My view on Canadians that bought up Florida
by Ariel Kormendy on Friday, April 12, 2013 5:16pm
It's important to note that I didn't decide to write about this topic because of any benefit I get out of this and has no correlation with me being a registered real estate salesperson in Ontario. It is out of my pure passion for Florida and my love for real estate that I share these thoughts with you. In 2009, I actually ended up being one of more than 500,000 Canadians that currently own real estate in Florida. At that time I didn't realize that so many Canadians decided that the "Sunshine State" was their preferred investment, although I did really believe it was a great investment and still think it is. I have several thoughts on the BMO report released yesterday about how us "Snowbirds" are helping fuel the housing recovery in Florida.
Let's start off with a quick review of the current market and who's buying... I will further explain my thoughts on how not only Canadians are helping the market in Florida currently, but why it's not too late to consider this as a potential mid to long-term investment.
Here are some of the statistics:
- Housing prices in Florida are up 12% since April 2011.
- Canadians are the #1 foreign buyers of housing in Florida.
- According to the most recent S&P Case-Shiller data, the price of a single family home in South Florida surged 12 per cent from its low point hit April 2011.
- There is growing demand for Florida real estate from foreign buyers, most notably Canadians, who have helped support property prices.
- Canada is Florida's number one source of foreign tourists and the state's number one foreign buyer of real estate. In 2010, Canadians accounted for 36 per cent of all real estate purchases by foreigners.
- More than 500,000 Canadians currently own property in Florida.
The report also outlines the key geographies in Florida where Canadians currently own real estate. These include:
- Sarasota-Bradenton-Venice (17 per cent)
- Orlando-Kissimmee (13 per cent)
- Miami-Ft. Lauderdale-Palm Beach (13 per cent)
- Cape Coral-Ft. Myers (9 per cent)
- Tampa-St. Petersburg (9 per cent)
- Naples-Marco Island (9 per cent)
- Other (30 per cent)*
A BMO report from 2012 found 16 per cent of Canadians would consider buying a home south of the border. Furthermore:
- Of those considering buying property in the U.S. in 2012, 56 per cent would do so to gain a vacation or secondary property.
- Forty-four per cent cited affordability as a motivation to purchase a home in the U.S.
- One-third viewed the purchase of a property in the U.S. as a long-term investment (29 per cent).
Buying now will secure long term gains for Canadians
My views on this are quite simple. It's been many consecutive years now that we as Canadians have been graced with a strong real estate market and many have built wealth through the accumulated equity in their homes and investment properties. With the market seemingly stable across many areas in the Country, we are equally blessed that OUR "recession" didn't hit the housing market like it did in the United States and in particular, Florida, in 2008 and 2009.
In 2009, if you did some research and hooked up with the right real estate agent, you could have purchased (as an example) a 2 bedroom, 2 bathroom condo in Downtown West Palm Beach for $150k more-or-less. Two years prior, you would find the same condo selling for upwards of $400k. Sound like a deal? It was. In fact, it still is!
Today, that same condo has in-fact provided a good return already. If you were one of those folks that had the coconuts to buy property in the middle of the recession with THOUSANDS of properties on the market (many of them foreclosures and short sales), you are likely now in possession of a positive net cash return should you decide to sell. What does a comparable condo sell for today? About $180-200k.
Here's an more accurate example, with a current condo on the market. Notice the tax assessments and the range in property values. In June of 2005, this particular condo sold for $545,000. Today it is on the market for $180,000, reduced several times. What does that mean? There are still deals to be had!
With the way things are going, is it un-reasonable to say, with the currently upward trend in Florida home prices, that this same condo will sell at the same level it did in 2005? That's up to you to decide. Is it un-reasonable to think that in the next 5 years this condo could realistically sell for $250k-$300k? I don't think so. With the right location and proper due diligence, I believe it is possible.
OK, so let's assume that out of the 500,000 Canadians that currently own homes in Florida, that a good number are people that now consider that vacation home their version/replacement of a cottage, like myself, or that they purchased the home to enjoy the retirement years in good weather. What percentage are investors? Nobody really knows, but I can tell you this... It only makes sense that there are a number of people that purchased and continue to purchase that did so specifically to turn a profit in either the mid to long term. It was almost impossible to flip in the short term, so most understood it was a longer term investment and one that would likely provide a better return than those with GIC's, Mutual Funds or Bonds. Now lets for a minute think it's 2018, you own property in Florida and the market is back to respectable levels... what do you do? Do you hold on to it and enjoy the use of a southern "cottage" year-round? Do you sell it and re-invest in another foreign market? Do you sell and use that money to purchase real estate locally? What would you do?
One thing is for sure. The tides are moving in the favourable direction of seeing positive gains as Canadian investors in Florida and if you didn't get in yet, it's not too late and you're not the only one thinking about it.
Thinking of selling or buying a home?
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Ariel: 647.464.0957 (Direct)
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