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Winnipeg Free Press - PRINT EDITION

Phoenix rises: Canadians still buying properties despite price hike

By: Martin Cash

Posted: 06/20/2012 1:00 AM | Comments: 0

Phoenix homes are still popular with Canadians. ( )

Demand from Canadian investors for vacation and investment properties in the American sunbelt is rising, even though prices and new housing permits are on the way back up.

The same day a BMO Capital Markets Economics report said the U.S. real estate market continues its recovery, close to 100 high-net-worth individuals attended a U.S real estate seminar at the Manitoba Club hosted by BMO to learn more about investing in properties south of the border.

"We have seen a real increase in inquiries specifically related to purchasing properties in the U.S.," said Judith Chambers, vice-president and market manager, BMO Harris Private Banking in Winnipeg.

Tuesday's BMO report showed building permits in the U.S., an indicator of what's to come for starts, jumped 7.9 per cent in May to the highest level since September 2008.

The BMO seminar featured former Winnipegger Diane Olson, whose team at United Brokers Group has been the top producer in Arizona for the last three years -- and all of her clients are from Canada.

Olson had the foresight to aggressively market the glut of foreclosures and fire sales in the overbuilt Phoenix market to western Canadian buyers over the past four years and is close to hitting the 1,000-sales mark.

And even though she says prices in Phoenix are up about 25 per cent in the last seven months, her business has not trailed off.

"It's true that the days of the lowball offer are over, but there are still fantastic opportunities to be had," she said.

"We do have to spend more time educating clients now."

Not only are prices up, but there is more competition for properties.

"We are back to multiple bids," she said. "Within an hour of a listing, there are five to 10 offers. Prices are still below the high times, but the deal you got last year you will not get this year."

But since many expect the Canadian dollar will stabilize at around the 95-cent mark, it means even if U.S. house prices are higher today, costs may not be much more for Canadian investors than they were three years ago with the dollar around 80 cents US.

Christa Walkden, a Winnipeg accounting professional with MNP's U.S. Taxation Services who spoke at the seminar on tax implications of U.S. purchases, said the number of calls seeking tax advice has not gone down.

"The dollar is fantastic," she said. "Two to three years ago, the exchange rate could make or break a deal."

Walkden said if a Canadian buyer understands the rules, it's a simple process to navigate the taxation issues in the U.S. market.

For example, if the property is used as a vacation home, tax issues really only matter when it's sold or when the purchaser dies.

Olson, who has become an expert on Canadians investing in the U.S. housing market, particularly in Arizona, said initially it was almost exclusively about Canadians buying vacation homes. But now it's split 50-50 with people buying investment properties.

Rental homes owned by Canadians are popular among Arizona renters because they know those homes were purchased with cash -- it's almost impossible to get mortgage financing for investment properties in the U.S. -- and renters won't be forced out because of foreclosure, she said.

martin.cash@freepress.mb.ca

Arizona prices

DURING the build-up of the U.S. housing bubble, house prices in Phoenix rose $10,000 to $20,000 a week, realtor Diane Olson says. Those prices came crashing down in the fall of 2008, but are starting to come back up:

2005

Typical house price in Phoenix was about $265,000

2009

That same house sold for $70,000 to $80,000

2012

Today, that house would sell for $130,000 to $190,000

Republished from the Winnipeg Free Press print edition June 20, 2012 B4

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