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Canadian Dollar Plunge against USD Creates Opportunity
Big currency changes can generate huge opportunities for investors. And the forecast for the US Dollar vs Canadian Dollar comes with great hope for 2017 and 2018. Despite antagonism toward change, the US will not see a housing market bubble or crash. Canada on the other hand will see a lower loonie, some new reports saying 72 cents by end of 2017, and to 70 cents later on. It’s consistently low, which means there are some real estate bargains waiting for you above the border.
The predicted plunge of the loonie to 70 cents USD is good for Canadian exports, and for our housing market which will need ongoing support. With foreign investment at an all time low, Canadians will want to promote homes for sale to American buyers. And Americans will want to invest in Canada now, whether it’s for auto parts, oil and gas, vacation rental properties or other real estate.
What are the 7 major factors driving a low Canadian dollar?
Are you a Canadian realtor or US realtor looking to take advantage of opportunities in Canada? There are excellent commissions to be earned in promoting Canadian investment property. Land is and will be, a bargain for Americans in 2017. It’s unlikely, that Asian buyers will continue investing as they have. The housing landscape is changing in Canada. Oddly, housing is one sector the Canadian government is relying upon to generate tax revenue and stimulate its economy. US investment in the Canadian housing market could keep it afloat as well as avert potential housing market crashes.
The falling Canadian dollar has major implications for real estate and entrepreneurial small business startups. In this post, we explore the forecast outlook for the CAD vs USD, the macroeconomic and business factors drive it, and what opportunities American’s can enjoy buying real estate in Canada. The forecast for the US housing market is rosy, but the ROI from Canadian real estate is an eye opener.
Buy American? Wait a Minute, Canada is Really Cheap!
One obvious opportunity is the increasing attractiveness and affordability of Canadian real estate for Americans. The rising economic power of US investors means there are a huge pool of buyers with money to spend on homes, condos and land. Sellers will have to compete to be heard in the clamor for American buyers, but a good measure of buyers will be from the US in 2017 to 2019. By June, US buyers may enjoy a 50% premium on their money.
Is the US Dollar Rising Against Most Other Currencies?
This chart from fred.stlouisfed.org shows the US dollar is rising against most major currencies. This strength is even more prounounced with the Loonie, and the CAD is predicted to fall to 70 cents within the next 6 months.
Longforecast.com is offering its prediction of a more moderate yet lasting fall for the loonie. This chart shows the US dollar will have buying power of a $1.40 within 2 years.
What Americans should realize is that Canada’s economy will return and the dollar will rise again in perhaps 5 to 10 years. This is one of the windows of opportunity to buy cheap. Canadians are reluctant to sell their homes, but after reading this, they’re going to be eager to sell their home this spring.
A good measure of the fall of the loonie goes simply to the growing strength of the US greenback. However, there are plenty of other weights that will cause the loonie to plunge to near 70 cents as early as May.
“Currently, the CAD is trading at 74 cents US, but the outlook is for a 4 cent drop in the next few months. By summer, The US Dollar will be worth $1.50 CAD. That’s quite a nice boost in profit for companies who get paid in US dollars and a nightmare for companies who have hedged their foreign currency exposure risk.
“The bias of the market now seems clearly to be higher rates and a steeper yield curve, in part because of Trump’s ambitious plans to cut taxes and boost spending, implying higher issuance of Treasury debt and larger U.S. fiscal deficits,” he wrote in a note to investors.” from a cbc report http://www.cbc.ca/news/business/loonie-oil-monday-1.3850050
“According to several recently released forecasts, the Canadian dollar is expected to fall against the backdrop of several factors: a U.S. economy gaining speed, interest rate hikes by the U.S. Federal Reserve, and oil prices that are projected to remain soft.” — CBC report http://www.cbc.ca/news/business/loonie-us-dollar-forecasts-1.3863851
The full impact of President Trump’s policies are difficult to foresee, however many experts believe the signals are clear about the US Dollar forecast. It is going to rise against all currencies including the Canadian dollar.
- higher interest rates expected in the US will drive US dollar up
- US bonds will become more attractive as will American company stocks
- lower interest rates will keep CAD same or will be reduced in order to maintain business competitiveness
- oil & gas production rising in US thus raising supply and driving price down which will lower demand for Canadian oil and gas
- rising trade barriers and border taxes will reduce Canadian trade advantage thus discouraging multinational corporations who can’t make winfall profits anymore or move their wealth fast to avoid taxes
- rising US productivity, jobs, startups, and speculation will pull investment money into the US thus raising demand on US dollar
- rising consumer spending power will raise US inflation
With the lower loonie, the Canadian economy should benefit greatly, yet Justin Trudeau will need to negotiate what access Canadian companies will have to US markets. Trump is already cancelling the TPP and NAFTA agreements. Canadian companies will only look good on the basis of their cost advantage selling to the US. If negotiations don’t go favorably for Canada, we could see a Vancouver and Toronto housing crash. That’s a long shot, but risk is risk. We won’t see a crash in US housing markets.
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