News: Canadian loonie fuels housing growth

Wed, 14 Nov 07

It was not so long ago that the Canadian 'loonie' was being battered by the US 'greenback'...

And when the United States property market caught a cold, Canada was laid low by a nasty bout of pneumonia. But that was then. Nowadays, the patient needing a health check is the US market – especially in the wake of the sub-prime mortgage crisis which has caused so many recent flutters globally. It is – and has been for some time – a different story in Canada.

Close to a decade of careful financial management on the part of the Canadian government, complete with federal surpluses, has culminated in the loonie reaching parity with the greenback and now surging ahead to even higher values.

So any property investment made in sterling upon conversion to Canadian dollars will see the currency increase in value alongside your investment. (The loonie is, of course, the affectionate term for the Canadian dollar, named after the indigenous bird which appears on a $1 coin, while the greenback is the US dollar’s nickname).

Sound financial planning

In September of this year, proof of the Ottawa government’s sound financial planning – and, perhaps, Washington’s less prudent fiscal policies – came when the Canadian dollar matched the US version for value – something which hadn’t happed since 1976.

Since then, the more northerly currency’s value has climbed to US$1.039; and while Canadian exports may take a hit as a result, imports from the US are higher than ever, to say nothing of the kudos Canadians are enjoying.

Besides a more conservative monetary policy (including higher interest rates than the US), Canada is rich in energy and resources such as natural gas, copper, zinc, nickel and significantly oil. Second only to Saudi Arabia oil reserves, Time Magazine said they were “Canada’s greatest buried treasure” and “could satisfy the world’s demand for petroleum for the next century”.

The emergence of China as a major world player on the economic stage has boosted Canada’s coffers and status – the communist state will buy all the minerals she can lay her hands on from Canada. Canada is not a country to stand on its laurels, however, and other booming, hi-tech businesses such as BlackBerry (developed by Research in Motion – RIM), CAE flight simulators and Bombardier regional jets have become world-leading brands.

Surpluses, economic growth, diversifying modern industries, high exchange rates... it all means more dollars in Canadian pockets which, in turn, has led to a strong property market.

Again, this is an indicator of the Canadians’ careful nature. The market has grown steadily and is solid – and the Canadian Real Estate Association has endorsed this assessment by forecasting 10.4 per cent capital appreciation this year. You can put your money into Canadian property and expect a good return over the next few years, even as the neighbouring US market is in flux.

Intelligent business practices

The key is demand. Canada doesn’t build on expectation, only to suddenly find a massive surplus of housing stock on its hands. Even in the world’s second largest country, no one builds without having a market, which makes perfect business sense.

Contrast that approach – and the state of the market – with Britain, where the property boom has run its course and recent forecasts have predicted a fall in price during the next year in some areas. In Ireland, too, where property prices tripled between 2000 and 2006, the bubble has burst. The country’s Economic & Social Research Institute (ESRI) has reported that average house prices in Ireland declined by 3.3 per cent from January to August this year.

Canada’s strong property market is not just a nine-day wonder, it’s here to stay. All evidence suggests there are years of growth to come, and where better to get in than, quite literally, at ground level, by embracing land investment.

For more information, visit http://www.landcorpinternational.com

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