Well, after the highly speculated American election, our attention now turns to addressing what a republican victory, and Trump presidency will mean for the Canadian real estate market.
President-Elect Trump will influence the Canadian economy in 3 different ways which we will analyze.
U.S.A Inflation = Canadian Inflation:
Trump’s stated in his victory speech of his intentions to fix American inner cities, rebuilding highways, bridges, tunnels, airports, schools, and hospitals. All of this spending leads to inflation in the United States. Now this will in turn increase the inflation in Canada as well due to our economy’s heavy reliance upon our exports to the U.S.A.
The Canadian dollar decreases the following year after an American election. With the inflation impacting the states, this will influence the Canadian dollar as well. 31.5% of Canada’s GDP is based upon our exports, and of our exports, 74% of them are exported to the United States. This means that our dollar is reliant on the American dollar. When the American dollar is valued high, they will purchase more Canadian goods which will lead to an increase in the Canadian dollar as a result.
Implication on Canadian Real Estate:
Real estate is considered to be a special type of investment referred to as an inflation sensitive asset. What this means is that as Trump fulfills his policies, and increases the public debt by investing into the economy, the result of this increased debt is increased inflation. With real estate being an inflation sensitive asset, the price of these investments will increase. By increasing the price of these investments, more home owners will be inclined to sell their homes, which will lead to an eventual increase in real estate transactions.