Will Real Estate Benefit From Canada's New Government?

The Real Estate Espresso Podcast

Will Real Estate Benefit From Canada’s New Government?

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Will Real Estate Benefit From Canada’s New Government?

Welcome to the Real Estate Espresso Podcast. Your morning shot of what’s new in the world of real estate investing. I’m your host, Victor Menasce. On today’s show, we’re taking a look at the federal election that took place yesterday in Canada.

While Canada has a number of political parties, it really was a two-party race: Mark Kearney running for Prime Minister as the head of the Liberal Party, and Pierre Pollyev as the head of the Conservative Party. When Justin Trudeau stepped aside a few months ago, the Liberal Party elected a new leader in Mark Karney. At that time, the Liberals were trailing significantly in the polls. Trudeau was extremely unpopular.

Mark Karney is well known, having previously served as the Governor of the Bank of Canada and, in an unusual step, also as the Governor of the Bank of England. To have the Bank of England select a foreigner, an outsider, to head their central bank was an unusual step, but it’s pretty clear Mark Karney had earned considerable trust globally as a solid central banker. He presided over the Bank of Canada through the great financial crisis in 2008 and, frankly, Canada was largely unaffected by the crisis in the US, which also spilled over into Europe.

The one central figure in the election was not even a candidate. Donald Trump’s statements about trade, annexation, military spending, and border security became defining issues in the election. So, the Canadian people have spoken and the country has elected a Liberal minority government with Mark Karney as the Prime Minister.

My assessment is that the conservative leader continued to use campaign slogans from 6 to 12 months ago. He failed to pivot to the reality on the ground, which was that the new candidate facing him was Mark Karney. He failed to pivot in a way that would address the negotiation with Donald Trump. Mark Karney did a much more convincing job of demonstrating leadership throughout the campaign. Pierre Polyev did not play the part of Prime Minister, and I believe he did not convince the electorate at large that he was up to the job effectually. This election had extremely high voter turnout compared with previous elections. In fact, Pierre Polyev was not reelected and he lost his seat in parliament.

What might be considered a little bit of dirty politics, this particular parliamentary district had over 90 names on the ballot, a tactic clearly designed to confuse the electorate. He narrowly lost his seat by only a few thousand votes, with an incredibly high 79% voter turnout in the district.

So, what does all of this mean for real estate? We hear frequently about how the U.S. has a shortage of housing. Comparatively speaking, the U.S. actually comparatively speaking has a surplus compared with Canada. Canada, like other western countries, is only requiring additional housing as a result of immigration. Demographics are not enough to grow a population.

Mark Carney promised Canadian voters a comprehensive housing plan to address the housing crisis, by doubling the pace of home construction. The goal is nearly 500,000 new units a year over the next decade.

Key elements of his plan include:

Reduction of the capital gains tax rate
Creation of a Build Canada Homes agency
Increasing investment in prefabricated and modular homebuilders
Cutting costs and red tape
Eliminating the sales tax on first-time homebuyers for new homes

As a developer who is active in both Canada and the U.S., I would have been happy with either party winning the election. Both had decent initiatives aimed at stimulating housing. The strong fundamentals combined with the removal of several barriers make investment in some markets in Canada extremely attractive. Mark Carney was, after all, Chairman of Brookfield Asset Management, a commercial real estate company after he left the Bank of England. He’s someone who clearly understands commercial real estate. Regardless of Mark Carney running for the Liberal Party, he’s seen as much more centrist and, as a central banker, is widely recognized as someone who’s fiscally conservative.

As you think about that, have an awesome rest of your day. Go make some great things happen. We’ll talk to you again tomorrow.