January 05, 2021
Following 15 months of stringent COVID lockdowns, Canadian snowbirds are arriving eager to snap up residential real estate with cash in hand.
By Brett Forman
The holiday season has come and gone, heralding the long-awaited return of Canadian snowbirds to South Florida. After a stymied 2020 season, when typically bustling RV parks, apartment towers and favorite restaurants were eerily quiet, the Nov. 8 reopening of the U.S.-Canada border for vaccinated travelers is a cause for serious celebration—both for the snowbirds and many businesses who count on their presence. Following 15 months of stringent COVID lockdowns, Canadian snowbirds are arriving eager to snap up residential real estate with cash in hand.
Flocking to Florida
More than one million Canadians take up winter residence in the United States each year, with some 500,000 living in Florida, according to the Canadian Snowbird Association. This year, now that COVID vaccines are widely available and traveling by car or RV is once again an option, the organization predicts that 90% of Canadian snowbirds will make their way south this winter. In comparison, about 30% made the trip in 2020.
Canadians spending the winter months in warmer American climates is clearly not a novel concept, especially in the Sunshine State’s southernmost counties. South Florida has long been a mecca for Canadians, with tremendous population pockets in Broward—particularly Hollywood—and in Palm Beach County. What is highly novel about this year’s influx, however, is the extreme pent-up demand fueled by more than a year of stringent Canadian pandemic restrictions. Paired with pricing that’s a steal compared to Canada’s top markets, it’s an exceptionally attractive time for Canadians to pour their dollars into real estate investments in South Florida.
Residential Investments a Value Buy
While many would-be local homebuyers are finding themselves severely priced out, residential pricing in Palm Beach and Broward counties is pennies in the bucket compared to conditions in Canada’s hottest markets. In October, Toronto and Vancouver average home sale prices topped $1 million. In comparison, South Florida is a bargain: the October median home sale price was $345,000 for Broward, $406,500 for Miami-Dade and $386,000 for Palm Beach County.
Canadians have the capital too: Emerging from months on end of lockdowns, Canadians are ready to spend, and many have a stockpile of excess cash at their disposal. Amid widespread shutdowns, household savings rose to the tune of $180 billion, a Bank of Canada report found. Canadians who sold off their Florida properties amid the uncertainty of the pandemic will also undoubtedly be looking to reinvest.
Development Opportunities Abound
This tremendous pocket of opportunity for Canadian investment isn’t limited to buying a vacation home. Surging demand, a favorable lending environment, the proliferation of remote work and potential for area job growth make this an ideal time for Canadian investors to make major commercial plays in South Florida.
Demand for renting and buying apartments in the area shows no signs of diminishing. In October, sales of condominiums and townhomes in South Florida jumped nearly 25% to 4,411, and the median sales price rose 15.4% to $225,000. Rents also remain strong, with Broward and Palm Beach counties logging record rents for the 12th consecutive year. And the pool of buyers continues to widen: In addition to booming in-migration that drew approximately 950 new residents to Florida every day, South Florida’s job numbers are soaring. In October, the Fort Lauderdale area added 33,600 new private-sector jobs over the year, (up 4.8%), Miami added 68,700 (up 7.1%) and the West Palm Beach area added 27,100 (up 5%).
Favorable Lending Conditions
Multifamily developers will find no shortage of options for financing new projects. With such a deep supply of banks and other investors vying for business in the space, current terms are very favorable for developers. Strong borrowers will have numerous options to choose from with aggressive loan rates and plentiful preferred equity.
Beyond financing terms, commercial developers are also factoring in speed of execution into their decision-making. Escalated land prices, rising costs of labor and materials and increasing commodity prices make rapid progress essential. Developers want to be able to quickly lock in costs and build.
As one of Canada’s largest nonbank commercial mortgage lenders with operations across North America, including an office in Palm Beach, Trez Capital is seeing this demand first-hand and providing financing for many of these cross-border investments. Like the growing number of Canadians and other international investors betting on success in South Florida, we are bullish on the tri-county area’s long-term growth prospects and ability to sustain intense housing demand.
Brett Forman is Trez Capital’s executive managing director for the eastern U.S. Trez Capital is a diversified real estate investment firm and preeminent provider of private commercial real estate debt and equity financing solutions in Canada and the United States.