How Trump tariff threat and foreign buyers ban impacts Okanagan real estate market
American tariff threats are already impacting the Canadian economy, and the foreign buyer ban means the real estate market will look different than it did the last time the loonie dropped so low compared to the U.S. dollar.
In the past, American investors have taken the opportunity of a low Canadian dollar to get into the real estate market here, but foreign investment laws will make it less appealing this time around.
The BC Real Estate Association’s chief economist Brendon Ogmundson said the foreign buyer ban impacts cities like Kelowna and Kamloops, but some tourist destinations like Whistler or Big White and smaller cities like Merritt are exempt.
“It's possible that if the Canadian dollar falls more, like we're just under 70 cents right now, maybe that would entice some investors, especially in the ski resorts areas, if they're exempt, but there's not going to be a rush of investors to big cities,” he said.
He said foreign investment in the housing market hasn’t been on economists’ minds since the new regulations came into effect at the start of 2023.
“Since we've had so much tax and regulatory firepower aimed at foreign investors, or non-resident buyers, that it just hasn't really been on our radar much,” he said.
Ogmundson has concerns about the housing market considering president-elect Donald Trump’s 25 per cent tariff threats.
“If we weren't talking about the potential for 25 per cent tariffs on all our exports in the United States, I would be pretty optimistic. We had a really strong end of the year in most markets where the last three months of the year saw pretty strong sales,” he said. “But a 25 per cent tariff has the very high probability of putting the Canadian economy into a recession, which means job losses and likely a decline in home sales and prices.”
READ MORE: 2024 worst year for Central Okanagan real estate sales in 12 years
Associate dean and professor of economics at Simon Fraser University Steeve Mongrain said the tariff threats have likely affected consumer confidence, or how comfortable people are making a big purchase like a house or a car.
“Do you think, next month or during this year, it's a good time to make a significant purchase,” Mongrain said. “The threat of inflation, the threat of losing your job, or for self-employed people reduction in revenue. So that's a simple question that you can ask to people... that tells you what's the view of people about where the economy is going,” he said.
Canadians’ trepidation is reinforced by the latest MNP Consumer Debt Index which shows two in five Canadians are worried someone in their household could lose their job, and half of Canadians are $200 or less away from insolvency.
“Many Canadians are already tightening their finances, reassessing budgets, and exploring cost-cutting measures to manage rising costs or debt repayment. Unfortunately, even substantial sacrifices may fall short of providing meaningful financial relief in some cases, despite lower interest rates,” MNP’s president Grant Bazian said in a press release.
People might be apprehensive about buying a house, but Ogmundson said there is too much uncertainty to start panicking.
“It really depends on how the Bank of Canada reacts. If we get a Bank of Canada that's very aggressive in fighting that recession, we could see a pretty strong rebound in the housing market,” he said.
“The housing market obviously has been extraordinarily resilient to very, very large shocks in the past. And we don't know what's coming ahead. So, no sense in fretting about it until we're actually confronted with some certainty.”
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