards a second home south of the border.
“That’s a little bit contrary to what we might have expected earlier because the strong US dollar was making US prices seem more expensive,” Danielle Hale, NAR’s managing director of housing research, tells BuzzBuzzHome News.
“But that trend seems to have peaked in January, and since then the Canadian dollar has gained some strength back against the US dollar,” she adds.
Although the Loonie dropped below 70 cents US at the beginning of the year, it has come close to 80 cents recently. Meantime, the average selling price of a Canadian home continues to soar. In May it was up 13.2 per cent compared to the same time last year, according to the Canadian Real Estate Association.
So with more valuable dwellings, homeowners in Canada may now decide to take out a second mortgage or downsize in order to fund a vacation home — the most popular property choice for Canadian buyers of US property — says Hale.
NAR’s research branch suggests Florida, Nevada and Arizona are the markets poised to see renewed growth from these snowbirds. But Hale says Canadians will also likely start eyeing other parts of the US sunbelt due to climbing prices in some of those states’ markets.
Home prices in Canada rising faster than in U.S. That will lead to 2nd home buying in sunny FL, NV and AZ. pic.twitter.com/nd9K9ECD4H
— NAR Research (@NAR_Research) June 14, 2016
“I think that probably what we’ll see is that vacation-home buying will not just be concentrated in those areas,” Hale tells BuzzBuzzHome News. “Maybe similar climates and environments like South Carolina, Georgia, and other parts of the Gulf Area might also see some benefits,” she predicts.
Hale adds the number of US properties Canadians have purchased has been flat or in decline for at least the past several years, though she expects 2016 to be the year that the annual number rises again.
NAR is currently working on its latest annual international homebuyers profile report, scheduled for releases in early July, but will only include partial 2016 figures. The annual uptick in sales, if there is one, won’t be immediately visible. “I think that strength won’t show up until our 2017 report,” Hale suggests.
However, a recent statement from real estate brokerage RE/MAX appears to contradict NAR’s prediction: RE/MAX says Canadians are increasingly looking in their own backyards for secondary recreational properties instead.
“The low dollar is having a positive effect on local recreational property markets as Canadians are choosing to buy here where their dollar will go further, and US buyers are looking to Canada,” said RE/MAX in a release accompanying its Recreational Property Report 2016.
Similarly, Pamela Alexander, CEO of RE/MAX’s Ontario-Atlantic branch, doesn’t agree that the number of Canadians swooping in on vacation properties in the US will increase this year, noting home price gains are strongest in and around Toronto and Vancouver, but don’t reflect widespread appreciation.
If transactions in Ontario and British Columbia aren’t counted, the average price of a Canadian home dipped 0.7 per cent in May from a year ago.
“I still think there’s tons of Canadians that are going to invest in the States because of the weather, but I see it as relatively flat unless the dollar rebounds remarkably and prices in the US don’t continue to move higher,” says Alexander via phone from a home she owns in the US.
Even though the Loonie is regaining its footing, she says Canadians are wary of swings in the exchange rate and the impact this can have on costs such as tax, insurance, and even hydro bills. “When there is uncertainty, I feel like it’s the biggest impact,” she tells BuzzBuzzHome News.