Homebase Mortgages

How Brexit Can Make the Vancouver and Toronto Real Estate Markets Even Hotter

Policy makers have been trying to slow down the skyrocketing prices of homes in Toronto and Vancouver and it looks like Brexit could add more fuel to their headache. How so? Realtors from Vancouver and Toronto are currently pitching Canada’s most-loved cities as a safe haven for real estate investors now that investing in London seems a lot riskier, thanks to Brexit.

The owner of Toronto brokerage Engel & Völkers, Anita Springate-Rinaud was quoted as saying that Brexit is good for Toronto brokers, further saying that field agents will most likely begin calling to redirect their investments to Toronto – a seemingly safer bet from an investor’s point of view.

Foreign Investors Eyeing Canada for Future Investments

It is no secret that foreign investors are now viewing Canada as the land of certainty as far as real estate is concerned. In fact, if Springate-Rinaud’s statement is right, we can expect an even higher demand for our office towers, homes, and condos in Toronto and Vancouver from foreign moneyed clients.

Figures from Cushman and Wakefield shared that there’s around $443 billion in global capital that wealthy investors have set aside for commercial property that’s not used up yet. Brian Kriter, Cushman & Wakefield’s executive managing director of valuation and advisory shared that within hours of the Brexit outcome, at 6:30am Toronto time, he was discussing potential ramifications of the event with colleagues in New York and London. Since then, he has met with an Asian commercial real estate lender who is now considering channeling his funds for plans of a multimillion-dollar financing deal in London to North America instead. As you read this article, Cushman & Wakefield may have already held their client day in New York. The client day is aimed to discuss the early effects of Brexit’s fallout.

Kriter shares that there is a phenomenal amount of capital that’s just looking for a new home in commercial real estate; and that right now, that capital is very fluid. He also added that foreign investors are seeing Canada as a land of certainty.

A Quick Look Back at London

It is to be noted that during the past 10 years, central London had the biggest price increase in residential property compared to any major city and that it has also been a favoured destination for global capital that’s seeking a stable sanctuary. Knight Frank LLP shared that 3 out of 4 newly built homes in London were bought by foreign buyers in 2013 and that half of the buyers were from Asia. As for commercial property, 70% of central London purchases in 2015 were made by foreigners.

Sotheby’s International Realty in Canada chief executive officer Brad Henderson added that Brexit and the pound’s plunging in value may go the other way around and attract even more foreign buyers if it creates more predictability in the UK.

The Chinese Factor

In 2014, China invested $18.3 billion in global pursuits, and more than half of that went to Sydney, Manhattan, and London according to Toronto-based real estate firm Colliers International Group. Since then, they’ve diversified to other markets, with Canada’s market getting a bigger slice of the money over the years. Chinese investment in Canada surged to 42% of $1.4 billion as of February this year. That’s a huge leap from previously recorded 5%.

With everything said, Sotheby’s Henderson said that we are still in the early days, so concerns about real estate markets overheating in Vancouver and Toronto may just play out as an overreaction. However, he further added that Canada is still a bargain and that capital will always go towards stable, more attractive markets.

Homebase Mortgages