Looking to buy your next home or investment property after the US election? You are not alone! Competition for great Canadian properties just got crazier!
Our American cousins, I gotta say… “You’re Fired!”
Indeed, many Americans woke up this morning with a hangover-like feeling that their hopes and dreams have just been pissed away and flushed down the toilet by a surprisingly, and now very apparently significantly large, disenfranchised portion of the population who felt that their voices were not being heard.
By voting in Trump, they were effectively voting to blow up the existing political establishment that no longer seemed to work or function “for the people”.
Whether there is any truth or substance to our American cousins fears, whether Trump will ultimately be “the change” they are hoping for or the end of Western civilization as we know it is all up in the air. But one thing is for sure: the world as we know it will never be the same.
What Canadians will undoubtedly find interesting is that several hours before Trump was even announced as the winner of the US election, the Citizenship and Immigration Canada website crashed several times last night with the sheer volume of traffic hitting it, supposedly from our American cousins down south, and continues to sporadically do so today as well.
Even more telling was the number of visitors to the online dating site MapleMatch.com that specializes in “bringing Americans and Canadians together”. The number of visitors to the site was 100 X than normal and the site still remains offline, with the following message for anyone attempting to access the site:
“…The Maple Match team is aware that a number of users are experiencing issues with adding photos and information to your profile. Many of these issues were caused by an unprecedented amount of downloads (over 5,000 in just a few hours) that overloaded our servers…”
So naturally, you may be asking yourself where does this leave us Canadians? How will the Trump presidency impact us and what exactly does this mean to the Canadian real estate market?
First, no one likes uncertainty. Unfortunately, given Trump’s election stance and promises on a litany of matters that could very well impact us Canadians and the rest of the world, uncertainty is the reality that we Canadians are waking up to today along side with our American cousins.
Trump’s hawkish views on immigration reform, a disbelieving view of environmental change issues, promises to deport people and build new walls (which history has time and time again has taught us has never been a good thing), scraping ObamaCare and revamping US healthcare, as well as, the now decades old North American Free Trade Agreement (NAFTA) are certain to have a direct impact on us in the Great White North.
What’s worse is that Trump has traditionally been very loose on spewing all of these promises throughout his campaign, yet not very forthcoming with actual plans and ways he intends to achieve them. And this is the essence that of the challenge that we face today, regardless of whether you are an American, Canadian or anyone else in the world for that matter.
The problem is we have yet to determine how much of his rhetoric was bark vs. bite. Were the changes he promised simply an effort to attract votes to win the Presidency with no real intent on following through? Or is there any reality or “teeth” to Trump’s election promises?
With this in mind, the following is my take on what a Trump presidency could possibly mean to Canadians, and more specifically, the Canadian real estate market.
I will begin with a positive note. Regardless, of who was going to win the US Presidential election we Canadians have enjoyed and expected to continue to enjoy being held in the highest regards by the world community.
Indeed, several governments and central bankers around the world continue to applaud and find inspiration from our Canadian monetary and fiscal policies and economy.
So how will the Trump Presidency expected to impact Canada?
I believe that the single biggest “risk” to Canada’s economy and by extension Canada’s real estate market is Trump’s well documented election posturing and possible threats to either renegotiate or outright scrap our decades old North American Free Trade Agreement (NAFTA) as it stands today.
Why? Because like it or not, the United States still accounted for the vast majority of Canadian exports at 78% (Source)! So a potential scraping NAFTA could be a very real and very real risk to our economy.
However, although a renegotiation of NAFTA as we know it is possible, I highly doubt that a total scrapping of NAFTA is on the table for a few very relevant yet simple reasons.
As you can see on the chart below, what we export to America is predominantly raw materials that help drive the American economy.
We export lumber, oil, industrial chemicals and a plethora of other items that America needs yet either cannot produce themselves or which are more costly to produce themselves or which they already produce themselves but may still not have sufficient raw material supplies of their own.
This means that America, regardless of whether Trump, Clinton or anyone else for that matter, relies on and will continue to rely on raw materials from around the world to drive their economic machine.
The great news is that as one of America’s closest and most cost efficient suppliers of what they “need” not simply want we can expect to benefit and we can expect our position as America’s supplier of choice to continue whether under our existing or possibly renegotiated NAFTA (or some other trade agreement).
