The drop in the loonie will likely reduce the number of Canadians who make a trip to the U.S., but snowbirds will continue to flock southwards, a TD Economics report suggests.
Highlights of the report include:
- Each year, about 23.5 million Canadians visit the U.S., injecting about C$22.3 billion into the U.S. economy. About 80% of the visits are either overnight or same-day trips.
- The drop in the Canadian dollar will reduce the number of visits by about 3 million in both 2014 and 2015 and lower total spending by some C$4.5 billion.
- The decline is expected to be concentrated among short-term visits to the U.S. On the plus side, Canadian retailers located within close proximity to the U.S. border are likely to benefit from much of this spending remaining at home. In addition, U.S. traffic to Canadians likely to increase relative to recent years.
- By some estimates, there are more than 500,000 snowbirds. In contrast to short-term visits, it’s unlikely there’ll be a significant negative impact on longer-term stays by Canadians in the U.S. — snowbird behaviour tends to be driven by lifestyle choices.
- Snowbirds have been accumulating significant U.S. real estate over the past decade. The combination of a lower loonie and rising U.S. home prices will put a dent in new purchases of U.S. real estate by Canadians. Renting in the U.S. will become a more alluring option.
- At the same time, existing snowbirds are unlikely to unload their U.S. properties in markets where home values continue to appreciate.
Read the full report here.