While we’re uncertain whether the 47th President of the United States will act on his pre-office tariff threats, there is one thing we should do:
Be prepared.
Since his election, Donald Trump has made many statements, some quite outrageous. However, from a Canadian perspective, the main concern is the looming threat of a blanket 25% tariff.
But what do tariffs have to do with real estate?
Canada’s home prices are already rising due to supply shortages, harsh market conditions, and economic uncertainty.
Throw that in with the inflationary cost of living and big city incomes that are drastically
lower than those of similar US jurisdictions, and Canada’s domestic real estate housing market is muddled, at best.
Add Trump’s anticipated trade tactics, and Canada’s economic recovery appears perilous. While the Bank of Canada’s interest rate cuts may help somewhat, it is still an uphill battle.
Tariff Impact
But what impact could these tariffs have on Canadian real estate?
Tariffs on building supplies, construction materials, and imports would significantly increase the cost of building new housing, which Canada desperately needs. From a Canadian developer’s standpoint, these imported materials include rebar, flat steel, plastic building materials, furniture, and prefabricated buildings.
In short, these tariffs would have a significantly negative impact on the Canada-USA supply chain and the cross-border flow of goods.
Investment
Canadians who invest in US real estate could also be affected by potentially protectionist Trump policies that would deter investment. If this were to happen, those same investors could redirect their money to the Canadian domestic market, thus increasing prices and reducing the housing supply.
Summary
While Canada could combat these tariffs by instituting its own, it would lead to price hikes on both sides of the border. The issues surrounding Canadian real estate and building stagnation would only worsen, not improve.
In the short term, I anticipate real estate prices to stagnate. However, if the accessibility of building materials becomes challenging and those prices increase as a result, we will likely witness the accelerated price growth of real estate.
Hopefully, these proposed measures can be avoided through negotiation and the understanding that these tariffs, even reciprocal ones, merely raise prices for both countries, rendering it a lose-lose situation.
Are you ready to move to the next stage? Let’s chat. Send me an email (hillary@hillarylane.ca) or text/phone (416-882-4707).
Photo by Aaron Burden on Unsplash
