Low Canadian dollar helping fuel real estate prices

February 19, 2016MortgagesNo Comments »

Usually, a weak currency has more economic disadvantages than benefits. However, Canada’s real estate investors are currently one of the biggest benefactors of the problems reeling their currency at the moment. To start with, a weak currency attracts more foreign investors into the country, and in most cases the investors buy houses at bigger prices. Stick with me for the next few minutes as I show you some more benefits of a weaker loonie to the housing industry.

The Canadian dollar has been on a poor form mainly because the oil sector, which is Canada’s biggest economic pillar, is in a pitfall at the moment. Of course the low oil prices have had far reaching effects on people and businesses that relied on the sector a lot. However, for the big players in the Canadian real estate industry, a poor form dollar can never have better benefits.

The opportunists are fast buying houses and apartments to sell them when the dollar strengthens, the costs of constructing the houses are rising, workers are demanding higher pays and the end result is coming back to haunt house buyers and tenants. Should we blame the contractors? Does the government have a hand in the rise of housing costs? Of course yes, but the biggest influence in the whole rise of real estates in Canada has been the dollar itself. A lower priced currency usually affects a big sector as the real estate in quite a number of ways.

The fact that the real estate is generally a stable investment sector throughout most part of the year, more and more investors tend to choose it as their preferred investment destination. Also, people who probably valued foreign exchange or stock investments more start to shift towards the more stable sectors such as real estate developments. In addition to this, the fact that Canada does not have very strict rules on foreigners’ investment in the real estate industry makes it a lucrative target for foreign bigwig real estate developers.

Note that investors are venturing into the wider real estate industry and not just the housing sector. Areas such as warehouses, shopping centres and recreational facilities are other investment opportunities that have seen a high demand since the downfall of the Canadian dollar. Most of these areas, including the more expensive high rise buildings and malls are now becoming only a reach for the very rich institution investors. People who own serviced offices are another lot who are reaping from the bubble of a crashed currency. The costs of offices are very high at the moment, and most people are opting to do shared offices or go for quality over luxury.

While the investors will continue to reap more benefits, housing affordability might start to worry many Canadians in the big cities such as Toronto and Vancouver. The lucrative industry is likely to attract more and more investors however, and in the end a balance between a steady growth rate of the industry and affordability of the houses might be found. In meantime, the weak Canadian dollar will only continue to fuel the real estate prices.

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