Does an Election Scare the Real Estate Market?

Toronto is not a government town. Still, several hundred thousand jobs are tied directly to the three levels of government. It is the seat of the provincial government. There will be both provincial and municipal elections in the coming year.

So, does and election scare the real estate market in Toronto? A good case study would be to take a quick look at Ottawa. In 2015 there was the seventh federal election in the past 18 years. There is a saying that is unique to Ottawa real estate agents: “No one buys in an election year.”  Or, “No one sells in an election year.”

We decided to take a look back and see if this held true. With solid data from the mid-90’s onward; started with the 1997 federal election. There were fewer homes sold in Ottawa in the months leading up to the 1997 election than were sold in the same months a year later. This pattern of fewer homes sold in Ottawa before the federal election than were sold in the following non-election year pattern repeated for 2000, 2005 and 2007 elections.

We also know, looking back at the data, that Ottawa too experienced a “down” market for most of a decade from around 1991 to 1998. So, maybe this was all just due to the fact that more homes kept selling every year? To find out, we took the numbers from the year before and the year after for the two elections before 2015… the comparison is startling!

There was a federal election on October 14th 2008. Here are the MLS numbers for sales before that election and compared to the year after the election; as well as, the preceding year:

Date July 14 – Aug 14             3 months before election Aug 14 – Sept 14             2 months before election Sept 14 – Oct 14     month before election
2007 1197 1157 980
2008 Election yr 1172 1075 940
2009 1290 1122 1049

There was a federal election on May 2nd 2011. Here are the MLS numbers for sales before that election compared with the year before & after:

Date Feb – March                  3 months before election March – April                   2 months before election April – May     month before election
2010 930 1438 1645
2011 Election yr 874 1187 1456
2012 1008 1326 1588

Amazing. The number of homes in Ottawa sold prior to both the 2008 and 20011 federal elections was dramatically reduced when looking at the same time frame the year before or after. In some snapshots there is a 20% difference! On average, there is 8.6% less volume for sold units in an election year. Keep in mind these are sold units, not homes “for sale.” Drive around, you’ll always see plenty of those.

Looking back on the numbers surrounding the most recent 2015 Federal election, we saw the market in Ottawa (and Toronto) once again pick-up steam in months and after the election. Also the stats show that it doesn’t matter who wins, it’s the removal of uncertainty from the market that matters. There are a few elections coming up in 2018. Voters will head to the polls for both the Ontario provincial and Toronto municipal elections. Typically in Toronto, these elections don’t carry as much weight as the federal election does in Ottawa. But, both are in the same year and remember:

“No one makes a move in an election year!”

Not without a great realtor on their side. If you or someone you know is looking to buy or sell, contact us. Our marketing plans, experience and systems for buyers will help you make the right choice. Experience counts!

Investment Properties in Toronto:

A large part of my business is working with investors. A plan that includes investment property is a great way to get ahead in life. Let’s look at a couple of reasons why:

Potential appreciation of a highly leveraged asset:  You invest a relatively small amount of your money, and borrow the rest, often much much more, from a lender. If you purchase a property using a significant amount of debt relative to equity, the investment is said to be “highly leveraged”

If you have 10,000 to invest in a Toronto property and you use leverage and borrow $90,000 from a bank. By combining your equity with the money loaned to you, you are now able to buy a $100,000 asset.

Let’s assume that each year, for 10 years, your investment property will appreciate by 5%. Here is where being able to leverage works for you. The appreciation is on the entire $100,000 asset. For example:

Year 0: $100,000       *1.05 (appreciation)

Year 1: $105,000        *1.05 (appreciation)

Year 2 $110,250          *1.05 (appreciation)

….Year 10: $162,889

Cash is King: Income properties are occupied by tenants. That means you will be receiving rental income.

Rental income from tenants can be used to amortize your mortgage. Over time with a 25 or 30 year mortgage, your payments pay off the principal and interest. Leaving more money in your pocket. The longer you hold the property, the more of the loan and principal the tenants are paying down and the more wealth you are creating for yourself.

Accounting: There are also huge tax write-offs for income property.

With so many properties in Toronto and options out there, where should you buy? The most important role I play with investors is steering them away from the bad and towards the good when it comes to picking a solid investment.

Is it smart to buy several units in the same building? Or how about even the same neighbourhood?  Do you know what the future holds for an area? Are you making the best choice to capitalize on future development, expansion and infrastructure projects such as public transportation

Imagine if you made a decision that also factored in government, businesses, shopping, schools, zoning, traffic, exposure, demographics… Lot’s to consider. There are several reasons why some investors fare better than others.

Make no mistake, income properties in Toronto can a source of frustration. It’s not as easy as picking stocks – you can’t do it in your basement while wearing pajamas.  However, if you are committed, have a plan and approach it with a long term view, it can be one of the best decisions you ever make.

Care to find out more on investing in income properties in Toronto and get started on your goals for building wealth? Call or message me today.  My team of professionals is ready to help!