In fact, Donald Trump’s promised to create millions of new jobs in America by throwing billions of dollars into infrastructure spending (perhaps he is taking a page out of our own Canadian government’s infrastructure spending announcements and playbook). Regardless, infrastructure spending requires a plethora of raw materials. Luckily for Canada, we have what Donald Trump and America wants. 🙂
It is important to note however that new renegotiations or new trade agreements do not get done overnight. Indeed, these typically take years to complete and go into affect. I am sure Trump and his advisors are fully aware of this as well. Therefore, I do not expect any changes to occur overnight.
Incredibly, this very fact should actually add to keeping things stable and good reason to maintain the status quo until all trade terms and conditions are hammered out by both countries, that is if any changes are deemed to be necessary to begin with.
Moreover, based on other Trump election rhetoric, it seems that trade with Mexico will likely be much more impacted than anything he may have planned for Canada. Indeed, given immigration reforms propagated during his election campaign Trump has made it pretty clear that his main beef is with Mexico. In fact, for Canada he may have other things in store.
Indeed, he has been vocal on fast tracking approval for TransCanada’s Keystone Pipeline if elected. Something western province Canadians and indeed all of Canada is sure to benefit from, especially given how low oil prices have hit those provinces economies over the past few years.
So how will the Trump win affect the Canadian real estate market?
To be clear, let’s acknowledge that there is always the risk of a shock to our economy as a result of any changes or promises proposed by Trump during his election campaign, such as totally scrapping NAFTA or if Canadian exports are no longer allowed to go to US market. This could very well be the “Black Swan” event that causes our economy and by extension our hot real estate market to crash.
However, I believe this to be highly unlikely given our countries historic reliance on each other as I have already indicated. So more likely than not, I would expect our real estate market to maintain the status quo.
If anything, I would expect real estate pricing and activity to rise with the creation and expansion of projects like the Keystone pipeline by Trump’s administration. This is expected to create thousands of new Canadian and American jobs and facilitate better flow of our Canadian oil to the refineries in America. Indeed, this may be but one example and possibly only a drop in the bucket to the total infrastructure spending envisioned by “The Donald”.
Indeed, Donald Trump may succeed in doing what trillions of dollars of quantitative easing, monetary policy and the Federal Reserve have all failed to do so far. His fiscal policies may very well bring in higher inflation and since prices of hard assets like cars, washing machines and (you guessed it) real estate tend to move higher during inflationary times any possible real estate market correction will most likely be short lived.
Again, I reiterate that things like infrastructure spending policies and plans take many, many months to negotiate, agree on and put into place and even more years to actually take into effect and complete. This “stuff” is nothing like turning on a light switch. So do not expect any of these changes to happen overnight. Indeed, these may or may not even happen at all and even if they do they may not happen for several years still and quite possibly even several decades!
Let us also remember that in the interim, elections in the US occur every 4 years. The Donald has already made his desire to dismantle and repeal many Obama initiatives like Obamacare. If he fails to get re-elected in 4 years time, what’s to say his successor will not do the same to The Donald’s own initiatives?
As for real estate activity and prices in the near future across the Golden Horseshoe area, and including the GTA, I expect the hot market craziness to continue unabated. After all, what has really changed with Trump being voted in?
Let’s not forget that Canada continues to be a beacon of stability around the world. This is why over 100,000 people continue migrating to the GTA and surrounding areas alone each year. That’s over 1 million people every decade!
And guess what? Each and every one of them will need a roof over their head to call home. Affordable homes were already getting harder and harder to find even before the US elections, with demand remaining sky high and inventory of homes for sale continuing to dwindle. And here’s the kicker:
Now add to this the thousands of our American cousins who are looking into potentially moving and making Canada their new home as well and you have a recipe for an already hot and crazy real estate market getting even crazier.
Looks like my job as a Realtor bringing joy and clarity to my Canadian and American clients alike each time I find them the home of their dreams or an awesome investment property is far from over.
You can also rest assured that finding and getting my clients exactly what they need, want and dream of is something that will also not change, regardless of who is in the White House or Ottawa. Unlike politicians, that’s one promise you can always bank on.
Isn’t it nice that there are still some things and people that you can continue to consistently rely on?
Integrity: Now that’s what I call a win-win! 🙂
Until next time…
Your Chief Millionaire Maker & Real Estate CFO