In an earlier blog, I detailed that Canada recorded its first ever surplus in bilateral direct investment with the U.S. last year. Direct Canadian investment in the United States was $17.1 billion greater last year than U.S. direct investment in Canada in 2008. This amount includes Canadian amounts used to purchase goods, materials, and businesses (such as Toronto-Dominion Bank’s purchase of Banknorth and Commerce Bancorp).
In addition, the amounts invested by Canadians has also been used to purchase real estate country wide. Although the Canadian economy slowed in 2008 along with the economy here (although not as drastically), the flow of investment into United States real estate was unaffected. For example, Canadian purchases of U.S. real estate more than doubled in a year, from 11 percent to 23.5 percent.
No doubt some of the increase in investment was due to the Canadian dollar. The Loonie has generally been worth more than American greenback, giving Canadians their best exchange rate since 1976. A lower U.S. dollar means Canadians can now buy a home here, or can buy more home for their money.
Overall 2009 Canadian spending in the US should also be positive. Although the currency fluctuation this year have at time been dramatic, shifting favorably and unfavorably in regards to Canadians, the currencies have been more or less at par. Future values are difficult to predict however; as of the beginning of October, the United States dollar is worth more than the Loonie ($1 U.S. = $1.0677).
As a result, Canadian real estate investment numbers this year may be down somewhat, but are generally expected to be on the same path as 2008. That is because any currency disadvantage should be offset by the large drop in metropolitan Phoenix area real estate market values – up to 50% in some areas. So Canadians should continue buying homes in significant numbers here.
The greatest potential drag on purchases of U.S. assets could be the continuing job losses in Canada. The Associated Press reported that Canada’s job losses will mount into 2010, according to Jim Flaherty, the Finance Minister. Economists expect that although the Canadian economy should stabilize along with the U.S., but there is concern the labor markets may not. Job losses have continued, and from October 2008 to May 2009, Canadian job losses reached 363,000.
Don’t miss out on opportunities to sell your home, or if you are a Canadian, to buy here. At www.simplysoldaz.com, we welcome Canadian buyers, and even have a currency converter on our Global Buyer page to keep track of how the Loonie compares to the Greenback. Contact us for more!
– N. Mark Kramoltz © 2015