How do Canadian and American real estate trends compare in 2017?
What similar trends do these two North American countries share this year and what factors may be diverging as each nation deals with its own unique economic factors?
Rental Property Trends
Both the US and Canada are wrestling with high rental rates. Affordability has become a growing concern in both countries, leaving many cities on both sides of the border taking drastic measures to make their housing markets more affordable.
In the United States, Fannie Mae and Freddie Mac have boasted that they will blast through regulated lending caps as they make loans for ‘affordable’ housing developments. Overall, US cities continue to work to outlaw homelessness, while rents continue to increase and a new generation of landlords are becoming increasingly tougher on approving tenants. One exception may be San Francisco, California, which Zillow reports is currently experiencing a significant decline in rental rates.
Canada is also taking significant actions in this space in 2017. Although the government is working hard to slow the residential housing market in hot cities, it is also committing millions of dollars to develop more affordable housing. New rules also take aim at this through the institution of tight rental increase controls, new taxes on foreign buyers and vacant homes, as well as compensation for evicted tenants.
Retail Property Trends
On a national scale, Canada and the US appear to be on almost opposite paths when it comes to retail property. Despite some revival of American manufacturing, the last year has seen constant headlines warning of major retailers closing stores. This includes big names like Macy’s, J. Crew, JC Penney, and even Walmart.
On the other hand, Canadian retailers and US retailers operating in Canada, can’t seem to grow fast enough, as they are opening new locations and are taking on larger floor plans. This can be attributed to the fact that online shopping is such a small percentage of Canadian retail, as compared to being the norm in the US. Still, Canadian retailers are already moving ahead of the curve and are becoming very tech savvy through the incorporation of hybrid ‘clicks to bricks’ strategies that offer the best of both worlds.
While there are some similarities and many differences between these two national markets this year, the demand for income producing investments and the security of tangible real estate investments remains the same. This year billions and possibly trillions in global capital is expected to be invested into North America. While residential real estate in Canada may no longer offer the appeal and outlook they once did, commercial real estate investors could find that Canadian retail offers some of the most attractive yields and strong growth prospects, when compared to other international markets.