Macdonald Realty

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For those worrying that the Canadian real estate market is in a bubble ready to burst and unleash a U.S.-style financial collapse, it’s time to do some economics homework, says Real Estate Investment Network President Don Campbell.

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By Shane Buckingham

CRE Senior Staff Writer

For those worrying that the Canadian real estate market is in a bubble ready to burst and unleash a U.S.-style financial collapse, it’s time to do some economics homework, says Real Estate Investment Network President Don Campbell.

What the sceptics are missing, Campbell told a crowd of more than 300 delegates at CRE’s Investor Forum, is that today’s global economic uncertainty has positioned Canada as “safe haven” for international investors looking for a secure place to store their wealth.

Situations, such as the tsunami and nuclear disaster in Japan, rising tensions in the Middle East and North Africa, and the mounting debt crisis in Europe, along with a slow, wobbly U.S. economic recovery, have many investors rushing to put their capital into Canadian real estate.

For instance, Campbell talked to an investor from Bahrain who’s investing more than $200 million in Canada because he’s concerned about the instability in his country, where there have been a series of violent clashes between government forces and protesters.

The 3 Fs

Aside, from the stability factor, Campbell told delegates that the critics are also overlooking the growing demand for what he calls the three “Fs”: food, fuel and fertilizer.

"Canada is uniquely positioned to provide the world with the three ‘Fs,’ and our supply chain is safe. The inflation in these commodities will drive prices upwards and boost jobs into key areas of the country, which in turn will lead to migration of people to those regions, driving real estate and rental demand upwards," Campbell said.

Consider the world’s food supply. The United Nations Food and Agriculture Organization reported in March that global food prices reached their highest point in the last two decades during February.

Not to mention, salt water that washed over the Japanese crops and the nuclear fallout in and around the Fukushima Reactor has virtually destroyed the soil in many areas of Japan.

“Did you know we’re one bad harvest away in China from starvation?” Campbell told delegates.

This precarious situation has arisen in a decade during which about 300 million Chinese will move from the countryside to urban centres. That means China will have to switch to more intensive form of farming to feed its people, Campbell said.

And the only way they’re going be able to do that is by using petroleum products, such as potash, which is mined in Canada and Australia, he added.

Then, there’s rising demand for fuel, which Canada can provide from the country’s large oil reserves, second only to Saudi Arabia.

The growing demand for oil and natural gas sector means more jobs and more government revenue, Campbell said, which means more investment in social programs such as education and health care.

One more F

There is, however, one more F Campbell added to the other three: forestry. Canada will be entering into a “forestry super-cycle,” he told delegates, as Japan, a large importer of high-quality lumber, starts to rebuild and the U.S.-residential construction sector begins to recover in 2014.

“You’re going to see lumber markets spike in the next few years, so that means more jobs,” he added.

All this translates into more overall economic growth. Campbell predicts that Canada’s gross domestic product during 2011 will reach 3.3%.