| Now may be a good time to consider diversifying | | | | capital gain from disposition of investment property in |
| some of the asset holdings into real estate. If you are | | | | Canada is taxed as income. Capital gains are |
| a foreign investor interested in buying property abroad, | | | | computed by deducting the costs incurred in selling and |
| investment property in Canada may offer certain | | | | purchasing the property, capital expenditures, and such |
| value that cannot be matched by the opportunities | | | | costs as additions and improvements to the property. |
| available in your home market. There are several | | | | This may be a more favorable tax treatment than that |
| advantages of buying investment property in Canada | | | | applied on properties abroad. |
| that any person investing in property abroad should | | | | On the other hand, foreign investors as non-residents |
| consider when making decisions about location of his | | | | earning rental income from investment property in |
| or her real estate investment. | | | | Canada are generally subject to a 25 per cent tax on |
| With property prices currently declining, albeit at a | | | | gross income. If they chose to file an individual |
| modest pace, real estate market conditions in Canada | | | | taxpayer return under section 216, their income may |
| do not provide opportunities for short selling and | | | | be taxed at the standard federal income tax rate. |
| making quick profit on short sales. Therefore, | | | | These rates range between 15 per cent and 29 per |
| Canada’s real estate market, which, according to | | | | cent, depending on income. An additional 48 per cent |
| some reports, has seen prices fall up to 8 per cent in | | | | surcharge on the final tax liability is applicable. Various |
| annual terms, may represent a good opportunity for | | | | deductible expenses and depreciation allowances may |
| foreign real estate investors interested in buying rental | | | | substantially lower the total tax liability. At same time, |
| property abroad. This investment strategy would | | | | foreign investors holding investment property in |
| secure income flows that justify buying rental | | | | Canada are exempted from paying provincial taxes. |
| investment property in Canada at time when prices of | | | | Once all these tax elements are factored into the total |
| residential properties are falling and rents are | | | | return on property investment, owning investment |
| increasing. Once the prices start to pick up, which may | | | | property in Canada may prove more favorable than |
| be as soon as next year, gains on rental investment | | | | investments in comparable property abroad, including |
| property in Canada in the form of capital appreciation | | | | those in the investors’ home markets. |
| will start to accumulate. However, expectations of | | | | Overall, investors from overseas who consider buying |
| capital gains on investment property in Canada should | | | | investment property in Canada could take advantage |
| be realistic, taking into perspective expectations of | | | | of the weaker pricing of residential properties to lock in |
| returns on comparable property abroad. Based on the | | | | investment properties that have a substantial potential |
| available historical data, capitalreturns from investment | | | | for return on capital. This return could be higher than |
| property in Canada have averaged 7.1 per cent in | | | | that offered on similar investments in property abroad. |
| compounded annual rates. This average rate of return | | | | Investors could lease their investment property and |
| is much higher than that realized by investment | | | | earn rental income that may be taxed at rates that |
| property abroad. Investment property in Canada offers | | | | are more favorable than those in the foreign |
| a major potential to those property investors, | | | | investors’ home markets. Once the real estate |
| especially international property investors, who want to | | | | market in Canada returns to strong growth and prices |
| buy rental investment property and realize both income | | | | recover, investment properties’ value will |
| and capital gains from their investment. | | | | appreciate, yielding additional returns on investment. All |
| Another benefit to foreign investors buying investment | | | | this could provide a total return on investment property |
| property in Canada is the favorable tax treatment of | | | | in Canada that is comparably much higher than the |
| income from Canadian rental investment property and | | | | return on investment on properties abroad. |
| realized capital gains. Only half of the total realized | | | | |