Varun Kohli May 4, 2023 No Comments

As the world grapples with ongoing economic and financial instability, many people are wondering how to safeguard their investments and assets. In times of economic uncertainty, it is natural to feel hesitant about investing in real estate. However, buying property in Canada, particularly in Ontario, can be a smart decision, even in a volatile market and a crazy world. Here are a few reasons why.

First, buying real estate when prices are stagnating is a smart and effective way to enter the market. When the market is experiencing a lull, sellers may be more willing to negotiate on price, and buyers can take advantage of this by getting a good deal. In Ontario, for example, we’ve seen a bit of a slowdown in the real estate market in recent months, with some areas experiencing a big drop in home prices. This presents a great opportunity for buyers to enter the market at a more affordable price point. Recall what happened in the 2007-8 crisis. Home prices took a dive and activity started to dry up. Folks that took a risk and entered the market then benefitted from a trifecta of decent buying options, competitive pricing, and an environment that was accommodating in policy and interest rate terms. Folks that renewed their mortgages found themselves enjoying some of the lowest interest rates in Canadian history. Many of these homebuyers now have houses worth many times what they purchased them for.

Second, in times of long-term economic instability, policymakers are often forced to accommodate the real estate market. The government recognizes that a strong real estate market can provide much-needed stability in a shaky economy. As a result, policymakers may implement policies that support the housing market, such as low interest rates and mortgage incentives. This can make it easier for buyers to purchase property and incentivize sellers to put their homes on the market. We are seeing more and more federal, provincial, and municipal policies to support housing construction, stimulating savings for a home purchase, and more infrastructure investment. Support for Canadian banks is ironclad. All of this will confluence into bullish stimulus over the medium to long term that will lift prices.

In Canada, we’ve seen this type of policy accommodation in action. The Bank of Canada has consistently kept interest rates low over the past few years, making it easier for Canadians to purchase homes. It will go back to an accommodating posture as soon as it can and as soon as inflation gets back under control. Additionally, the government has implemented various incentives for first-time homebuyers, such as the First-Time Home Buyer Incentive and the Home Buyers’ Plan. These types of policies help to support the real estate market and encourage investment in property.

Third, Canada is well-positioned to weather the economic storm thanks to its abundant natural resources and commodity production. Even in times of economic uncertainty, there is always a demand for resources such as oil, lumber, and minerals. This means that Canada is able to generate revenue and maintain economic stability even when other sectors are struggling. We’re seeing huge government surpluses in the West. Alberta is back in the black. The higher the oil price goes, the more federal and provincial governments will have in their treasurer. Global uncertainty and high commodity prices favours Canada and hedges us against risk.

Fourth, Canada is projected to continue to experience high levels of immigration for the foreseeable future. This means that there will continue to be strong demand for housing in many parts of the country, particularly in Ontario. Immigration helps to fuel economic growth and drives demand for various goods and services, including housing. Our population is rising at an extremely generous clip, and this will push up demand for housing.

Finally, investing in real estate can provide a reliable source of passive income. By purchasing property and renting it out, investors can generate a steady stream of income that can help to cushion against economic instability. This can be particularly useful in times of economic uncertainty when other investments may be volatile. Buying a home now and renting out the basement in an environment where rental demand is soaring is a great way to recoup some of the high costs of entering the market.

Of course, investing in real estate is not without its risks. It’s important to do your research and understand the market before making any investment decisions. Additionally, the current global economic and financial environment is complex and unpredictable, so it’s impossible to know with certainty how the real estate market will perform in the coming months and years.

However, by keeping these factors in mind and working with a knowledgeable real estate agent, investors can make informed decisions and take advantage of the unique opportunities presented by the current market. In Ontario and across Canada, real estate continues to be a strong investment option even in the face of economic instability.

By taking advantage of stagnant prices, benefiting from policy accommodation, recognizing Canada’s natural resource strengths, acknowledging the benefits of projected immigration, and exploring the passive income potential, investors can successfully navigate the complexities of the real estate market and make informed decisions that will help to secure their financial future.

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