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BMO Financial Group
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BMO Bank of Montreal

October 28, 2014 10:18 ET

REPEAT/U.S. Vacation Homes Expected To Appreciate For Canadian Snowbirds: BMO

- Prices in Florida and Arizona expected to increase steadily in coming years

- Canadians are the largest foreign buyers of Florida housing

- Residents spending time in Canada and U.S. face new government guidelines

TORONTO, ONTARIO and PHOENIX, ARIZONA and SARASOTA, FLORIDA--(Marketwired - Oct. 28, 2014) - As Canadian Snowbirds prepare to head south to escape the winter chill, U.S. housing affordability remains healthy and prices are expected to increase in Florida, Arizona and other popular areas for Canadians owning vacation properties, according to the Annual Snowbird outlook from BMO Bank of Montreal.

For residents spending time in both countries, they must now keep in mind new border crossing rules announced earlier this year by the federal government. Furthermore, property owners and prospective buyers have the added consideration of the strengthening U.S. dollar.

Overall, U.S. house prices have soared 20 per cent in the past two years, but are only about half way back to their peak in 2006. Traditional destinations for Canadian Snowbirds remain affordable. Compared to their peaks, prices in Tampa are down 34 per cent, Phoenix down 30 per cent, Las Vegas off 43 per cent, and Miami down a whopping 52 per cent.

"Now, with the American economy and employment gaining strength, home sales should gather some momentum," said Sal Guatieri, Senior Economist, BMO Capital Markets. "We expect prices to rise over time alongside growing family incomes.

"We also expect the U.S. greenback to rise moderately further against the Canadian dollar, boosting capital gains appreciation for Canadians who purchase U.S. property," added Mr. Guatieri.

Florida is a Hotspot

Florida continues to be a hotspot with Canadians representing the largest foreign buyers of Florida housing. More than 500,000 Canadians currently own real estate in Florida.

"Florida properties are a bargain compared to real estate in Canada. The median priced home in Florida is nearly half that in Canada," said Jack Ablin, Chief Investment Officer, BMO Harris Private Bank. "Popular areas include Sarasota-Bradenton-Venice, Orlando-Kissimmee, Miami-Ft. Lauderdale-Palm Beach, Cape Coral-Ft. Myers, Tampa-St. Petersburg and Naples-Marco Island.

"We project retirement state housing prices to outpace the national average, due to increasing numbers of retirees, and abundance of capital from abroad and lower interest rates. Foreign buyers are interested in U.S. real estate because it's relatively cheap when gauged against incomes and is situated in a stable/safe haven economy," added Mr. Ablin.

The median home price in Florida is US$124,000 and US$198,000 in Arizona. The median home price for major centers in Canada is estimated at US$255,000 (CND$283,360).

Jerry Bevers, Regional Mortgage Manager of BMO Harris in Florida and Arizona, advises that those interested in purchasing U.S. properties should consider financing the new purchase with a financial institution in the U.S. - preferably a Canadian-based bank with branches south of the border.

"We're here to help. BMO Harris has a mortgage product specifically designed to assist foreign borrowers (non U.S. citizens) who are looking to purchase a home in the U.S.; many Canadians have found it has made their buying experience a much simpler process."

BMO customers can visit a BMO Harris branch in the U.S., which has locations in Illinois, Arizona, Florida, Wisconsin, Indiana, Kansas, Missouri and Minnesota.

BMO offers the following tips for Canadians interested in purchasing property in the U.S.:

How much time will you spend south of the border?

Consider how many months of the year you'll be living there so that your purchase reflects your lifestyle.

As of June 30, travellers were required to swipe passports both when they enter and when they depart each country. Canada and the U.S. will share the information. If you exceed 183 days in the U.S. in a year, you become subject to U.S. tax laws.

What states and neighbourhoods fit your needs?

Since you are responsible for property maintenance, consider how easily you can access your property from your Canadian home throughout the purchasing process and after acquisition.

Consider flights and airlines, if you can fly there direct, and the cost. Research and even ask locals about the community to ensure it suits your needs.

What to consider when financing the purchase with a U.S. based financial institution?

It is important to be aware of the differences in mortgage financing and how interest is charged in the U.S.

Furthermore, understand the impact of penalties and withholding taxes if and when you decide to sell your home in the U.S.

Do you understand the status of the property?

Understand the terms of the property. For instance, is it labelled as short-sale or on foreclosure?

The status of the property can have a variety of implications. Be sure to consult an expert before making any buying decisions.

How will you use your property?

Is your purchase for investment or lifestyle purposes? This will affect where you buy and how you hold the property. Also, understand the options available and what will benefit you in the long run.

If your purchase is for income purposes, keep in mind that renting your property means added responsibility. Research the possibilities of increased utility usage, property management needs and the vacancy rate in the area to ensure you're prepared.

About BMO Financial Group

Established in 1817 as Bank of Montreal, BMO Financial Group is a highly diversified financial services organization based in North America. The bank offers a broad range of retail banking, wealth management and investment banking products and services to more than 12 million customers. BMO Financial Group had more than $586 billion in total assets and approximately 47,000 employees at July 31, 2014.

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