What a Second Trump Term Would Mean for Canadian Real Estate?
This article is a thought experiment to outline how complicated the National and International Macro factors are interacting with the real estate market. The knock on effect from the new US presidency alone is potentially HUUGE (as Trump would say), yet it’s unpredictable and full of complexities.
I would suggest my clients to refrain from using every sensational news story to create a thesis for their real estate decision making. An argument can be made either way depending on which data set the sensational news article is focusing your attention on. However, having a good understanding of the major factors affecting your investment is also good idea.
Here’s the breakdown of what potentially could happen if Trump becomes the 47th president of the United States in January 2025:
Economic and Trade Policies
Trade Policies: Trump’s approach to trade, including tariffs and renegotiated trade deals, could affect the global economy, influencing Canadian markets. Trump has floated the idea of increasing Tariffs to boost US domestic manufacturing. Higher tariffs could increase prices in US therefore keeps inflation high and could require higher rates. Higher rates in US would translate to higher rates in Canada. Higher rates would have a negative effect on prices of real estate. (Negative for real estate)
Economic Policies: If Trump's policies stimulate the US economy, it could positively influence Canada’s economy due to their close economic ties. If Trump is better for the economy, as many voters seems to think, than the higher wages in the US will also translate to higher wages in Canada as employer will come to Vancouver for tech workers for example to look for lower waged worker thereby also driving up Canadian tech wages. Vancouver tech employees is a top substitution for US tech companies looking for ‘cheaper’ labour. (Positive for real estate)
Immigration Policies
US Immigration Policies: Stricter immigration policies in the US might lead to increased immigration to Canada, particularly to popular cities like Vancouver. This could boost demand for housing and drive up real estate prices. (Positive for real estate)
Foreign Investment
Currency Fluctuations: If Trump’s policies lead to a stronger US dollar (through higher interest rates/stronger economy/higher inflation) relative to the Canadian dollar, it might make Canadian real estate more attractive to foreign investors or local investment with foreign sources of income, potentially driving up prices. Even local permanent residence and citizens often get their sources of funds for purchase from foreign sources.
Interest Rates
Monetary Policies: The US Federal Reserve’s policies under Trump might influence the Bank of Canada’s decisions. If the US raises interest rates, Canada will generally follow the US trajectory, impacting mortgage rates and housing affordability in Vancouver.
Trump will do everything in his power to pressure the fed to cut interest rates BIGLY like when he was in power last time to make the economy run hotter under his watch. Even though the president is not suppose to influence the independent Federal Reserve, he will absolutely try, as he is the antithesis of following traditions and rules. (Positive for real estate)
Geopolitical Factors
Global Stability: Trump’s foreign policy and geopolitical decisions could affect global stability and economic conditions, indirectly impacting Canadian markets. Increased global instability could lead to capital inflows into perceived safe havens like Vancouver. Trump tends to heat up the political discourse as well and a portion of wealthy families looking for a safer place for their kids to go to university may opt them into Vancouver/ Canada instead of US for safety and peace of mind despite the greater economic opportunities in the US. This is already happening after the numerous mass shooting events that are publicized in the media. (Positive for real estate)
As you can see the outcome of the election alone could have a complex and unpredictable affect on Canadian Economy and Real Estate market. Therefore, latching onto a new world event and believing it will for sure change the course of the market in a certain direction is not a wise move. Local policies and micro-economic data in the real estate market is a more accurate reflection of the bigger factors impacting real estate markets.
Real estate market is sticky as its a more illiquid asset and emotions are involved in making real estate transactions vs a quick stock acquition/disposition. Having a realtor with a deep understanding of the trends and nuances of market dynamics and knows how to take advantage of each types of market with different strategies is your best bet to get ahead in the real estate arena.
