Oh Canada!
Market conditions and Covid effects on our neighbors to the North.
The Canadian buyers and sellers have always been active in looking for the perfect winter retreat in the Arizona real estate market with ease of travel, common language, and no restrictions on ownership of property in the US. The Canadian buyers and sellers have financial concerns that can impact their decisions and with the impact of Covid that list is getting longer.
- The exchange rate: Right now, the exchange rate of the Canadian dollar to the US dollar is $1.35+ Canadian to buy one US dollar. The diminished purchase power makes the US property more expensive. Hard on the buyer. Nice for the seller.
- FIRPTA: The Foreign Investment in Real Property Tax Act authorizes the US to tax foreign non-resident aliens when they sell the property. Proceeds from the sale of property are withheld up to 15% with some exceptions (if the home is less than $300,000 and in use for at least 50% of the time the property is IN USE). The buyer becomes the responsible party for the withholding, and some buyers do not want to be bothered with the paperwork and will shy away from a FIRPTA sale. Not a great reason to not buy, but a reason to plan for a foreign seller.
- Restrictions on Travel: With cancelled flights, restricted border crossings into the US travel during Covid is less desirable.
- Health Insurance: This is the big deal for the Canadian in the US. The Canadian healthcare system will not cover any healthcare if the traveler is out of the country for more that 3 days. This has been managed by the Canadian purchasing a health care rider that covers them when they are traveling for more than 3 days, however there is no rider available if you contract Covid. If a Canadian contracts Covid they can only receive care in Canada if they want to use their health insurance.
Does this current environment favor the Canadian buyer or seller? With the exchange rate and the concerns about future travel, coupled with the current sellers’ market and low inventory in the US this may be a good time to sell. Properties in the sunbelt areas favored by the Canadian winter visitor are also leading the pack in desirable real estate to sell at this time.
