How Does Canadian Real Estate Investing Stack Up Against the Rest of the World

How Does Canadian Real Estate Investing Stack Up Against the Rest of the World?

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As an active participant in the Candian real estate investment market, you likely spend most of your days concerned with the rules and regulations, the up-and-coming trends and the far-flung future of your local market. You might even have your attention focused solely on one specific neighbourhood in Canada. That’s how a significant portion of real estate investors in Canada spend their time: hyper-focused and ready to jump on opportunities.

Table of Contents - How Does Canadian Real Estate Investing Stack Up Against the Rest of the World?

Of course, every once in a while, the savvy investor knows that it is essential to step back and take a look at the broader picture. In other words, how does real estate investment in Canada stack up against the rest of the world? The answer is a bit of a mixed bag.

It costs a good amount to invest

Let’s kick things off with one of the most critical metrics in the real estate market: the average cost of a home. In Canada, the average value of a home from province to province is about $480,000. That’s pretty high in the grand scheme of things.

  • In the United States, the average cost of a home is roughly USD 226,000 ($310,000).
  • In the United Kingdom, £235,000 ($359,000) will net you a nice home.
  • French homes average £160,000 ($245,000).
  • In Indian cities, a home will cost north of 7 million rupees ($139,000).
  • A home in beautiful Beijing costs about USD 310,000 ($422,000).

Those prices will shift considerably depending on whether you are looking at an urban area. It will also vary significantly from province to province. A home in Vancouver runs north of a million dollars. The average cost of a home in Regina is roughly a quarter of that.

Skyrocketing home prices

In addition to the relatively high cost of a home, the Canadian housing market is witnessing a rapid increase in those costs year after year. Across the country, builders are having issues keeping up with the demand for new houses. As a result, the cost of a home rose more than 56% between 2008 and 2018. Compare that to the United States, which saw just a 24% housing price increase during the same period. The dramatic rise in housing prices has not abated since 2018. Indeed, before the onset of the novel coronavirus, the average cost of a home was expected to rise as much as 4 percent in 2020.

Some housing experts warn that the last decade-long phenomenon is a bubble that will eventually pop if the nation continues its course. For the moment, however, demand is extremely high and home prices are soaring. In other words, investors with the capital to invest now could see a substantial increase in the value of their property.

Be cautious of overvaluation

When you’re getting started in real estate investment, one of the fundamental rules is never to pay more for a property than it is worth. It sounds obvious, but in real estate markets throughout Canada, overvaluation of home prices is a real problem. Not only is it causing issues with a lot of younger home buyers, but it makes getting into the investment game more challenging.

Every year, global investment banking company UBS surveys housing markets that are in danger of hitting a bubble. This year, Toronto turned up at number two, based on “low rates and supply shortages.” The people of Toronto have likely seen this change in action. Housing costs tripled between 2000 and 2017.

Vancouver showed up at number 6 on UBS’ list. Experts regularly target Vancouver as a potential real estate trouble spot. In 2019, the province was number 6 on the Swiss Bank’s troubled housing index.

The industry looks strong

All of the above may have sounded a bit doom and gloom. Still, the truth is that even those financial insiders who predict the worst for real estate markets in Canada acknowledge that the industry has a lot going in its favour, due primarily to three factors.

First and foremost, banks across the country are making it easier to secure a mortgage for first-time homeowners. This strategy has increased the number of available buyers who can reasonably get the money they need to buy your property.

Number two, it isn’t easy to build new homes anywhere in Canada compared to countries throughout the rest of the world. Either space is in short supply, or local regulations keep new construction intentionally slow. The result is the same: supply isn’t rising fast enough to meet demand.

Finally, some financial analysts believe that the damage has been done. As one explained, “a turnaround is unlikely for now, especially as [real estate] prices are still 75 percent higher than a decade ago.”

It’s easy enough to get into

Despite the potentially steep cost of entry, the Canadian real estate market is still rewarding. The country applies several tax incentives for those people who own property. The tax breaks are indeed better for those people who live in the properties they occupy, but there are several ways to take advantage of the nation’s liberal tax law.

If you’re concerned about the cost to acquire property, there are also several strategies that you can employ to get in on the action even as you save up enough to break out on your own. Real estate investment trusts allow you to buy a stake in companies that invest in a wide variety of real estate assets. Asset-sharing strategies will enable you to pool your capital with like-minded investors. Some investors find enough start-up capital by renting out a room in their home.

As you save up your money and dip your toe into the industry, the most important thing to do is keep reading, keep researching and keep learning about the ins and outs of real estate in Canada.

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Scott Dillingham

Scott Dillingham

I have been investing and lending to real estate investors for nearly 10 years now. After thousands of successful deals between flips, rent to owns, student properties and commercial assets I have developed a deep knowledge of real estate investments and have a passion of sharing this information with the world! If your looking for a lender who specializes in rental property financing you're going to want to connect with me at team@lendcity.ca.