Canada — the next property sweet spot?

The Government’s new loan curbs and debt-servicing framework have hit hard at home and are pushing more Singaporeans to overseas properties to seek better returns. Like many Asian investors who have also been hit by property cooling measures, more Singaporeans are looking out for the next sweet spot where prices are lower and investment yields higher than back home.

Traditionally, Singaporeans investing overseas have favoured Australia, Malaysia, the United Kingdom, the United States and, more recently, Canada. Recent statistics indicate that Canada is becoming an increasingly viable, if not better, investment option than the old favourites.

Canada has overtaken Australia, Brazil, China, Singapore and the UK as countries most favoured by foreign investors, according to an AT Kearney annual survey released in June.

From an investment viewpoint, Canada makes sense: It is the top G-7 country in GDP and employment growth in the last 10 years, it has the soundest banking system in the world, and it is home to several of the world’s most liveable cities. It is a politically stable democracy with strong regulations and respect for the rule of law.

However, knowing exactly where to invest in Canada is equally important. Asian investors have begun to recognise the value of Edmonton, a city in Alberta where almost all of Canada’s oil and gas are located.

Unlike Vancouver and Toronto, which are overpriced, Edmonton has great potential for strong rental returns and capital appreciation.

The energy boom in Edmonton has boosted its employment rate to an impressive 96 per cent, much higher than that for Vancouver and Toronto. Workers in Edmonton also earn 2.6 times the national average. The surge in employment has resulted in an increased demand for housing: The vacancy rate in Edmonton is at 2.5 per cent. St Albert, an affluent satellite city in Edmonton, has an even lower vacancy rate of 0.3 per cent.

An 850-sq-ft two-bedroom apartment in Vision Investment’s latest project Sage Gardens in St Albert costs about C$255,000 (S$311,000), an accessible price point for many Singaporeans.

Unlike Singapore where current rental yields barely exceed 4 per cent, yields in St Albert, Edmonton, and several Canadian cities average 7 per cent. There are also no buyer and seller stamp duties. Canadian banks typically offer financing of 65 per cent to all investors, regardless of nationality and the number of mortgages they hold.

Ultimately, regardless of where one chooses to invest, due diligence is important. Brick and mortar is often a safer bet than land bank. Investors should partner with a reputable investment company, get a professional assessment of the property they are interested in and find out what the most common real estate scams are.

Source : Today – 6 Sep 2013

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