Canadian Investors are competing among various other global real estate buyers to yield maximum returns. With the expanding opportunities more and more Canadians are putting money into real estate companies outside Canada.
“Canadians are buying everywhere,” said Ross Moore, director of Canada research at CBRE Group Inc., the biggest commercial broker. “They are shopping the world. What’s happened in the last five to 10 years is the big pension funds pretty well own everything of quality in Canada. They love real estate and have all this money coming in and they have to put it somewhere.” The destinations are choosing to invest in real estate are U.S, Japan and U.K.
Some of the popular reasons for this drastic shift are discussed below in detail. These reasons are also defining the new approach Canadian buyers and their changing outlook:
Easy targets: In comparison to Canada; the markets in U.K. and Australia added Moore. The markets are easy to understand and also transparent for new investors. Sonny Kalsi, co– founder of GreenOak Real Estate, who previously led Morgan Stanley’s real estate investment unit. Investment yields on properties are measured in terms of capitalization rate, a building’s net operating income divided by purchase price. A property valued at $100-million with income of $5-million a year would translate to a cap rate of 5 per cent.
Liquidity, stability :“Liquidity, stability and the view that rents have a lot of upside” are driving real estate investment in Japan, said Kalsi. “You can buy for a 4 to 6 per cent cap rate, and borrow at 1 to 2 per cent so there’s significant positive spread with real potential upside.” By company, the international property ETF’s biggest holdings are Mitsui Fudosan Co., Japan’s second-largest developer; Brookfield Asset Management; Paris-based Unibail– Rodamco SE, the biggest developer in Europe; Scentre Group, the Westfield Group spinoff that owns shopping malls in Australia and New Zealand; and Land Securities Group Plc, the largest developer in the U.K.
ETF Gains :The SPDR International Real Estate ETF had a record 117.8 million shares outstanding as of Aug. 29 – a proxy for fund flows since more shares are created to meet demand – up from 400,000 shares when the fund was formed in December 2006. The ETF has gained 10.3 per cent year to date with dividends reinvested, compared with 9.8 per cent for the Standard & Poor’s 500 Index, the U.S. equity benchmark gauge.