TGIF: The Impact of the Government's New Measures on our Local Real Estate
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How are Government’s new measures going to affect our local real estate? OR are they?
With all the latest chatter, it is tough to remember our economics 101 course teaching us that the real estate market turns on supply and demand. Right now, our inventory is low, and demand high in the condo & townhouse market - while more measured in the detached market. Finance Minister, Carole James in looking for moderation said “My hope is by addressing both supply and demand, you will see more supply in the market and that will ease some of the cost pressures.” Does no one remember 2008? All that new inventory came on together, causing a crash after several years of low inventory. We don’t have to engineer these swings - builders know there is a demand everywhere for new condo buildings & detached homes and are all working feverishly to have a supply. In the words of Cameron Muir, chief economist with the BC Real Estate Association - “If home prices are arbitrarily driven downward by government policy there are large consequences to that in the marketplace, including builders pulling back on production so you’ll end up in another supply crunch down the road.” Supply doesn’t happen overnight.
Will closing the tax loopholes, increasing the foreign buyers tax, widening of areas covered by this tax make BC real estate “affordable”? Depends on the definition, but it won’t, in the sense of being accessible to lower income groups. This is a red herring - Michael Dolega (TD Bank senior economist) predicted a “muted effect” because the market has already adjusted from the levels of excess 2 years ago. Predictions are that we might see sales activity and prices fall by 5-8% - will this in any way make our real estate affordable? Please....Government has not built any rental housing since the 1970s - it is late to come to the affordability party and these measures are not going to help the people who need it.
As the province with the largest number of small businesses, of course our real estate is our retirement. We all know what happened to our RRSPs and we can’t rent those out. If it were not for the private investor, the rental market would be in a worse crisis. Okay for those to criticise who enjoy the reassurance of an indexed pension - not a reality for many residents. So...we look forward to the criminal element being removed from the real estate market and for everyone in BC to pay taxes - but we have a hard time imagining any of this leading to that overused & incorrectly used word “affordability”.
So...if you want to know what we really think, give us a call!! Always happy to talk real estate no matter the conditions. Watch out for the snow - umbrella required. We have you covered as always.
Michelle, Scott, Sheila, Ray and Shane.