The high-flying Canadian dollar makes purchases of U.S. goods very attractive. As a result, Canadians are flocking across the border to shop. Some are even buying property.

The question many in the financial services industry are asking is whether this spending will make a dent in this year’s RRSP contributions. The short answer is: not likely. Although there are few data on how much Canadians are spending in the U.S., economists doubt that it is enough to be of concern.

But no one denies there is interest. “With the C$ dramatically up and a number of U.S. housing markets significantly down, we could see an increase in purchases of U.S. assets by Canadians,” says Paul Ferley, assistant chief economist at Royal Bank of Canada in Toronto.

The current weakness in the U.S. housing market — which includes Florida, the prime destination for Eastern Canadians seeking the sun — does suggest that if clients were thinking about buying a U.S. vacation home, now is the time to do it. House prices in Florida are down by an average of 35% from their 2005 high.

West coast advisors at Connor Clark & Lunn Private Capital Ltd. , whose corporate offices are in Toronto and Vancouver, are seeing some interest from their high net-worth clients. One advisor reports having many clients who are looking for property in the U.S. Another advisor indicates lots of discussion and some action. Yet another says real estate agents in U.S. border towns south of Vancouver report that 50% of the traffic is from Canadians. However, others at CC&L aren’t sensing a lot of interest.

Of course, HNW clients are the market segment in which you would expect to find people buying U.S. vacation homes. But it’s not the segment for which such purchases would mean lower RRSP contributions. CC&L’s clients, for example, tend to have enough income and assets to buy U.S. property and still make RRSP contributions.

The segment upon which economists think the urge to buy U.S. property will have the least impact is the vast middle class, for which buying a vacation home in the U.S. is out of reach, even if U.S. prices are down and the C$ is high. It’s also the segment that struggles to make full RRSP contributions each year.

For this group, even buying a cottage in Canada, for which travel to and fro is not nearly as expensive as trekking south, is beyond the means of most. In 2005, the latest year for which data are available, only 8% of Canadians owned a second home in Canada, according to Statistics Canada. The data do not cover property owned elsewhere, but that would almost certainly be a much smaller percentage.

That’s why economists don’t expect a big impact on RRSP contributions as a result of a surge in purchases of U.S. property — particularly as the HNW individuals who do buy homes in the U.S. are likely to still have enough income and assets to keep making their RRSP contributions.

Certainly, data from the Invest-ment Funds Institute of Canada do not suggest that flows into mutual funds were weak in September. That month may be too early for any impact to show up, but the figures do at least argue that investors weren’t at that time squirrelling away money to finance a U.S. vacation home rather than investing.

That means firms focused on Canadians concerned about saving enough for retirement, such as mutual fund manufacturers, are much less likely to be affected by the strong C$.

If you do have clients interested in buying a U.S. vacation home, they might want to consider options to protect themselves in case the C$ weakens again, as many expect.

One option is to recommend clients buy a hedging instrument that ensures they have a certain amount of US$ at the current exchange rate at some point in the future, says Ferley.

Another possibility is to buy US$ now, when they are cheap, and invest them in U.S. securities.

The other barrier to buying U.S. property is the hassles at the border. This may be part of the reason why enthusiasm to take advantage of the high C$ and lower U.S. house prices is not as great as many thought. IE