Image Source: Kurt Bauschardt

Image Source: Kurt Bauschardt

In spite of some warning that Canadian developers are overbuilding, the Canadian Real Estate Association is adamant that the nation’s major cities are currently experiencing a dramatic shortage in available housing inventory.

National House Prices Grow at 4th Fastest on the Planet

Canadian home prices are still marching up at a rate of over 8% per year, one of the fastest paces in the world. This is only eclipsed by price increases in Ireland, Sweden and Australia. Yet, the latest figures show the most significant decline in home resales in two decades. A fact the CREA credits to a shortage of properties available for purchasing. Meanwhile the Financial Post declares housing affordability is “a growing challenge” in Canada’s top markets, where $1M appears to be the status quo for buying a property in many neighborhoods.

No Shortage of Demand

Thanks to low interest rates and international currency fluctuations there appears to be no shortage in demand for Canadian property on the horizon. A strong US dollar has reportedly turned off many international buyers in hot markets like Miami where foreign investors make up around 50% of real estate sales. Canada’s softer dollar may only make it more attractive for foreign buyers to snap up more of our prime real estate. The new liberal election win may increase foreign purchases of Canadian property even further over the next couple of years. The current intense competition for residential property and lack of affordability is reportedly influencing Canadians to look further outwards to find house deals, and the growing remote working trend is only likely to fuel this trend.

The Impact on Canadian Commercial Real Estate

Ongoing house price increases, and the migration of Canadians certainly has the power to impact Canadian commercial real estate for the better. The spreading out from the center creates potential for sizable gains for outlying commercial properties. This may be seen in both income performance and sales prices as demand for this investment niche rises.

A less expected, but equally significant side effect of the above may be more Canadians choosing to invest in commercial real estate instead of residential homes and condos. This could particularly benefit multifamily and retail properties.

In summary; while there remains some confusion over the direction of Canadian real estate markets in the media, there certainly appears to be no lack of demand. Those that get ahead of the curve and expansion movements will likely have a lot to gain if they put the right properties in their portfolios.