Real Estate Without Borders - Episode Summary
Episode Title: Declining Travel to the US - Will it Impact Real Estate?
Release Date: April 22, 2025
Host: Daniel Fosh
Guest: David Hutchinson
Introduction
In this insightful episode of Real Estate Without Borders, hosts Daniel Fosh and David Hutchinson delve into the recent decline in Canadian travel to the United States and its potential ramifications on the US real estate market. They explore the underlying economic and political factors driving this trend, analyze its impact on real estate investments, and discuss the broader implications for American investors.
Reasons for Declining Canadian Travel
Economic Factors: Weak Canadian Dollar
One of the primary reasons Canadians are reducing their travel to the US is the weakened Canadian dollar. David Hutchinson highlights, “[01:20] David Hutchinson: ...we just can't afford to or it's not as desirable based off of where the Canadian dollar is currently positioning itself.”
Daniel Fosh adds context by explaining the currency dynamics: “[01:44] Daniel Fosh: ...the DXY, which is the dollar index, has been down. The USD is crashing.”
The depreciating Canadian dollar means that Americans become more expensive for Canadians, reducing their purchasing power and making US travel less attractive.
Seasonal Changes
As winter passes and Canadian weather becomes milder, the necessity for "snowbirds"—Canadians who migrate south during colder months—diminishes. Daniel notes, “[00:50] David Hutchinson: ...any reason that Canadians might have to go south is diminishing as the weather gets warmer in Canada.”
Political Tensions
Political factors also play a role. David suggests that beyond economic reasons, lingering tensions and negative perceptions of Americans may discourage Canadians from traveling: “[06:55] David Hutchinson: ...there's a lot of angry people angry with Americans.”
Impact on US Real Estate
Significant Decrease in Canadian Buyers
The episode reveals a substantial decline in Canadian investment in US real estate. David states, “[08:53] David Hutchinson: ...Canadians hold a ton of real estate in the US... if they're selling, it could move the needle in places like Florida and Arizona.”
Moreover, a staggering statistic is shared: “[16:20] Daniel Fosh: ...900,000 fewer Canadians crossed the U.S. border in March compared to 2024.”
Regional Hotspots Affected
Key regions traditionally popular with Canadian investors, such as Florida, Arizona, and Palm Springs, are experiencing notable impacts. Daniel observes, “[18:34] Daniel Fosh: ...Palm Springs loves Canada.”
These areas, known for their vacation homes and attractive climates, are seeing reduced demand as Canadian buyers retreat.
Investment Trends and Mortgage Challenges
The episode discusses how changes in investment patterns are influencing the real estate market. David notes, “[11:09] Daniel Fosh: Canadians often pay cash for US properties, 51% in 2023,” but also highlights the difficulties amid fluctuating currencies and stricter mortgage requirements: “[11:33] David Hutchinson: ...Canadian lenders have scaled back their cross-border lending programs.”
Tax Implications: FIRPTA
For Canadians selling their US properties, the Foreign Investment in Real Property Tax Act (FIRPTA) imposes a 15% withholding tax on the gross sale price. David explains, “[09:51] David Hutchinson: ...FIRPTA mandates a 15% withholding tax on the gross sale price.”
This tax burden, along with exemptions for sales below $300,000 and properties intended for personal residence, adds another layer of complexity for Canadian investors.
Future Implications for Real Estate Investing
Market Stability and Forecasts
With Canadian investment cooling, regions heavily reliant on foreign buyers may face increased vacancies and price adjustments. Daniel raises concerns about market stability: “[07:52] Daniel Fosh: ...volatile and downward price discovery and issues.”
This shift could lead to slower growth or even declines in property values in affected areas, presenting both challenges and opportunities for investors.
Capital Flow and Global Investments
The hosts emphasize the importance of diversifying investment strategies internationally. David asserts, “[26:00] David Hutchinson: ...real estate is the biggest asset class in the world, residential real estate. It's like $13 trillion or something.”
By expanding portfolios beyond traditional markets, investors can mitigate risks associated with regional economic downturns and currency fluctuations.
Additional Discussions and Insights
Technical Difficulties During Recording
During the episode, the hosts encounter technical glitches, leading to a momentary shift in focus. David humorously remarks on the situation, “[14:46] David Hutchinson: ...this Dave guy is just really...”
Networking and Conferences
The conversation transitions into the value of networking at real estate conferences. David shares personal success stories facilitated by connections made at events like Inman Connect: “[21:59] David Hutchinson: ...I got a sale of like a $1.4 million house in Toronto based off of an agent that I met in New York.”
Daniel encourages listeners to leverage global opportunities by building international networks, emphasizing the podcast's mission: “[26:25] Daniel Fosh: ...this is why real estate and Real Estate Without Borders really matters.”
Conclusion
Daniel and David wrap up the episode by reiterating the significance of understanding international travel trends and their impact on real estate markets. They urge real estate professionals to adapt by embracing global connections and diversifying investments to navigate the evolving landscape shaped by economic and political shifts.
Notable Quotes:
- “[01:20] David Hutchinson: ...we just can't afford to or it's not as desirable based off of where the Canadian dollar is currently positioning itself.”
- “[08:53] David Hutchinson: ...Canadians hold a ton of real estate in the US...”
- “[16:20] Daniel Fosh: ...900,000 fewer Canadians crossed the U.S. border in March compared to 2024.”
- “[26:25] Daniel Fosh: ...this is why real estate and Real Estate Without Borders really matters.”
Stay Tuned:
In the next episode, Daniel and David will explore the winners and losers in the US real estate market, providing valuable insights for investors navigating these changes.