For some time now the London real estate market has been seen as a safe haven for foreign investors looking to increase their real estate exposure. Is it a coincidence that the London property market seems to be taking a breather at the same time as experts are looking towards Vancouver as the next hot spot for European investors?
Over the last few months we have seen a number of real estate companies operating at the luxury end of the market switching their attention to Vancouver. This is a trend which many expect to continue for the foreseeable future for a variety of reasons.
Increased demand
While Canada is an enormous country, due to the landscape much of the population and as a consequence the real estate market is centred round a relatively small number of major cities and towns. As demand for property has grown, with the luxury end of the Vancouver market up by 20% since September 2014, this has created a variety of hotspots which have not gone unnoticed by overseas investors.
Historically the likes of the UK and the US in particular have been seen as the staple diet of worldwide real estate investors. Canada, often seen as the poor cousin of the US, has certainly come into its own due to its handling of the 2008 worldwide recession and careful management of the property market. However, is there still value for overseas investors?
Currency considerations
Many international real estate investors have been drawn towards Canada, and in particular Vancouver, because of the vibrant real estate market and the advantageous currency considerations. Experts suggest that while properties across Vancouver’s luxury market may be too expensive for the local investment community they still offer exceptional value for international investors based on international valuation measurements.
As a consequence, this growing demand from the international community for Canadian property and in particular real estate in Vancouver is likely to continue. This comes at a time when the US economy is under more pressure, the UK recovery is in the eyes of many beginning to flounder and the European debacle continues. In some ways the Canadian situation can be described as calm waters in choppy seas.
Government policy
It is well documented that the Canadian government is monitoring the real estate market amid concerns of dubious practices among some parties. Indeed we have already seen a number of new regulations introduced to the mix which are likely to give overseas investors yet more confidence in this buoyant market. However, the government will need to address the issue of local affordability against international affordability because ultimately this will lead to problems in the longer term.
As we have seen in the UK, when local affordability is stretched this forces many people into the rental market which favours the corporate end of the real estate arena. This also has a material impact upon property prices going forward as well as rental valuations. Are the Canadian authorities on the verge of a UK style property market problem?