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The real estate market in major Canadian cities such as Toronto and Vancouver continues to flourish thanks to growing interest from developers, investors and buyers, both domestic and international.
Despite ongoing (and so far unrealized) concerns that Canada’s real estate market may be overheated, sales activity and prices remain robust in many of the urban centres due in large part to increasing urbanization, rising immigration, foreign investment and development as well as low interest rates. This abundance of real estate activity on both the development and investment front has been at an all-time high in all asset classes including industrial properties, hotels, apartments and offices.
In the residential housing market, prices in major centres such as Toronto and Vancouver have been rising rapidly over the years, but are still considered a bargain to foreign buyers when compared to other international markets such as New York, London and Hong Kong, especially due to the softening of the Canadian dollar. Demand for condominium units in both cities continues to grow, which is evident in the steady launch of new developments and the number of construction cranes that regularly dot the Vancouver and Toronto skylines.
For an increasing number of buyers, downtown condominiums offer more affordability than a traditional detached suburban home and can often provide more convenience, from pedestrian access to urban amenities to reduced commute times to and from work. As more young workers opt for the city lifestyle, more developers respond; building new condos to meet an increasing demand for rental units.
These residential projects are being built not only by domestic developers, but also by foreign companies. Since the recent liberalization of China’s offshore investment policies and a softening of local market conditions, Chinese institutional and individual investors are among those looking for real estate opportunities outside their own borders. For many, Canada has become one of the preferred markets due to a stable political and economic environment.
In downtown Toronto, China’s Greenland Holding Group, recently broke ground on its first Canadian project – a twin tower residential complex with a hotel and museum. The project, known as King Blue by Greenland, includes a 122-key luxury boutique hotel, 44 and 48-storey residential towers, and the highest heritage facade ever revitalized in Canada.
King Blue is Greenland’s first Canadian project in an international expansion strategy which includes other key cities in the United States, United Kingdom and Australia.
“We think Canada is a country that is consistently attracting foreign investment and foreign interest around its real estate market – and will attract all types of investment,” Henry Cao, President of Greenland’s Canadian unit said in a recent interview with PwC.
Cao describes Toronto’s condo market as, “one of the top markets in the world,” and one of Greenland’s top three priorities for future investment.
“We probably will close one or two more deals in the next one-year period,” Cao said.
Greenland is also keeping its eye on markets across Canada. Calgary is of particular interest right now because of the cooling effect lower oil prices are having on that city’s housing market. After years of appreciation, house prices and sales have slipped in cities across Alberta in recent months, which for some investors present a good buying opportunity.
“We are actually looking very closely at the Calgary market,” said Cao. “We think there may be opportunities to invest.”
Cao said Greenland invests in various types of real estate including commercial, residential, hotel and infrastructure. However, the company’s overseas strategy will primarily focus on residential developments, at least for the next couple of years.
“After that, we may have more flexibility with other types of investments,” Cao said.
Cao explains that Greenland has three main sources of capital for its investments: the company's own equity, a capital raising platform for Asian capital market and local financial institutions in Canada.
“I think the third source is a very important one,” said Cao, adding that some Canadian banks are “very interested” in their project.
The combination of foreign capital inflows working in partnership with major Canadian banks is a strong economic fundamental which inevitably leads to diversification as parties become more comfortable with the relationship.
Cao believes foreign investment should be welcomed.
“For an international city like Toronto, we think that foreign investment will always be an important growth engine for the city's economy,” Cao said.
To foreign investors, Canada is considered a strong and stable country in which to do business. Cao expects investment demand from foreign companies to continue for many years to come.