Why do Canadian real estate investors love New York City?

[Nicholas Wallwork]

A recent report into real estate investment trends has cast a very interesting light upon Canadian investors who seem to have a deep and meaningful love of New York City real estate. Canadian investment in New York City real estate over the last 10 years has topped $15 billion which is an enormous amount of

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[ParadiseValley1]

Canadians love Big Apple real estate as much as ice hockey — scoring more New York City properties than any other nationality in the world.

Over the past 10 years, $15.37 billion in Canuck cash has flowed into the city’s commercial-property market, nearly doubling the $8.8 billion of second-place United Arab Emirates over the same period.

The frozen north’s warm feelings for New York keep growing. The amount Canadians spent on Gotham real estate jumped from $1.97 billion in 2014 to a record $3.85 billion so far this year, according to Real Capital Analytics.

The biggest investors from our neighbor to the North are pension funds, such as the Canada Pension Plan Investment Board and the Ontario Municipal Employees Retirement System.

Insurers and asset managers are also big investors in projects like Hudson Yards, the biggest private real-estate development in US history.

“Canada is a big, capital-rich country with oil sands, and there are only a limited number of real-estate assets that they can trade back and forth with each other,” said Jim Costello, senior vice president of Real Capital Analytics.

“If you are running an investment fund in Montreal or Toronto, where do you go? The US is right next door, there are language and cultural connections . . . It is an easy first destination for Canadian capital.”

Over the past decade, Canadian cash has bought 81 New York City properties, compared with 15 bought by the second place United Arab Emirates, according to Real Capital.

New York’s third biggest real-estate investor over the past decade is China, which invested $8.1 billion in 30 properties, followed by Israel, which invested $5.26 billion in 59 properties.

Canadians are also big time residential-real-estate buyers.

“Foreigners, especially Canadians, are spending more on New York real estate now than ever before,” says Ryan Serhant, a broker at Nest Seekers International and a star of Bravo’s “Million Dollar Listing New York.”

 

[diyhelp]

Little bit ironic this as Canada is now crying wolf because Chinese investors are allegedly pushing up real estate prices. Hence the introduction of a 15% foreign investor tax - fair?

 

[Josh Caldwell]

Canadian institutional investors love NY City. The reason is that they can plop big dollars into marginal yet safe investments. Individual investors from NY and across Canada are leaving the city for more fertile markets across the US, where better returns and lower barrier to entry abound. NY is the shinny object, it is far from the best place to risk your money.

 

[lookinginvest]

There is a similar trend emerging in London - investors are now cashing in their "London property premium" and buying cheaper larger properties in other parts of the country. However, do not write-off the London property market, it will bounce back.

 

[Josh Caldwell]

There is a similar trend emerging in London - investors are now cashing in their "London property premium" and buying cheaper larger properties in other parts of the country. However, do not write-off the London property market, it will bounce back.

I should have guessed the London had the same situation. The "brand name" cities are sexy, and there is a bit of ego in saying that you own something in a city that is known world wide. I would love to own a multi unit in London but for the price, I can own a lot more property and make a lot more money. For the most part the math (cost to rental ratio) favors the smaller metro areas.

 

[FWL]

I have looked at different parts of the UK and the ones which offer the best value are those within commuting distance of the heavy employment areas such as London. To buy a home in the centre of a major UK city is now beyond the means of the vast majority of people.

 

[Josh Caldwell]

I have looked at different parts of the UK and the ones which offer the best value are those within commuting distance of the heavy employment areas such as London. To buy a home in the centre of a major UK city is now beyond the means of the vast majority of people.

I am not sure if it is the same in the UK, but in the US there are a number of cities where being a home owner is beyond the reach of most wage earners and investors. In those area's it is nearly impossible to rent a property for enough money to cover a mortgage. In those instances the investment tends to be a LOT more speculative, where the only exit strategy involves value appreciation. Value appreciation is at the whim of the market and you as an individual investor have zero control over that.

For that reason, I stay far away from those over priced but popular areas. I prefer my investments to be in places with stable economic outlooks, lower priced housing, and easily achievable positive cash flow that is greater than alternate investments like paper securities.

Even in my house flipping, not buying, and commercial real state strategies avoid those over priced areas. Leave those areas to what I call dumb money. Dumb money comes from hedge funds, private equity, insurance funds, and huge family trusts. Dumb money is not actually dumb, it is just too big to be nimble. Dumb money needs to find a place to quickly park vast sums of cash. Dumb money will take a 3% return on a big chunk of money rather than a 10% return in a bunch of smaller investments because it is simply too hard for them to manage the vast number of investments that they would need.

 

[realdeals]

I totally agree @Josh Caldwell

I view these markets as having a lot of froth on the top of the "fair value" price. When the winds of economnic downturn come (as they always do in cyclical markets) this froth is blown away and the "premium" can disappear over night. The "fair value" markets would not suffer as much in a down turn and those with high rental yields offer another degree of support.

 

[Josh Caldwell]

@realdeals very well said. I love the "froth on top" verbiage, I may steal that for future use !!

 

[diyhelp]

Is New York the equivalent of London in the UK? In many ways detached from the general US housing market?

 

[niksadonist]

Is New York the equivalent of London in the UK? In many ways detached from the general US housing market?

I don't think you can compare New York to London. They are two very different cities with different infrastructure and mentality.