Canadian marijuana not only is the single real estate market on roll in Canada. The most beautiful city in British Columbia, Vancouver, North America is too distinguishing itself as a home to a Canadian Real Estate asset bubble. The signs are popping up everywhere after its burst. So where is opportunity to invest in Canada?
As per REBGV i.e Real Estate Board of Greater Vancouver, single detached homes in Vancouver have risen from approximately to $1.75 million CAD from $400K CAD since year 2002. Here are some Secret to Real Estate Wealth: Canada’s Leading Experts Reveal Their Secrets for Building and Protecting Real Estate Wealth.
These stats increased by 337% in 15 years. With fast rising home prices, a huge portion of population has been engaged in real estate brokerage, renovations, construction, real estate development and everything is going along with this.
Echoes of San Diego, Las Vegas and Phoenix can’t be ignored from 2006. According to Mises/Hayek theory, it defines a speculative bubble as government increase in supply of money, that resulted in an unnatural low interest rates.
Reaction to the manufactured lower interest rates result in investments by entrepreneur in durable goods or capital intensive versus consumer goods. A Little Book of Canadian Real Estate Investing is also available to know more about Investing in Canada.
Instead of flow of capital into an unfettered real estate market this flows into some of the speculative investments. As long as this remain continue it will result in the bigger speculative bubble.
Then why does majority of local people believe that this time is different? They all refer to Vancouver as a geographically constrained and believe that housing will go higher and higher.
So, same can be said about number of coastal cities that have experienced busts and boom through typical cycle of real estate market over years.
Presently it is NOT different. Investors should be aware of all of the possible knocks on an effect of large Canadian Real Estate correction.
Also some new catalysts are there which can’t be ignored. Interest rates and taxation are going higher and higher. Cap rates on commercial and rentals properties are too low.
Price-to-rent ratio of Canada is now well above as comparative to the U.S. housing debacle in 2006.
As per Bank of Canada, around 47% of mortgages of Canadian Real Estate will reset in next 12 months. To put all this in the perspective, an average of 5.14% is the 5 year fixed mortgage rate in Canada.