At our Annual Conference this week, we explored some of the reasons that the real estate market has soared, despite the pandemic and the resulting economic turmoil.
While we tend to focus on our own markets, and talk about how real estate is local, there are bigger forces at play here. It isn’t just Vancouver, Victoria, or Kelowna experiencing a boom right now. Across Canada, the US, and even the wider Western world, markets everywhere have been strong throughout the pandemic.
Why is this? We believe there are 2 main reasons:
The World is now awash in Liquidity.
At the beginning of the pandemic, governments around the world turned on the liquidity taps to support the economy.
First (1), 80% of job loss has occurred at the bottom end of the income scale, meaning the bulk of the crisis has fallen on those who were least likely to be able to buy real estate in the first place. In addition, those who did not lose their jobs have been reducing their expenses as a result of at-home mandates. Second
(2) Government programs like CERB and CEWS have pumped so much money into the economy that household disposable income has actually gone UP through the pandemic.
Finally (3), record-low interest rates show no signs of moving up and will move asset prices higher. It’s not just real estate. Stocks are also at record-highs from all of this liquidity.
Changing Consumer Preferences:
While there is still debate about whether changes in consumer behavior – predominantly work-from-home trends are temporary or long-lasting and systemic, the pandemic has shown that there are many parts of many peoples’ jobs that can be done as well or better from home.
The Canadian office market is currently worth $250 billion. That means that if workers spend only 10-20% more time at home moving forward, there could be a reallocation of capital of $25 to $50 billion from the office to the home. That’s people in 1 bedroom apartments discovering they need an office, people in Townhouses realizing they need a yard, or down-sizers who have now changed their minds.
Source: Macdonald Realty Corporate
For more information about how these trends may affect you in buying or selling a home, contact me and let’s talk.