23 Mar Real Estate Market Types
While it is generally surmised that the Canadian real estate market has historically been fairly stable with moments of unpredictability, like any other securities market it is not uncommon for Canadian homeowners to experience market volatility in the form of peaks and valleys, market bubbles, crashes, real estate cycles, and the positive/negative impact of government controls. Arguably, the two most impactful indicators of how the Canadian real estate market is projected to perform has to deal with the effects of interest rates and government interventions. For example, officials that govern the Bank of Canada (BOC) may convene (up to 6 times a year) and as a result may feel it is in the best interests of Canadians to hike interest rates in an effort to cool an over-heated real estate market, whereby housing costs (in theory) would become much more affordable. Conversely, the BOC could also lower interest rates in an attempt to induce or make it more attractive for buyers to purchase real estate. The government also has the authority to impose regulatory stimulus/sanctions to make buying or selling more or less inviting. For example, at the federal level, the Canadian government could institute higher or lower tax levies on foreign buyers purchasing real estate in Canada as a way to regulate the amount of interest in the Canadian real estate market. The federal government also oversees the Canadian Mortgage & Housing Corporation (CMHC) which is Canada’s largest investment insurer and is responsible for the criteria needed to lend out (predominantly) high ratio mortgages to average homebuying Canadians. CMHC could also assist in heating or cooling a real estate market by simply manipulating the standard criteria required to get a mortgage or adjusting the premiums they charge on high ratio mortgages. The provincial and/or municipal government(s) can also have a more localized impact on a real estate market by simply altering the percentages charged for land transfer taxes or offering a “tax exemption” or “inducement” when purchasing real estate. Whatever the case, there are many factors that persist when purchasing or selling real estate and it is important to understand what type of market you are in, so that you may be realistic about the outcome of any given real estate transaction. If you’re having some difficulty trying to assess your financial position or determining the right market conditions to make you next move, please feel free to contact myself anytime as I would love to assist you in this matter.