While American citizens, like all foreigners, are currently banned from buying homes in Canada for two years, Canadians have become the second-largest buyer of residential properties in the United States.
North Vancouver-based Western Wealth Capital (WWC), for instance, has completed over $5 billion in multifamily transactions, representing a portfolio of more than 29,000 rental apartments across five cities in the United States since 2011.
Of the US$53.3 billion worth of U.S. residential real estate purchased by foreign buyers between April 2022 and March 2023, US$6.6 billion can be attributed to Canadian buyers, according to a new report from the U.S.-based National Association of Realtors (NAR).
Based on U.S. sales dollar volume, Canada is ranked as the second top foreign buyer. China is first with a dollar volume of US$13.6 billion.
When it comes to the share of foreign buyers in the market, Canada is third (10 per cent) behind China (13 per cent) and Mexico (12 per cent). In the previous 2022 survey period, Canadians were the top foreign buyers of property in the U.S. at 11 per cent.
Canadians are being drawn to the U.S. due to short- and long-term rental opportunities, lower price per square foot, the potential for a vacation home and agreeable landlord laws. The result is a steady presence of Canadian homebuyers south of the border.
“Apart from, say, New York you’re getting a lot more for your money in the in these U.S. cities, even some pretty major cities,” said Matt Christopherson a research analyst with NAR.
Toronto's average per square metre housing price is US$10,947; Chicago’s is US$1,950, according to the August 1 report.
In Vancouver, the average per square metre price for a detached-house equates to US$7,848 and a condo apartment is US$9,221, according to a separate study released August 2 by Century 21 Canada.
Vancouver-based real estate agents Amy Leong and Ally Ballam are taking advantage of the market of Canadians looking to buy a home in the U.S.
“We’ve got some clients that are negative US$1,000 a month cashflow,” said Ballam. “They’ve still done very well on the return on their properties. Say they bought three, four years ago, they still made US$200,000 to US$300,000 even with the correction that has happened so far in the last few months. Now, they’re going to take that money and repurpose it into another market where they’re no longer to be negative cashflow.”
Of the Canadians buying in the U.S., 55 per cent are buying in Florida with the next most popular states being Arizona at 14 per cent and California at 4 per cent.
Leong and Ballam said that Arizona is the state they focus on the most. They categorize it as “green tape state” with little to no Airbnb or short-term rental restrictions.
Western Wealth Capital is considered the third-largest landlord in Phoenix, where it began buying apartment buildings in 2011 in the wake of the financial crash.
Midwest getting attention
David Puotinen, managing partner at Real File Chartered Professional Accountants, said that 80 per cent of his clients who were investing in Canada are now looking in the U.S.
He said that while historically Florida has been a top destination for Canadian buyers, price appreciation is pushing Canadians to other states.
When it comes to investing in longer-term rental properties, a year lease or more, the midwestern U.S. is in high demand.
“The U.S. Midwest is the most popular place right now for Canadian investors. Just because, especially for those who are trying to buy multi-family properties, you can buy a multi-family building for US$50,000 or US$60,000 a unit,” Puotinen said.
For Airbnb, Arizona, and more specifically, Scottsdale is the hub.
“So many U.S. citizens are migrating to Arizona. They’re coming from Portland, they’re coming from Seattle ... There’s so much economically that’s going on in that state. There’s a lot of migration throughout the U.S., and it’s not just Canadian foreign buyers buying in Arizona,” said Ballam.
Vacation homes are the top target for buyers looking for U.S. properties (49 per cent), with the second being primary residence (29 per cent), according to the report. Eleven per cent of buyers are looking for a combination of vacation and rental; seven per cent buy to rent their property.
Out of all the foreign buyers in the U.S., Canadians are the most likely to buy vacation homes.
“Our clients are real estate investors, and more and more people are looking for that extra income source.,” said Puotinen. “Maybe it’s to supplement retirement, maybe it’s to get an early retirement. And then there are some who, frankly, want to build an empire.”
He added that Canadian interest in U.S. real estate will slow down.
“Interest rates are dictating a lot of it. Plus, Canadian banks aren’t particularly easy to deal with for U.S. investing.… More people are going to be looking at a [long-term rentals] in the next little while. I think that the opportunities in the U.S. Midwest will become more attractive for Canadian buyers; that’ll get a little bit hotter.”
