Chills in US economy send property punters north
Once thought of as boring, Canada is beginning to look sexy. The nation that lacks the brash corporate culture of its southern neighbour may be about to reap benefits from its conservative image, and more importantly, its conservative accounting.
With its economy outperforming that of the United States in the downturn, property punters are taking a long-term view of the Canadian economy as one with fewer systemic problems than the US.
'Canadian multinational corporations might be more resilient because they don't have those question marks or inflated earnings problems,' says Piers Brunner, managing director of Colliers International Hong Kong.
Ranking lower on the boardroom shenanigan meter is a good thing for a residential property market that has posted impressive gains of late.
Fuelled by low interest rates, the price of residential condominiums in major cities last year rose on average between 10 per cent and 12 per cent.
This year the sector has risen 5 per cent. Price gains are higher in major cities, with Toronto, Ottawa and Vancouver ranking as the nation's most expensive areas for property.
But expensive is a relative concept, especially in global terms. An average two-bedroom condominium in Toronto, the economic heart of the country, sells for C$190,000 (about HK$976,600). A studio in London sells for an average C$400,000.
The price discrepancy underscores the fact that Canadian property has been generally flat in recent years, and is just beginning to rally from a low base, according to Mr Brunner.
'It's understandable that the Canadian market might have further to go,' he says. 'The low interest environment is going to be with us throughout 2002 and it is a platform for growth.'
Colliers International anticipates continued strength in the residential markets of Vancouver and Toronto where vacancy rates are at historic lows of 1 per cent to 2 per cent.
Ottawa, a price leader in recent years and the city's residential sector, is likely to cool as a civic economy that depends heavily on the technology sector.
The residential markets in Calgary and Edmonton, two cities in the country's main oil-producing province of Alberta, are expected to perform well because of broad-based economic diversification in recent years.
Colliers International cautions that the office sector is likely to soften in coming months as the economy catches recessionary chills from the US.
'It looks to me as though there is a two-tiered environment. The office market is correcting and has more vacancies, but the apartment market is predicted to increase 5 per cent in capital values this year,' he says.