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Strong currency, tax benefits, and lifestyle gains lure Canadians South
Managing financial risk is critical to investment success
SAN FRANCISCO, Aug. 24, 2007 /CNW/ -- According to HiFX, one of the largest providers of foreign exchange services to individuals and businesses, Canadians are more actively purchasing homes in Central America and Mexico.
HiFX surveyed more than 100 Mexico real estate agents as well as agents in Nicaragua and Costa Rica, and found that nearly 30 percent of all real estate clients in these regions are Canadian. Broken out by country, more than 32 percent of the clients purchasing in Mexico are Canadian, 27 percent of clients purchasing in Nicaragua are Canadian, and 26 percent of purchasers in Costa Rica are Canadian. Jaime Niembro, owner of Ajijic Real Estate based in Western Mexico stated, "I've experienced the trend of Canadians purchasing real estate in Mexico and Central America first hand, and based on continued favorable market conditions, I expect this trend to continue, and perhaps even pick up steam in the future." Ward Naughton, president of HiFX stated, "Various factors are coming together to make Central America an increasingly popular destination for savvy Canadians with a global mindset." Naughton continued, "The strength of the Canadian dollar is making purchases in Central America increasingly attractive, and meanwhile you are in some of the most naturally beautiful regions of the world."
Managing Financial Risks
While there are tremendous benefits to purchasing foreign property, investors should plan carefully and consider the currency risks associated with buying a property abroad. Currency fluctuation can have a significant impact on the total amount of money you pay to purchase your investment.
Here is an example that demonstrates the impact that currency can have on a real estate purchase, as well as the good real estate values that Canadians can find in Central America and Mexico:
If you had considered purchasing a property in Mexico priced at $500,000 U.S. dollars at the beginning of January 2007, it would have cost you $592,000 Canadian dollars. Meanwhile, if you looked at that same property now, just seven months later, it would only cost $528,000 Canadian dollars, an 11 percent discount due to currency fluctuations. Reflecting the strength of the U.S. dollar five years ago, the same property would have cost a staggering $809,000 Canadian dollars in 2002. In other words, the same property is now $281,000 Canadian dollars (or 35 percent) cheaper than it was five years ago.
Douglas Johnson, head of HiFX's private client division stated, "If you are a Canadian looking to buy property in Mexico or Central American countries, you will most likely need to transfer your currency into U.S. dollars in order to purchase the property and arrange financing. It is very important to pay attention to the exchange rate for your payments, or it could end up costing you a lot of money."
Johnson continued, "Even though Canadian property is a very good value right now, financial risk management should always be part of the planning process. It is also important to handle the real estate, mortgage, legal and tax aspects of your purchase very carefully. HiFX partners with experts in all of these areas to provide its clients with a full range of consultative services."
About HiFX
HiFX provides foreign exchange advisory services to individual and corporate clients. Its network of offices in North America, UK, Europe, and Australasia manages $35 billion in corporate foreign exchange transactions annually. HiFX is trusted by more than 2,000 companies in more than 100 different industry sectors from airlines to major technology companies. The company website can be found at http://www.hifx.com/personal.aspx, and feel free to contact Nathan Barcic at (415) 321-6389 or
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with any questions.
Original article reprinted with permission from HIFX and smartmoney.com
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