Now is the perfect time to make your move.
Sarah Goulding
other
The recent economic growth performance in Canada has many Canadians worried, but for foreign investors and companies looking to expand, this is an opportune time. Over the past few years, foreign direct investment (FDI) has been on the rise in Canada, with the United States accounting for a significant portion of direct investment. More recently, investors from Asia have advanced their positions, increasing their Canadian investments by more than 90 percent in 2014. China accounted for almost 60 percent of this growth, according to Stats Canada.
Last year, foreign direct investment peaked in the third quarter of 2015 at $31.4 billion, coinciding with a drop in the Canadian dollar in July to US$0.77. Looking at the commercial real estate market, total sales volume by foreign investors also peaked in the fourth quarter of 2015, totaling CDN$736.3 million, a significant increase from the fourth quarter of 2014 when sales volume reached $537.3 million.
With the Bank of Canada reporting a low of US$0.69 in January, the Canadian dollar has recovered slightly to US$0.78. The low loonie has attracted interest from foreign investors who are looking to enter the market while there is a cost advantage. In the past six months, inbound commercial real estate investment activity has totaled US$1.6 billion, a 385 percent increase since last year, according to Real Capital Analytics. The United States, China and Europe have been the main sources of international investment activity, with the highly sought-after markets of Toronto and Vancouver being targeted. The strong demand from both local and international buyers will boost competition for premium assets this year.
Canada’s Domestic Economy Dependent on Oil?
There’s been plenty written about Canada’s exposure to the downturn in oil prices and the resulting plunge in the Canadian dollar. Canada has the third-largest oil reserves in the world and with the price of oil refusing to budge, you can continue to expect a lower Canadian dollar. However, Canada’s service sector accounts for approximately 70 percent of gross domestic product (GDP); therefore, Canada’s economy remains stable due to its strong financial, business and real estate services industries. Other big economic drivers in Canada are its manufacturing, agriculture and export sectors.
The Upside: Canada, a Haven for Foreign Investors
Even in the face of current economic challenges brought on by deteriorating oil prices, Canada is still considered to be a safe place to invest. Global uncertainty has resulted in foreign investors seeking more stable markets; this trend is particularly evident in China, where capital outflows reached a record $159 billion in the month of December, according to Bloomberg News. The plunge in the Canadian dollar has boosted the attractiveness of Canadian real estate assets to foreigners looking to park their capital in a safe place. Investors are bidding for trophy assets that have low vacancies and a proven track record in revenue-generating performance.
True North Strong and Free
Global uncertainty and further weakening of the Canadian dollar continue to shine a beacon on Canadian real estate assets. But what else is fueling interest? Here are just a few reasons why Canada is a good place to invest in this year:
An Economy to Bank On
Canada ranks number 13 out of 144 economies on the World Economic Forum’s Global Competitiveness Index 2015–2016, moving up from its 15th position in the 2014 ranking. Canada’s competitiveness has been fueled by its strong financial market development, ranking first for having the soundest banking system.
Canada’s Got Talent
Canada ranks fourth in the world and first in North America for economies successfully developing and leveraging their human capital, according to the World Economic Forum’s Human Capital Report for 2015. Compared to its U.S. counterpart, which ranks 17th, Canada can expect to remain highly competitive in the global talent pool this year. Looking forward, innovation and talent will be a major driving force for advancement in the world economy. Companies looking to hire the best talent can rest assured knowing that Canada ranks number one in the world in the 15–24 age group, which has 100 percent primary education attainment and 97 percent secondary education attainment. The quality of a Canadian education is ranked seventh in the world, with its management schools ranking fifth.
The Place to Be
The Economist Intelligence Unit’s 2015 Global Liveability Ranking surveys 140 cities across the globe, and the ranking is calculated through category weights. The categories are stability, health care, culture and environment, education and infrastructure. Three of the five top most livable cities in the world are Canadian cities, with Vancouver ranking third; Toronto, fourth; and Calgary, fifth.
More Than Just Good Manners
According to Transparency International, its Corruption Perceptions Index uses a country’s or territory’s score to indicate the perceived level of public sector corruption on a scale of 0 (highly corrupt) to 100 (very clean). A country’s rank indicates its position relative to the other countries in the index. This year’s index includes 168 countries and territories.
Canada ranks first in North America as least corrupt and ninth in the world on the index. The United States ranks 16th least corrupt and China ranks 83rd in the world.
Canada’s Pretty Forward (Looking)
The Bloomberg Innovation Index ranks the world’s 50 most innovative countries based on research and development, manufacturing, high-tech companies, education, research personnel and patents.
Canada ranks 12th in the world for most innovative country in 2015, but ranks fifth in the world for having the largest high-tech sector. South Korea comes in first in this year’s overall ranking, the U.S. ranks sixth, and China comes in at 22nd.
Canada Means Business
Forbes’ Best Countries for Business list ranks 144 countries in the world based on the following categories: trade freedom, monetary freedom, property rights, innovation, technology, red tape, investor protection, corruption, personal freedom, tax burden and market performance.
Overall, Canada ranks seventh in the world as the best country to do business in. Canada ranks first in the world for personal freedom, third for red tape, sixth for investor protection, seventh for trade freedom, and ninth for both tax burden and property rights.
In a resource-rich country that grooms a highly educated workforce, invests in infrastructure and technology, and continues to build a globally competitive and secure banking system, long-term growth is certain. For foreign investors, the low Canadian dollar combined with strong investor protection, low tax burdens and little red tape will ease entry into the Canadian market. For these reasons, it’s a great time to think about your Canadian strategy.
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