The past seven years have seen the US as a favourite for global real estate investors. That is all changing now and as the saying goes - What goes up, must come down. If something is increasing or rising, eventually it comes down, and that is happening now in the US housing market. This massive shift could be a great advantage for Canadian investors and real estate owners.
The data is undeniable. Existing home sales in the US have been faltering for months. Now new home sales have joined that trend, falling as much as 70% in some areas. Even last year rents in San Francisco were falling at over $400 per month. Zillow reports home values in Manhattan are already down 2.5%, and Miami Beach home values are down 5.6%. Forecasts call for those properties to lose another 5% in value within the next 12 months.
All of the same factors are in play that was there in 2006. Rising interest rates, high rates of competitiveness on overpriced properties, and countless speculative building projects. The icing on the cake is lenders beginning to rein in lending before it was even able to fully recover from 2008. Needless to say, it is not going to be a fun time to be a seller of US residential properties over the next few years.
For those that know their market cycles, there is little reason to panic. Know where the herd is stampeding to next, get ahead of them, and continue to invest wisely, based on sound principles.
Those with common sense and who initially planned to exit investments within the next 15 years are cashing out of the US now. They are dedicating capital for equity and debt investments into more promising destinations, where there is still growth potential, and cash flowing opportunities.
Last time this happened we saw Canada become very popular with sophisticated international investors. Expect this to be even more pronounced this time around due to increased ease of investing abroad and obtaining information online.
Of course, there will also be exotic islands being promoted again, and highly risky emerging markets. Just make sure they really exist and know the downside risks, like lack of legal protection.
The language, stability, legal processes and being the only country who has proven to be able to successfully navigate huge crashes all make Canada a top choice again.
The data seems to clearly show that the US housing market is once again headed deep into ‘correction’ territory. Demand has already dropped off substantially. Values are already floating downwards. Savvy investors are reading the signs and will be redirecting their capital to stronger markets, like Canada, in order to achieve their desired returns. ReDev Properties provides access to select commercial property investments in key Canadian markets. Visit us on the web today to find out how these opportunities could be exactly what your portfolio needs.