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Financial Post - Canadian snowbirds migrating back in increasing numbers — with cash from U.S. home sales
Monday, 18 May 2015
Canadian snowbirds have been cashing out of their property in the United States in increasing numbers, according to new data from one of North America’s leading currency exchange groups.
David Nicholls, head of partnerships for the North American division of CanadianForex, which is part of the Sydney, Australia-based OzForex Group, said the dollar amounts coming back into Canada from the sale of U.S. homes are up almost 100 per cent in the past year compared to 12 months earlier.
“The amount of money coming back from Canadians who have been selling property has pretty much doubled whereas as investment down into the U.S. (from Canadians) has stalled considerably and is almost down 50 per cent,” Nicholls said, adding that reasons for the change are rising home prices south of the border and the sliding loonie.
OzForex, one of the leading currency-trading companies in the world, says about US$12 billion of currency flowed out of the U.S. based on its own business. That figure is worldwide but much of the company’s American dollar trade is with Canada, and cross-border property investment is the most popular reason to convert dollars.
“The data set we have is very significant,” Nicholls said. “This is all individuals that (are) going back and forth. Investment hotspots like Arizona and Florida have been very popular with Canadians. People were buying into the market after it was depressed down there. You had the dollar at parity.”
It could be just a temporary blip, with the demographics likely to drive long-term growth of Canadian investment south of the border as retirees look to spend their winters in warmer climates.
“I can’t see this being a sustained trend, especially given the demand from boomers,” said Michael Dolega, an economist with Toronto-Dominion Bank who follows the Canadian investment in the U.S. “It is possible that investors that bought near the trough, and with loonie near par, could be cashing in on the price and foreign exchange moves at this point. But, hard to imagine this would be typical snowbirds where lifestyle decisions often trump financial ones.”
Glenn Williamson, chief executive and founder of the Canada Arizona Business Council, said he doesn’t see the trend and 90 per cent of all international commercial and residential real estate in Maricopa County, which includes Phoenix, is Canadian-owned and valued at more than US$12 billion.
“I’ve contacted realtors and what I’ve found is the lower-end homes, those under US$250,000, have slowed down (in terms of sales) but Canadians are still buying high-end homes from US$500,000 to US$4 million like crazy,” Williamson said.
The U.S. housing market has continued its steady recovery since it crashed in 2007, although prices remain below their peaks in most major markets.
The Washington-based National Association of Realtors say median price growth is forecast for 6.0 per cent for 2015, which comes follows 5.7 per cent growth in 2014 and 11.5 per cent in 2013. Vacation properties are not broken down for statistical purposes.
Steve Merchant, a past chairman of the Orlando Regional Realtor Association, says that while he has noticed less activity from Canadian homebuyers as the U.S. dollar strengthens, some investors remaining in the market have reasons to be positive. “Canadian owners of rental properties in the U.S. are happy with the strengthening because net rents are disbursed in U.S. dollars,” he said.
The change in Canadian attitudes comes after what some had called a perfect storm for sunshine belt investment — with domestic housing values being used for financing U.S. purchases that were rock bottom because of the strong loonie and the housing crash in America.
Nicholls said the peak of Canadian real-estate investment in the U.S. was in late 2012 and early 2013. “What we are seeing now is some of the early money that went in, is starting to come back after a really long run in the U.S. market,” he said. “They are taking their profits.”
From: The Financial Post
