Muscle to the market. Canadian homebuyers turn to Florida as prices at home rise

Friendship with Canadians has been a good idea for Americans since the turn of the 20th century, both in times of war and peace: from the Battle of the Somme and the beaches of Normandy in the first and second World Wars, when they proved to be fiercely determined allies, to the vital trade in tourism and real estate between Canadians and Americans in the 21st century.

For two decades and notably from the recession years onward, they’ve proved to be fiercely determined buyers of homes for their own use or purchased as investments, especially in Florida, statistics show.

But there are challenges for Canadian buyers in the current market, brought on both by much higher real estate prices at home, an exchange rate in Canadian currency of about 75 to 76 cents on the American dollar — that’s been the case for a few years — and rising prices on real estate here.

“The Canadian real estate market is very expensive in places like Toronto,

Ottawa and Montreal, and you can get a lot more for your money in Florida,” says Alain Forget, head of sales and business development for RBC Bank.

Forty-two percent of foreign buyers in the Naples-Fort Myers area Canadians. Pictured is a view looking north from Gordon Pass in Naples. COURTESY PHOTO

With a new lending program, the bank can help, he adds.

RBC Bank describes itself as “a wholly owned subsidiary of the Royal Bank of Canada (which) provides U.S. banking services to Canadians who work, live, shop, study or travel in the U.S.,” along with “U.S. homeownership through financing that allows them to buy a U.S. home while managing the cost of foreign exchange and keeping their Canadian assets intact — even without a U.S. credit history.”

As Mr. Forget (pronounced For- ZHAY) explains, “in some Canadian locations you might pay $1,000 per square foot, but only $200 to $300 in Florida. I think a lot of Americans don’t realize how important Canadians are to their local markets.”

Canadians are often cash buyers, Mr. Forget says, but now RBC Bank now has introduced a lending program for such buyers that can save them significant sums in Canadian dollars if they put down 20 or 25 percent on an American home and pay the rest in low-interest loans from the bank, keeping and using their cash in other ways.

An RBC Bank comparison of cash versus loan payments illustrates savings to Canadians this way: A cash buy of a $400,000 home here will require the Canadian buyer to fork over $528,000 in a Canadian-to- U.S. dollar exchange at closing. But if the buyer finances the home with 20 percent down or $90,000 in U.S. dollars, the down payment in Canadian dollars required at closing will be $118,800.

The program bodes well not just for Canadian buyers but for American Realtors, too. On the east coast they’re likely to see more Quebecers (95 percent speak French and 75 percent speak French as a first language); on the west coast, Canadians from Ontario are commonplace.

“Canadians are so important to all our markets, and in the Naples-Fort Myers area 42 percent of foreign buyers are Canadians,” says Lana Svjetlana Butsky, a broker at Neapolitan Realty. Next week, she’s closing on two homes in the Naples area purchased by Canadians, she adds.

“They’re not only important in the residential market, but lots of them are buying businesses, so they’re a making a huge impact on our economy. In 2019, they spent just over $3.5 billion in Florida.

So having RBC doing business both in Canada and here, it’s just a huge plus. Everybody benefits.”

International trade requires international talents, too. “I’m fluent in French, which has allowed me to capably serve the growing Canadian population in the region,” explains Joanne Lavigne, a Realtor for United Realty Group who works with clients both in Broward and Palm Beach counties. She calls the RBC Bank program, “excellent.”

So do others, both east and west, including Carla Rayman Kidd, a certified international property specialist and principal with her partner Patricia Tan in Your Global Consultants in the Sarasot Venice market, where roughly half of all foreign buyers are Canadians.

“Here’s how it helps us,” she explains. “Canadians over the last decade have been typically cash buyers and they still are. But with the exchange rate coming down starting about 2012, they’ve adjusted their price point downwards.”

Between 2008 and 2011, the recession in the U.S. and a continuing strong economy in Canada gave Canadian buyers what Mr. Forget calls “the perfect storm:” Home prices in Florida and elsewhere dropped drastically, the Canadian dollar exchange was about one-to-one with the American dollar, and Canadians got superb deals at no exchange-rate loss to them. They began to flood into Florida and they paid cash.

“And over the last eight years Canadians are still coming,” notes Ms. Kidd. “But because our prices were going up and the Canadian dollar declined, they still spent cash — just not as much on a house as they would now on this RBC Bank product. And now they can’t afford Canada.”

With the new loan program, instead of buying in cash you’re only outputting 25 to 30 percent for the down payment, at a really low interest rate, and you hang on to your cash. “You want to hold on to your cash. You can make more money in the stock market, or something.”

RBC Bank can help Canadian buyers get mortgages in about five days in Canada, notes Mr. Forget, or about 30 days here.

And for a 10-year loan, notes Ms. Kidd, the interest rates are running 2.7 to 3.5 percent and RBC Bank will loan up to $2.5 million.

“It’s cheap money — like, who wouldn’t do that instead of paying cash?” asks Ms. Kidd.

The timing is particularly good. Last year, Canadians were the second-largest foreign buyers of real estate in the U.S. and the largest in the Sunshine State, where almost 4 million Canadians visited as tourists or snowbirds, statistics show.

In Florida alone, Canadians own more than $55 billion in real estate assets, according to a study by the National Association of Realtors last July.

Best of all, many younger Canadians — the youngest baby boomers, the Generation Xers and Millennials — are both affluent enough and eager enough to invest in Florida real estate, now, before they get to retirement. Many will want to rent out homes for six months or so to cover virtually all the costs, suggests Mr. Forget.

It’s almost enough to make American buyers consider moving to Canada, and coming back as Canadians. ¦