Real Estate Talk:
Recession and politics
How a recession or political climate can create opportunities in any state of the market
By Joseph Marovitch
November 17, 2022
There are opportunities in every market, and every opportunity requires capital. Recession and politics affect the real estate market and are no exception.
In a market where demand is low and supply is high, the advantage is to the buyer, who can purchase at a discount. When demand is high and supply is low, the advantage is to the seller, who can sell at a premium.
If residential single home supply is low and prices rise, the advantage is to the income property investor since rental demand rises. If single homes supply is high, then purchasing is preferred over renting. There is always an upside and a downside in the market, providing capital is available.
The advantage in today’s market is if the buyer has cash, property can be purchased at a discount. The more cash the buyer can invest, the less interest the buyer must pay.
In our current market, with inflation at 6.9% and the bank of Canada rate at 5.95%, the effect is property prices decrease. However, carrying costs and interest payments are high.
The advantage in today’s market is if the buyer has cash, property can be purchased at a discount. The more cash the buyer can invest, the less interest the buyer must pay. If a buyer can purchase with all cash, then interest rates and the CMHC can be bypassed. The buyer can still refinance later when interest rates are lower.
Future possible opportunities come from a looming recession and a government that applies Bill 96. Bill 96 states that government services will be provided in the French language and that all documents must be in French only, including deeds of sale, certificates of location and any other documents overseen by the government.
Corporations with a certain number of employees must conduct business in French and the bill permits the government to enter private enterprises and check cell phones, desktop and laptop computers to ensure that all documentation and messages are in French.
These are draconian laws that most international corporations will not abide by, nor will many English Quebecers. Therefore, it is possible that many corporations and individuals will exit the province over the next few years, causing the economy to drag and real estate prices to decline.
‘There are always pros and cons in any market, and there is always opportunities to be found in every adverse event. One just requires a bright outlook.’
However, after three or four years of living in a weakened economy and struggling to pay rising food costs and taxes, and generally realizing Quebec cannot live outside a world that is multi-cultural and multi-lingual, Quebecers will vote in a party with a more inclusive worldview.
The future opportunity lies in Quebecers who believe in a Quebec within a world economy and politics. These are the Quebecers who remain in Quebec and invest in real estate during the hard times because while the economy lags and an exodus of corporations takes place, property values decline.
As the political landscape progresses and becomes more diverse and inclusive over the next few years, prices will rise, especially on the island of Montreal, where space is already limited.
There are always pros and cons in any market, and there are always opportunities to be found in every adverse event. One only requires a bright outlook.
Have a great week, stay healthy and remain positive.
The information I provide in these articles is a summary. Should you have questions or comments, please refer to the comments section at the bottom of the page. As well, to view past articles, click here.
Next article: The best months to sell
State of the market
CPI today (inflation rate) 6.9%
TD 3-year fixed closed 5.95%
In a recent Financial Post article on November 15, it is stated that the Canadian housing market has gone cold due to rising interest rates and inflationary carrying costs. It is also stated that inflation may continue to rise despite interest rate hikes due to supply and labour shortages.
‘In a recent Financial Post article on November 15, it is stated that the Canadian housing market has gone cold due to rising interest rates and inflationary carrying costs.’
Many potential sellers are waiting for spring to arrive in the hope inflation and interest rates will decrease, allowing real estate prices to rise. We may have to wait a little longer than spring as more interest rate hikes are in store.
Have a great week!
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Joseph Marovitch has worked in the service industry for over 30 years. His first career was working with families from Westmount and surrounding areas, hosting children between the ages of 6 to 16 as the owner and director of Camp Maromac, a sports and arts sleep away summer camp established in 1968. Using the same strengths caring for the families, such as reliability, integrity, honesty and a deep sense of protecting the interests of those he is responsible for, Joseph applies this to his present real estate broker career. Should you have questions please feel free to contact Joseph Marovitch at 514 825-8771, or email@example.com