Committing to direct investment overseas poses unique risks and provides unique opportunities. Owning assets that are not denominated in US dollars allows us to hedge against declines in the value of the dollar. Weakness in other currencies can provide the opportunity to use a strong US dollar to acquire assets elsewhere for relatively low prices. In other words, buy low with the hope of being able to sell high later.
In 2016, the Canadian dollar (loonie) had declined from an April 2011 value of $1.06 US for one loonie to a paltry $0.71 US for one loonie. In other words, a $300,000 condo would only cost an American $213,000 in US dollars. Historically, these types of declines have been followed by steep rallies. Canada is a modern country with strong legal protections and an internationally respected healthcare system. The roads are great, housing is on a par with the United States, and crime is very low. The airports are clean, modern, and efficient. Not only does Canada have a long reputation of financial responsibility, but the Canadian banking system is one of only a handful worldwide that escaped crisis during the Great Recession.
I found a beautiful little apartment within the walls of Québec City that had an office and a balcony with a view of the Chateau Frontenac. Numerous parks, museums, concert venues, restaurants, and stores are within walking distance and a magnificent national park is only half-an-hour away. The airport is 20 minutes from the front door by cab. Unlike most of the protected buildings in this World Heritage city, the six-story building is professionally managed and has both a gym and a rooftop deck. The condo fees and taxes are cheap. I could just lock the door and leave. It checked all of the boxes for a good investment that aligned with my goals and my time horizon of between five and ten years.
I bought my beautiful pied-à-terre in North America’s most European city with confidence, feeling that the exceptionally low value of the loonie provided a lot of downside protection. Along the way I learned a lot about how our government treats Americans abroad, the differences in our inheritance laws, banking laws, healthcare systems, tax systems, and views on civil liberties. I shall discuss them in future blogs.