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This morning’s news about Trump presidency has certainly taken the world by surprise. While some are still shaking their heads in disbelief, others have started making predictions about the effects of the new leader’s policies and pre-election claims.
Here’s what Canadian analysts think, so far:
Impact on interest (and mortgage) rates
The Republican win could derail America’s slowly growing economy: Trump’s promise to deport 11 million illegal workers, if brought to fruition, is predicted to put dangerous pressure on an already tight labour market. By taking workers out of the labour force, Trump could have a damaging effect to both the U.S economy and Canadian businesses with American clients or suppliers. (CNB)
To combat a business contraction, the U.S. Federal Reserve may abandon decisions to start raising interest rates. The idea is that by keeping rates low, the Feds will continue to encourage banks to lend money and convince businesses to expand through the use of cheap credit. So far, Canada has enjoyed six years of near-zero rates. With prolonged low rates from the Feds, it’s unlikely that the Bank of Canada will increase rates, so we can probably expect a prolonged ultra-low rate environment in both Canada and the U.S. (Moneysense).
Home buyers expected to benefit from lowered mortgage rates
For anyone planning on buying a home in the coming months, the presidential outcome may have delayed any mortgage rate increases on the horizon.
The election is not thought to impact the slight rise in prime rates following the recent Federal mortgage rule changes. However, it may in the future prompt the Canadian federal government to consider alternative methods for cooling heated housing markets such as Vancouver and Toronto.
Home sellers can expect an increase in demand following a rush to buy in Canada
Home sellers could actually see a surge in demand for Canadian homes amongst Americans, especially if Trump’s radical talk translates into action.
“Brand Canada” might enjoy a boost in popularity by contrast, leading to more demand in larger urban centres. This is, of course, assuming the American dollar and relatively high American purchasing power both remain stable in the near future.
Impact on vacation properties
If the American economy does decline, vacation and rental owners are expected to see a drop in their property values. Americans are the largest foreign buyers of Canadian holiday properties, due to the relative affordability of recreational properties and the strength of the dollar. A weaker US economy would mean a wholesale withdrawal from the holiday-home market, potentially impacting it for several years to come.
Impact on house prices across Canada…TBD
The effects of the election on home prices is currently uncertain. Pre-election promises to place massive tariffs on Chinese imported goods and to “tear-up NAFTA” could mean trading-wars that could seriously impede Canada’s currently slow-growing economy. (Moneysense)
Trade is relatively more important to Canada than to the United States. America’s comparatively huge population allows them to be more insular than we can afford to be. Any protectionist stance from the U.S. would have a significantly damaging impact on Canada’s export and trade industry, consequentially impacting localized housing markets.