Canadians Are Investing Less Cash Into Real Estate and More Into US Stocks and Bonds
Are Canadian investors starting to think that property returns are a little excessive? Statistics Canada (Stat Can) data on net investment in foreign securities shows strong growth for September. Investors have accelerated sending funds out of the country – mostly in US investments. At the same time, the dollar volumes for Canadian real estate investments are declining. With investors now making up a large proportion of buyers, this can be a headwind for the Canadian real estate markets.
Canadians are pumping billions into foreign stocks
Canadians who buy foreign stocks are back with a vengeance. A net increase of $ 17.2 billion in overseas securities was observed in September. That is 33% more than in the same month last year and 275.6% more than the September average for the last five years. It went back briefly last year when the lockdowns first took place. Now investors are making up for lost time and more.
When broken down into foreign securities, investments accumulated most in US securities. The United States recorded $ 13.2 billion in funds invested in foreign securities in September. This corresponds to an increase of 41.4% over the previous year and 576.1% more than the 5-year average for the previous September. To say that it is unusual for Canadians to invest so much money in US dollars is an understatement.
Canadian investments in foreign securities and real estate
The net flow of Canadian investments in foreign securities compared to the dollar volume of existing home sales.
Source: Statistics Canada; CREA; Live better.
Canadians are pulling out of real estate investments
Canadians amassing foreign stocks could capitalize on real estate. The US dollar volume of sales of existing real estate reached 34.9 billion US dollars in September. This corresponds to a decrease of 5.9% compared to the same month last year, but 50% more than the average for the last 5 years for the month. It’s a lot more than usual, but this is clearly a cooling trend – something the industry is expecting.
Canadian investments in foreign securities and real estate
The net flow of Canadian investments in foreign securities compared to the dollar volume of existing home sales.
Source: Statistics Canada; CREA; Live better.
The dynamic is interesting because of Canada’s high proportion of real estate investors. Investors, for example, represent more than a quarter of Toronto property purchases. When the same investors feel that returns are better elsewhere, more money can be diverted. A well-funded demographic increase in prices usually means slower growth.