OVERSEAS: Canada finding its place in Asia

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BOOM TOWN: As Canada opens up to investors from Asia, now is possibly the best time to enter the Canadian property market especially in the oil-rich province of Alberta where rental returns in cities like Calgary have surpassed those of London, Sydney and New York

Engaging with Asia: During the Spring Festival Gala show held on the eve of Chinese New Year in China, Canadian singer Celine Dion was honoured with the opportunity to sing the traditional Chinese folksong Jasmine Flower in Chinese. The show was broadcast live on television to one billion viewers across China and abroad.

The Chinese are famously known for reciprocating one kind act with another. Just two months earlier on 7 December 2012, the Canadian government gave the green light for China‘s state-owned offshore driller, CNOOC, to acquire Calgary-based oil producer, Nexen Inc, for US$15.1 bil (RM46.7 bil).
 
Observers said that it was a done deal as early as September 2012 during the Asia-Pacific Economic Cooperation (APEC) summit in Russia. While countries were busy discussing global issues, Canadian Prime Minister Stephen Harper pulled China’s president Hu Jintao aside to sign a “foreign investment protection” agreement to spell out conditions for takeover.
 
Harper’s overture to Hu underscores Asia‘s impact on world trade, challenging America‘s century-old status as the world‘s most dominant economy. China and Japan are now ranked world’s second and third largest economies respectively.
 
The China deal essentially paved the way for other Asian countries to make similar acquisitions. At around the same time, Malaysia‘s state-owned oil company, Petronas, was given the nod to acquire Progress Energy Resources Corp for RM16 bil.
 
Alberta leads: “Enhancing our presence and cultivating new opportunities in Asia are critical for our province. If we truly want Canada to be a global energy leader, technology champion and environmental citizen, we have to reduce our market dependence on the United States,“ Alberta‘s premier Alison Redford was reported as saying in an article by South China Morning Post.
 
Developing deeper a relationship with Asia was one of Redford‘s key agenda during her electoral campaign and she went on to achieve a historic win as Alberta‘s first female elected premier in October 2012.
 
Alberta is known as Canada‘s “energy province“ with key exports in energy, agriculture, forestry and industrial products. It is also home to more than 60 per cent of the country‘s conventional crude oil reserves and all of its oil sands reserves.
 
“With Canada actively opening up to Asia, we are finding it even easier to assist our investors to buy into properties in provinces like Alberta where growth potential is the strongest,“ said Virata Gamany, managing director of Vision International Properties.
 
Vision, with offices in Vancouver and Kuala Lumpur, works with a network of partners in markets like Hong Kong, Shenzhen, Shanghai, Singapore and other major Asian cities. The company has been promoting Canadian property investments to Asians since 2005.
 
What makes Alberta unique as a property investment destination for foreign investors is its positive business climate – Alberta is the only province in Canada with no provincial sales tax while personal income tax is the lowest in the country.
 
Calgary rentals highest: A recent survey by Investment Property Databank Ltd (IPD) shows Calgary, the largest city in Alberta, topping commercial property returns worldwide, ahead of London, Sydney and New York. Rental income and higher property values in Calgary produced a return of 21.6 per cent and the booming oil and gas sector was credited for the high rate, according to IPD.
 
“Calgary didn‘t go as deep into recession as a lot of the markets on the survey and we bounced back a lot
 
faster. If you are a global investor, you‘re looking for cities that have long-term potential for stable returns,“ said Susan Thompson, business development manager for real estate with Calgary Economic Development.
 
According to the latest press release by the Alberta government, the province‘s population continues to grow with an expected 95,000 new residents this year. With an annual 2.5 per cent increase, its population growth is higher than anywhere else in Canada and this will impact on demand for housing.
 
“With European sovereign-debt and banking issues likely to cloud the global economic outlook, Canadian interest rates will remain at or very near current levels. The continuation of low interest rates will continue to support Canadian housing activity and prices for some time to come,“ said Gregory Klump, CREA‘s chief economist. Since the 2008 and 2009 recession, the Canadian property market has rallied on record-low borrowing costs.
 
Policymakers in Canada are mindful of the US housing crisis and are constantly adjusting the rules preventing property buyers from taking on excessive debts especially with mortgage rates as low as 2.7 per cent.
 
Waiting Asian suitors: If there were concerns about Canada’s property sector heading towards a bubble, it would have been mitigated by strong growth in the western region, especially with Asian countries like China, Malaysia, India and Thailand, waiting to pump in capital to acquire stakes in Canada‘s giant oil sands projects.
 
Canadian banks are strongly capitalised and the country’s banking system is consistently ranked as the “soundest” in the world. There is far less shadow banking in Canada compared with the US.
 
Confidence is enhanced by the fact that the property market of the past few years is returning to a better balance between buyers and sellers. There is no indication of oversupply in the single-family house market and the rules that allow for extended mortgage repayments and low down-payments have been tightened.
 
It is easy to pitch Canada to Asians. The country is a successful multi-cultural society with a high quality of life and a first-rate education system that is competitively priced internationally.
 
“Besides investing in local properties, I chose to diversify into the Canadian property market for potential capital gains and as a hedge against local currency fluctuations,“ said FS Lim, one of Vision’s Malaysian investors. Lim picked Alberta because of its strong growth potential backed by oil and gas resources.
 
While Canada is actively promoting itself as a preferred investment destination and explains why it is, in many respects, a better choice than the United States, the UK, Australia or New Zealand – Asian investors would do well to act early while opportunities are still abundant and growth potential is strong.
 
Geomancers are unanimous in agreeing that the Year of the Snake favours earth elements. Sectors like property, construction, petroleum-related and mining are all expected to flourish. Oil-rich Alberta incidentally has all of these.

Canada can be a global energy leader.

Mining oil sands.

Edmonton skyline, Alberta.


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