No change to speak of

October 2007

No change to speak of

Parliament building. Original image at http://www.web.net

Election results
Whether or not you were disappointed to see Dalton McGuinty voted back in power two weeks ago doesn't matter -- at least from a real estate point of view. A swing in favour of John Tory or any number of Conservative candidates, whether you welcomed the idea of faith-based school funding or not, would also be unlikely to have much, if any impact, on house prices. Even a significant increase in the presence of NDP or Green Party members wouldn't lead to a commensurate rise or drop in prices.
All in all, there has to be a pronunced change in economic emphasis before the real estate market moves in a noticable direction.
Indeed, if or when a federal election occurs, there's unlikely to be any sharp movement upwards or downwards in house prices.
Moreover, the well reported subprime defaults in the USA have had little effect on our local market or, into the bargain, the Canadian housing economy.
Certainly, the market has its ups and downs, but political shifts don't have a great deal to do with them nowadays.

Things aren't what they used to be
Twenty years or so ago, the market tended to go in cycles, somewhat on the lines of seven lean years followed by seven good ones, depending upon whether you were observing the pattern as a buyer or as a seller. At that time, too, political swings seemed to move to the left or the right in similar fashion.
However, in recent years -- let's say the past decade at least -- this kind of parallelism has been much less evident. It's been difficult to decide the direction the market's headed by simply recognizing which party is in power. It also hasn't been easy to forecast any change in the price of a house if the party in power gets replaced, let alone seems likely to lose office in a forthcoming election.
I'm not aware of any serious study, never mind much comment, about how or why the political and real estate arenas have chosen (by now for some time) to go in directions that bear no obvious relationship to each other.
Indeed, the financial gurus are occasionally reported to be tearing their hair out because house prices seem impervious to all attempts to dampen them. Moreover, the current downturn in the US market has nothing to do with Republican or Democrat concern about America's involvement with Iraq (not to mention other anti-American overseas problems).
No, it no longer matters who's running the government. The arrival of new or different members is a coincidence. Proposed legislation, whether it gets passed or not, has little, if any, effect on house prices. Even a new budget, short of a major alteration in tax rates (which, in any case, is rather unlikely to be approved by the opposition) isn't going to make any real difference.
In fact, although speeches from the floor of the house may not always fall on deaf ears, there is only a slight chance that the public at large will stop or start buying property because of what's said.
There's a recognizable time lag before people take much notice, let alone change their direction and intention.

A turning point
I've long had an abiding interest in both politics and economics -- although I usually manage to keep it to myself in my newsletters (!) -- but in looking for what brought about today's lack of political effect on the real estate market, I can't help thinking that the root lies in the vogue for Supply Side economics that came to its head in the days of Margaret Thatcher (in the U.K.), Ronald Reagan (in the U.S.), and our own Brian Mulroney. Despite some differences in approach and courses of action, there was a common interest in bringing the local economy to what amounted to a halt. Justifiably or not, there was a belief that inflation had been getting out of hand for too long and, despite the hurt that was bound to be inflicted, people would end up the better for it if things could be slowed down and, as it were, the heat taken out of the economy.
Few people consider that the objective failed to be realized, especially if they became the hapless victims of job losses, plant closures, and, yes, the foreclosure of their homes (via what we call a Power of Sale.)
The fallout centred itself on the 1990s and it lasted for most of the decade. However, it was hardly a repeat of the customary seven (or so) year cycle. It was a prolonged period of adjustment and, interestingly enough (to me, anyway), the political parties didn't make any great fuss about it. They seemed to let it all happen and simply leave -- and expect -- the economy to right itself without any interference from them.
I won't and don't claim any insight (and never mind wisdom) in this opinion. However, I rarely hear political speakers complaining about how prices have long since returned from the doldrums of the 1990s. In fact, even in the US, neither the Democrats or Republicans are pointing fingers at the lending industry as the cause of the current meltdown. What complaints are heard mainly emanate from within the banking and real estate industry -- and they aren't raising voices against a government of any stripe.

Another coincidence
Once we got beyond the '90s, we've tended to elect minority governments rather than settling for a decided lurch in an opposite direction. Regardless of the limitations, the public consensus now favours a fine line between who's in power and who's expected to nip at their heels and, it's to be hoped, is entirely capable of doing so.
Given this, it's no doubt become difficult for any party to swing far to the right or left, let alone have a significant effect on the economy. The 1990s are perhaps too easily remembered to permit a repeat of the harm that befell numerous people. Whatever the voters think, trust in politics and politicians is something else that isn't what it used to be.
I, for one, see no harm in this and even considerable benefit.

So is this the time to buy or sell?
Well, it's as good as any, I suppose.
You can, at least as far I'm concerned, accept that there's unlikely to be any political interference, not to mention government induced upheaval.
In fact, the only principle to follow is the one that, no matter what happened a couple of decades ago, has always been the sensible one: to make sure you're going to get value for your money.
Regardless of the party they belong to -- or oppose -- every self-respecting member of parliament would agree with this.