The southern part of Peel Region includes both the City of Brampton and the City of Mississauga. Between these two cities alone, there are 88 thousand operating business and a population of nearly 1.3 million residents. Over the last few decades, commercial real estate development and immigration to Canada have been the two primary contributors to the growing population. What was once known as a rural area composed of both farms and small villages, has now become a well-known urban, commercial/industrial and residential area.
The City of Mississauga in particular has a leading underlying framework for business with roads that are well-maintained, access to major highways and a great public transit system, that is expanding. Although commercial real estate developments here are considered to be high-cost investments, they’re vital Canada’s economic development and prosperity.
Risks to Commercial Real Estate in Canada
According to TD and BMO Economists, the number one risk to commercial real estate in Canada is rising interest rates in the years to come. This is mainly due to US tax cuts and higher tariffs, actioned by President Donald Trump late last year. The fact of the matter is, inflation in the the US can cause Canadian interest rates to rise.
Last Year, commercial property investors already endured increased interest rates brought on by increased commercial real estate prices. Thankfully, most commercial investors were prepared allowing the commercial real estate market to absorb the after effects.
However, if rates continue to rise, investors in the Greater Toronto Area will begin to feel the impact. Over the next two years, the housing markets will simmer down due to increases in interest rates and stricter mortgage regulations. This is bound to dribble down into the commercial market as well causing developers and investors to have increased interest in land for commercial real estate development.
In previous years Canadian non-resident investors only made up for 5 percent of all commercial investments. Last year in 2016, non-residents of Canada accounted for nearly 30 percent of all commercial real estate investments. In other provinces such as British Columbia, the BC foreign-buyer tax is encouraging non-residential to invest in commercial real estate over housing. It’s simply a wiser investment in today’s economy.
Unfortunately Ontario is no different, as they plan to follow in BC’s footsteps by imposing a 15 percent tax on all non-resident real estate purchases. It’s called the “Non-Resident Speculation Tax, and it’s quite similar to BC’s foreign-buyer tax. One difference is that if a non-resident becomes a Canadian resident within a certain time period, they’ll receive a home buyers’ rebate.
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