Why Is The Housing Market So Important?
If you follow the money, you'll see why it's a big deal.
Did you know we have a federal election coming up in a few weeks? It's so crazy to see how different the political space is in Canada versus the US. South of the border, it seems like campaigning for a federal election literally takes years. Like, the president basically spends half their presidential term on the campaign trail. In Canada? Oh, there's an election next month. And boom, it's done.
I obviously won't get into anything political on this post, but if you know me at all and talk to me one-on-one, you know I'm not shy about voicing my opinions about how stupid every party seems to be when it comes to dealing with the real estate market. But I've always been so curious as to why economists and governments were so insistent in making sure no matter what happens in the economy, real estate was always top of mind. I mean, it's not like governments really care if your house goes up in value every year, right? Looking at the way these politicians talk about real estate, it's almost as if they want prices to continually come down - I won't get into why that's just a fundamentally flawed political promise and against every free market economic principle that exists (not to mention how it would actually be catastrophic for the economy). But I digress. And I promised not to get political.
So why is the housing market so darn important to the economy?
Wifey and I recently bought a new condo. We upgraded to a larger space not because of the pandemic necessarily, but we've had our eye out for a larger space for some time so when the opportunity came up a few months ago, we jumped on it. Side note - if you haven't read my post from a couple years back about how it probably makes sense to buy the most expensive home you can afford right off the bat, check it out here. Wifey and I lived through that personally and I find sharing these stories with clients helps them understand why I give a lot of the advice that I do. I've been through it all myself.
This was our first move in 7 years and it was the first time I really started to see the economic impact that buying a new place has on the economy. I tracked everything and everyone who benefitted from our move, because my brain is basically a spreadsheet. Here's how many people are impacted in a positive way just when someone like us buys a new house or condo:
1 - The City of Toronto and the Province of Ontario - Land Transfer Tax. I'm not going to get into why this is the absolute stupidest tax ever created but we basically paid tens of thousands of dollars to Toronto and Ontario just for the privilege of being allowed to buy a new place. You're welcome government. I'd really like to see where my money gets wasted...I mean, spent.
2 - Lawyers - You can't close on a property in Ontario without a lawyer. So there's a couple thousand bucks that lawyers made on the transaction, on each side of the deal.
3 - Mortgage broker - We went with the same mortgage broker who I refer all my clients to and since I only recommend the best to my clients, we used him as well, obviously. He makes a commission on every deal directly from the bank, so he got paid by our bank.
4 - Appraiser - We had an appraisal done on our new place, at the request of the bank, so the appraiser got paid.
5 - Painters and contractors - Wifey wanted the new place freshly painted, so we hired a painter who works in the neighbourhood. We also got our closets redone, had so