Why Canadian Real Estate is The Best Investment
IS CANADA A GOOD PLACE TO INVEST?
Yes, Canada is one of the best countries in the world to invest in real estate. The country’s rock solid banking system, robust economy, political stability, low crime and plethora of natural resources make it one of the most coveted nations in the world for new residents and investors alike.
There are 10 primary reasons why you should invest in Canadian real estate:
Canada has one of the lowest mortgage default rates of any developed nation. In 2022, only 0.17% of Canadian mortgages were in arrears according to Canadian banks, and Canada’s highest rate of delinquent mortgages ever was recorded in 1992 when it hit 0.65%. To put these incredibly low rates in perspective, in 2022 3.2% of US mortgages are delinquent and in 2008 during the subprime mortgage crisis the delinquency rate exceeded 25%.
Canadian real estate has continually appreciated in value. Looking at the last 15 years, Canadian real estate has appreciated by 199.88%, which is a 15% year-over-year return. If you purchased a house in Canada in 2007 at the average price of $335,180, in 2022 that same house would be worth $629,972.
The Canadian banking system is rock solid and backed by the government. Canada has a relatively centralized banking system that closely regulates mortgage lending and investment, and is made up of a small number of large, highly diversified institutions. In 2008 when the United States experienced their worst recession since the Great Depression of the 1930’s, Canada had no bank failures, no bailouts and the real estate market saw almost no impact. In the highly unlikely event that a Canadian bank did need to be bailed out, the banking system in Canada is protected by law - and the government offers free deposit insurance which protects your savings if a bank fails. This is why many large institutional investors view owning stocks in Canadian banks as an alternative to owning government bonds or treasury bills.
Canada is a hotbed for immigration. Canada accepts over 400,000 immigrants each year which represents over 1% of its total population. About 25% of the country is made up of foreign-born residents. Immigrants are attracted to Canada’s cultural diversity and enjoy the ability to find many local communities that are culturally similar to their country of origin. Canada has a national policy of multiculturalism and is a place where people of many different backgrounds live harmoniously. In November 2022, the Government of Canada announced a plan to boost the economy by increasing the immigration target to 485,000 in 2024 and 500,000 in 2025.
Canada is politically stable. Despite any shock value headlines you may have seen in the media, in 2021 Canada ranked the second most politically stable country in the world and overall best country in the world by an extensive study conducted by US News. The Canadian Charter of Rights and Freedoms protects the basic rights and freedoms of Canadians which ensures Canada remains a free and democratic nation.
Canada is one of the safest countries in the world. According to the Global Peace Index, Canada is ranked the 6th safest country in the world due to its low crime rates and trusted police force.
Your primary residence is exempt from capital gains tax. Unlike in many other developed countries, the Canadian government does not tax the profits made when you sell your primary residence. This means hundreds of thousands of dollars in savings for homeowners, especially those who move to new homes frequently.
Canada has a strong and diverse economy. Canada has the 9th largest economy driven by strong positioning in a diverse set of industries including construction, manufacturing, agriculture and technology. Canada has the third largest reserve of natural resources globally and is the second largest exporter of wood, fourth largest exporter of crude oil and the fifth largest exporter of natural gas. Canada’s biggest city Toronto has risen to become a global tech hub boasting over 15,000 tech startups and is the third largest tech center in North America following only New York and the San Francisco Bay area.
Canada is America’s closest ally and biggest trading partner. Canada has the second largest landmass in the world but despite its immense size, 90% of Canadians live within 150km of the US border. Many Canadian businesses enjoy easy access to the world’s biggest and most robust economy located right next door, which adds a degree of strength to the Canadian economy.
Canada has a very low unemployment rate. One of the most important factors to consider when evaluating a real estate investment is the strength of the local economy because job growth will drive continued demand from both buyers and renters. In 2022, Canada’s unemployment rate dropped to 4.9% which is the lowest in Canadian history.
Canada’s record rate of population growth is a strong indicator of the long term health of the real estate market.
How much tax do you pay when you buy a property in Canada?
The tax paid when you buy a property in Canada is called Land transfer tax. Land transfer tax in Canada is calculated at the Provincial level, so each Province taxes property purchases differently. In Ontario, this tax is calculated using the following sliding scale: 0.5% for a purchase amount up to and including $55,000. 1% for amounts between $55,000 and $250,000. 1.5% for amounts above $250,000. 2% for amounts exceeding $400,000, where the land contains 1-2 single family residences.
For example, let’s assume you’ve purchased a property for $600,000. How would your property taxes be calculated?
$55,000 x 0.5%
+ (250,000 - 55,000) x 1%
+ (400,000 - 250,000) x 1.5%
+(600,000 - 400,000) x 2%
=$8,475
How much is property tax in Canada?
Property tax in Canada is determined at the municipal level and therefore varies from city to city. Property tax is calculated by multiplying your property’s assessed value by a percentage rate determined by the local township. This percentage usually falls between 0.5% and 2%.
Cities in Canada where property values are high typically have lower property tax rates and vice-versa. Vancouver has the highest average housing cost in Canada but the lowest property tax rate at 0.25%. Toronto is Canada’s second most expensive city in Canada with a property tax rate of 0.55%. Contrarily, in Windsor which is one of the least expensive cities in Canada, residents pay Ontario’s highest property tax rate at 1.81%.
Does owning a property in Canada make you a resident?
No, owning property in Canada does not make you a resident. Anyone looking to become a permanent resident of Canada must still meet the eligibility requirements including the ability to speak English or French as well as a minimum level of education and work experience. Owners of real estate in Canada seeking PR or citizenship status do not hold any advantage over those who do not own property.
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