The U.S. real estate market is picking up from last year and it continues to attract buyers from all over the world. According to the National Association of Realtors, foreign buyers purchased over $102.6 billion worth of residential properties in 2016. It comes as no surprise that a large majority is Chinese, however who would have expected the Canadians to come in the second place? Canadians purchased over $19 billion in real estate despite not being exempted from tax implications such as the homestead tax and withholding tax. Granted, U.S. buyers are also in the same boat since they have to pay 15% foreign tax if they buy properties in Canada. Some of the popular places where the properties are snatched up are in Florida, Arizona, California, Texas and Georgia.
There are several reasons for why they are purchasing properties in the US in large number. Back home, there is a rapid rise of domestic price. The average property price increased 69% from last year and sales prices climbed up 10% and even 21% in Toronto. This influenced Canadian buyers to look outside of the country. On a side note, Canadians are the least likely foreigners to take up residency in the United States, which means properties are bought for investment or as a second home. Investors are betting against the dollar when selling back their property. Another factor is that Canadians who are buying properties abroad have a lot of capital and are eager to diversify. This enables them to buy a property regardless of the price. For example, two Canadians buyers purchased the penthouse units at the Yacht Club at Portofino for above market value. Finally, the aging Canadians are interested in downsizing. They would prefer to sell their mansion and buy one small apartment in a downtown city in Canada and one in South Florida.
Interestingly enough, Canadians use cash as their preferred method of purchase. Some of them are selling their house to cash out equity and invest in the United States while others refinance their property and take the equity to buy another one in Florida. Either way, there is no denying that Canadians are interested in U.S. real estate, which helps the market during the recession.