Real estate is vulnerable to fluctuations brought about by changes in currency values, observers say
A weaker loonie means that Canadian consumers are getting shortchanged compared to American or Chinese buyers when purchasing Canadian real estate, according to a markets observer.
In a contribution post for Business Insider, real estate blog Better Dwelling noted that real estate is prone to fluctuations brought about by changes in currency values, as it is what’s considered an “inflation sensitive asset”.
“It doesn’t mean you can’t make money, but it does mean the money you make will more likely resemble the true cost of goods rising,” according to the analysis. “In [real estate], the cost of doing business in American dollars – which is how we price almost all of our goods in internationally.”
Better Dwelling noted that in the current environment, Canadians are losing approximately 9 per cent when buying a home on the average benchmark price. The loonie has depreciated by 27 per cent versus the greenback since 2011, while Canadian home prices have grown by 26 per cent.
“Another way of looking at it is the value of labour has depreciated, but the value of homes have stayed the same. Canadian land is maintaining its value, but your labour isn’t,” the blog argued. “This is actually a disturbing trend if you think about it – things don’t just suck for us. We’re being devalued on a global scale.”
“If the Canadian dollar moves lower, we might see this trend continue. Actually, as long as Canadians can borrow the difference it will likely continue. We’ve already racked up epic amounts of debt dealing with stagnant wages, but we haven’t really acknowledged this at a national level yet.”
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In a contribution post for Business Insider, real estate blog Better Dwelling noted that real estate is prone to fluctuations brought about by changes in currency values, as it is what’s considered an “inflation sensitive asset”.
“It doesn’t mean you can’t make money, but it does mean the money you make will more likely resemble the true cost of goods rising,” according to the analysis. “In [real estate], the cost of doing business in American dollars – which is how we price almost all of our goods in internationally.”
Better Dwelling noted that in the current environment, Canadians are losing approximately 9 per cent when buying a home on the average benchmark price. The loonie has depreciated by 27 per cent versus the greenback since 2011, while Canadian home prices have grown by 26 per cent.
“Another way of looking at it is the value of labour has depreciated, but the value of homes have stayed the same. Canadian land is maintaining its value, but your labour isn’t,” the blog argued. “This is actually a disturbing trend if you think about it – things don’t just suck for us. We’re being devalued on a global scale.”
“If the Canadian dollar moves lower, we might see this trend continue. Actually, as long as Canadians can borrow the difference it will likely continue. We’ve already racked up epic amounts of debt dealing with stagnant wages, but we haven’t really acknowledged this at a national level yet.”
Related Stories:
Canadian dollar’s devaluation a possible contributor to price growth
Recovery in oil not enough to boost the Canadian economy
