Real estate gone loonie: Canadians snapping up luxury homes

Aug 31, 2012, 9:00 AM | Updated: 9:00 am
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SCOTTSDALE – When Matt Horton’s cellphone rings these days, it’s often from someone north of the border looking to buy one the luxury homes he lists with Realty One Group.

As if on cue, Horton receives a text message, then holds up his phone and chuckles. Another Canadian.

“What happens is word of mouth starts spreading up there,” he said. “Everybody and their mother has a place down here.”

A strong Canadian dollar and Arizona’s depressed housing market have created an opportunity for Canadians looking to capitalize not just on the exchange rate but a strong economy back home.

Canadians purchased 11,400 homes in Maricopa County in 2011, according to the Maricopa Association of Governments.

Canadian buyers now account for about 85 percent of Horton’s business, up from two or three transactions per year a decade ago.

“You’re seeing more people beginning to pull the trigger now even more than they were last year,” Horton said.

For many years the U.S. dollar had been the stronger of the two currencies, but today the Canadian dollar, often called the loonie, is demanding a slight premium against the greenback. As of Thursday, one U.S. dollar was worth CA$0.993.

As recently as June 1, one U.S. dollar purchased CA$1.04.

Calgary resident Tony Migliarese, one of Horton’s clients, said the strong Canadian dollar helped when he purchased a north Scottsdale home in 2008 as a vacation getaway. According to the Maricopa County Assessor’s website, the home sold for $1.475 million.

“It’s a significant cost difference in a climate that’s fantastic, consistently safe and welcoming to Canadians,” Migliarese said.

On top of the exchange rate, many Canadians are taking advantage of Arizona’s depressed housing prices, banking on future appreciation, Horton said. Many are investors who rent the properties.

“The rental rates in the area are sky high,” Horton said.

Glenn Williamson, CEO and founder of the Canadian and Arizona Business Council, estimates that more than a million Canadians will flock to Arizona in 2012 after 872,000 visited in 2011.

And while many purchase mobile homes and more modest single-family homes in areas like Apache Junction, Williamson said, interest has surged in purchasing high-end real estate in Paradise Valley and Scottsdale.

“Everybody in the world is going after the Canadian market … but the really cool thing about Arizona is there’s this long-standing relationship that’s been going on that’s never really burst through the bubble the way it is now,” Williamson said.

Still, Arizona must compete with Florida, California, Las Vegas, Palm Springs and a number of other popular destinations for Canadian snowbirds.

For Vancouver resident Jonathan Barnett, another of Horton’s clients, the decision to buy what he described as a “family holiday home” in Scottsdale earlier this year stemmed from all the city has to offer.

“I like the younger, more vibrant community. I like university towns, sports teams … and Palm Springs is kind of the opposite,” said Barnett, whose choice came down to the two cities.

Aside from the Valley being a desirable place to live, water shortages as well as higher property taxes and insurance rates in both California in Florida favor Arizona, said Dale Walters, CEO of KeatsConnelly, the largest cross-border wealth management firm in North America.

“That makes the overall cost of ownership higher and makes Arizona that much more of a bargain,” Walters said.

The continued influx from the north also depends on Canada’s health, which has been supported by minimal debt and deficit levels as well as foreign interest in the nation’s natural resources, in particular from the Chinese, said Ian Nakamoto, director of research at MacDougall, MacDougall & MacTier Inc. in Toronto.

“The trend is positive for Arizona, provided the Canadian dollar remains strong,” Nakamoto said. “I tend to view it as our game to lose.”

Despite that country’s current advantages, the Canadian government is concerned about rising debt, some of which is due to its citizens borrowing on their home equity to invest in U.S. real estate, Walters said.

“There are a million things that could go wrong, but none seem to be highly likely,” he said. “And regardless, for the wealthy, they’re pretty much immune to these things.”

At least for now it looks that way for real estate agents like Horton, who said he is still receiving 15 to 20 inquiries a week from Canadians.

“Young wealthy Canadians are loving Phoenix, and the nightlife, and the cars, and the houses,” Horton said.

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Real estate gone loonie: Canadians snapping up luxury homes