August 2009 newsletter

Whatever the case, however, I'm inclined to refer to what I said last month regarding whether or not the stimulus programs were having any effect on the economy. What I saw as at least some signs of a turnaround has been confirmed by a flurry of house sales during the past two months. Perhaps the listing agents and sellers were relieved to see this, even though the cynic in me still wonders if the reason behind them is a pent up demand rather than a return of buyer confidence. Moreover, I have difficulty in thinking that this momentum will continue, let alone increase, nor do I see it as a support for a view that prices are going to start going back up -- a claim that many agents are putting forward as a reason for not passing over any of their listings.

Although the market goes through cycles, it does invariably keep climbing over the long haul. It's rarely a dependable idea to look for a profit by buying and reselling in a short period of time, but hanging on to property for several years -- and certainly for a few decades -- is most unlikely to lead to a loss. There are exceptions to this rule if you're involved in a locale that's already deteriorating and it's advisable to be on guard against upheavals such as the recent Wall Street fiasco (although foresight of this was missed by numerous fiancial experts with far more knowledge than most of us possess or can probably ever hope to have!). Yet the basic single family residence market is a relatively stable one and the ups and downs in value are usually paper ones and the initial purchase price is rarely going to be unrecoverable. Admittedly, timing can be unfortunately inconvenient, but as my December 2008 newsletter pointed out, what goes down tends to do more than go back up. Moreover, if the market is unfavourable when reselling is imperative, a replacement property is most likely to be available at an equally depressed price.

A buyer's market

For the past couple of years, buyers have been scarcer than usual, to the undoubted frustration of sellers and their agents. Despite the bidding wars that are still on occasions occurring in Toronto, the market has been somewhat soft and I'm far fom convinced that it has yet returned to the heat of the early 2000s. There are well priced listings that sell quickly (as they've always done), but most of the time these days a buyer doesn't need to rush into making an offer. There's chance to reach a considered opinion instead of one that has to be made in a panic. There's also often room to ignore the asking price and to offer whatever you think that a place is worth to you instead of its present owner. The worst that can happen is a signback, which can then give you a second chance.

You do, needless to say, have to have a supporting rationale for your suggested purchase price, but this, in my view, is a fundamental requirement in the first place. Its basis ought to be a Comparable Market Analysis, a point that I always make whenever I'm making an offer up for any client. Even if getting off on a wrongfooting with a seller isn't too advisable, nevertheless the risk shouldn't be set aside if the price is obviously well beyond reason.

Beware the taxman

Overall, I reckon that it's likely to be three, four, or even five years before the housing market -- or at least our own in the Niagara area -- returns to the health that will get its sellers and their agents excited again. In the meantime,I believe that it will be reaonably well balanced with perhaps a tilt or two towards its buyers. However, I do think that we need to take the tax authorities into account.

To begin with there's no doubt that a Harmonized Sales Tax will be imposed on Ontario residents next year, despite the political price that Dalton McGuinty may have to pay for it. There's also the chance that Toronto's "double whammy" land transfer tax may be applied by our Regional Government, even though it has failed to generate the revenue that the city's politicians were hoping for.

The most important likelihood, however, is the need to clear up the huge accumulating deficits that have been and seem to likely to continue to be built up in a commitment to prime pump the economy. We're talking no small figures here and I have to believe that acceptance of Keynesian thinking will lead to eventual (quite significant) tax increases in order to pay down the national debts that politicians of different stripes haven't hesitated to incur.

These factors alone could make some mockery of everything that today's commentators are putting forth -- myself included!

Duncan Pollock, Real Estate Broker,
427 Gate Street, Niagara-on-the-Lake,
Ontario, Canada L0S 1J0
Tel: 905-468-3154 Fax: 905-468-3812
Cellular: 905-704-9037
email: duncanpollock@sympatico.ca
Note: E-mail address changed as above on Nov 3 2007

website: http://www.duncanpollock.com

PS. One of my web pages provides a list of the other newsletters I've sent out. If you choose to go to it, you can click on any title to bring up its full text.
PPS. I've recently been invited and encouraged to create a second website, one that deals with my approach to the industrial, commercial, and investment real estate market. You can reach it, if you're so inclined, at http://www.iciniagara.com.