With the recent win of Justin Trudeau of the Liberal Party as Prime Minister, many Canadians must be wondering how the Canadian real estate market will change. Although new leadership will change the brass within the House of Commons, most policies that direct the economy will remain the same, at least only for the short term. Trudeau’s campaign promises included a reduction in small business taxes, increased spending on public infrastructure, and changes to income taxes for the middle and upper class. What will these changes mean for Canadians?
With an ever growing trend of small- and home-based businesses in Canada, a reduction in small business taxes may expand the growth capabilities for many companies. As a real estate professional and small business owner myself, initiatives like this will provide me the opportunity to invest in assets that will contribute to long-term growth. The increase in spending on such assets will allow other businesses and individuals to mutually benefit from this reduction in tax. Increased spending will ideally also lead to job creation and sustainable economic growth.
The current economic environment offers all borrowers a unique opportunity to access funds for near zero interest rates. If there is a time to take on “smart” debt, the time is now. With the expenditures that the Trudeau government is planning to conduct on public infrastructure, the country of Canada will largely benefit with advancements in transit, roadways, health care, and information technology. All the while, more Canadians will be employed to complete such projects. Budget allocations and improvements could be implemented relatively quickly. Trudeau is set to start his new tenure in early November. With a designated four-year term, don’t be surprised if changes comes as early as the new year.
The discussion of income tax, as always, dominated this year’s election. Trudeau’s plan to increase taxes for the upper class or individuals that make in excess of $200,000 should only have a marginal effect. The new tax bracket only affects the amounts above and beyond that threshold. Although many critics may argue the negative implications of such a tax hike, the upper class is likely the only segment in the population that can afford such an increase in income tax. The middle class on the other hand will see a decrease in income taxes, allowing those individuals that make between $44,701 and $89,401 to take home a larger proportion of their income. The separation of income disparity has only continued to grow in Canada, and hopefully changes like this will close the gap.
What does this all mean for the real estate market? The current real estate market in Canada sees consistent increases in major cities, while most other areas see prolonged sales activity and price reductions. The proposed changes Trudeau outlined during his election should theoretically see an increase in jobs and market stability, especially for those living outside major metropolitan areas. There is still great fragility for other market indicators such as energy prices, foreign markets, and exchange rates. Many of these do have a large impact on the Canadian economy, but sadly are often hardly influenced by Canadian public policy. With an astounding voter turnout and a majority election of the Federal Liberals, I believe like many others that Trudeau will lead Canada through these times of uncertainty towards a much more stable path. The outcome will hopefully stabilize the Canadian real estate market in tertiary areas and hopefully lead to a correction for those extremely inflated markets.
Image Source: Flickr/Christine Wagner
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