By John Geha
The federal budget tabled in January included several initiatives to stimulate the Canadian economy through home-buying initiatives, and rightly so. Real estate is a main foundation of our national economy, and all of us in the industry were pleased to see it addressed in the budget. But the big question now is, what are real estate professionals going to do to maximize the impact of these initiatives?
The increase in the Home Buyers Plan (HBP) maximum from $20,000 to $25,000 will help Canadians buying their first home to do it in a financially responsible way. A proposed First-Time Home Buyers’ Tax Credit would provide up to $750 in tax relief. These incentives combined with increased affordability from lower mortgage rates and declining prices will help drive a new buyer into the market.
On the flip side to the government stimulus plan to encourage buyers, there is also demographic pressure, creating pent-up demand on the seller’s side. A Statistics Canada study noted the leading edge of the baby-boom generation is now on the cusp of retirement. Those born in 1946 are turning 62 this year, the current average retirement age of Canadians. These people will be moving to downsize or to accommodate changes in their income or lifestyle in record numbers.
All this spells good news not just for the housing industry, but for the national economy as a whole. Resale housing transactions across Canada generate significant economic activity. The purchase and sale of homes generates fees to professionals such as lawyers, appraisers, real estate agents and surveyors. When Canadians move, they purchase new appliances or furnishings and make renovations to tailor their new home to their specific needs.
A recent study commissioned by CREA estimates that between 2006 and 2008, the average housing transaction in Canada generated $46,400 in ancillary spending (spending on items other than the actual house and land). This represents a staggering $22 billion per year to the Canadian economy.
Of course, buying and selling homes drives the economy in other ways beyond the initial transaction. As communities grow, so do retail outlets, schools, recreational facilities, places of worship and infrastructure. And we haven’t even touched on the jobs created to generate the materials needed for such new construction. There are few industries that can exert such a profound impact on the economy.
That brings me to the age-old question, “What came first, the chicken or the egg?” We can apply that same question to real estate. Do we now sit back and patiently wait for the economic recovery to come and with it an improved housing market? Or do we proactively engage the consumer to instill confidence in the market now and drive the economy in the process? The answer is clear. As real estate professionals we must communicate to the consumer that there is great value in today’s real estate market.
How do we do this? One way is to stop talking numbers and start talking value. I firmly believe this is one of the best times ever to buy a home. Yet, the media has barraged the public with headlines about how much sales activity or house prices have fallen. They rarely mention they’re comparing today’s results against record-breaking highs. They focus on short-term provocative headlines that instill fear in the home-buying public. They say very little about the long-term benefits of owning your own home, including freedom and pride of ownership, or building equity rather than putting your investment in a landlord’s pocket. They don’t tell the story of the vast majority of homeowners who have enjoyed appreciation in the value of their home. Only through educating the consumer can we take away the fear and help drive the market back to recovery.
Those of you who know me have heard me say that people in our industry tend to overcomplicate our business. Remember, we need to listen to the consumer and address the consumer’s needs. That’s how we deliver value.
As real estate professionals, we must be able to illustrate to prospective buyers the “big picture” about how home values have appreciated over time. We need to demonstrate how historically low interest rates have improved affordability and added to the buying power of consumers. Be prepared to show them how much more home their money can buy today. There’s a great deal of good news to share, and we’re doing the Canadian consumer a huge disservice if we allow the media to tell only one side of the story. So let’s not wait for the economy to turn, and carry the housing market with it. Let’s do what we do best, communicate with our customers, build consumer confidence and drive the Canadian economy in the process.
John Geha is president of Coldwell Banker Canada Operations ULC, and has a proven track record as a management consultant in Canada for the past 10 years.
