Your Personal Finances

Home Ownership

With a stronger Canadian dollar and falling house prices in the U.S., many Canadians are wondering if they should be considering buying property south of the border. Prices are down and foreclosures are up – making the opportunity look even stronger for Canadians with the financial resources to cross-border shop for property.

According to the U.S.-based National Association of Realtors southern belts are taking the largest hits to their value. For the last three months of 2007, Cape Coral, Fla., condo prices were down 26% compared with the last three months of 2006. Meanwhile, Tucson, Ariz., prices dropped 19.8%.

RealtyTrac reports that foreclosures in the sun regions are also the highest. California and Las Vegas cities showed the highest number of foreclosures while properties in Florida have also been hit. In 2007, Miami had the eighth highest foreclosure rate in the nation. Fort Lauderdale and Orlando also showed increased foreclosure activity.

Many Canadians and other foreigners are already getting into the market. In a 2007 National Association of Realtors survey, Florida was the top destination for foreign buyers. Over one quarter (26%) of all buyers of property in that state last year were foreign. Sixteen percent of California's buyers were foreign, while Texas and Arizona saw 10% and 6% foreign buyers respectively.

But buying property in the US isn't like buying property in Canada. There are many rules you need to be aware of when investing in the US. For example:

• if you plan on renting the property part of the year, you must have American Social Security Number and file a U.S. tax return
• you will have to pay higher property taxes in Florida if you are not a permanent resident
• you will have to pay a 45% estate tax on your American property if your worldwide assets are more than $2 million when you die
• you also have to pay a gift tax ranging between 18% and 48% when you pass the property on to your survivors
• each state has different rules about withholding tax if you sell the property as a foreign owner

In addition, you are taking on a huge currency risk. If the Canadian dollar goes back down in value against the US dollar again, you will be taking a hit on the value of the home you buy.

The bottom line is that, while it may be an attractive time to buy in the U.S., you need to get professional advice from experts who know both Canadian and American tax, estate and real estate laws. While it would be nice to enjoy an Oceanside condo each winter, you wouldn't want any nasty surprises to take the joy out of your purchase.