As a former political hack, I take a keen interest in politics: I had actually predicted a majority Liberal government with 40% of the vote on Facebook last week. I was happy to see that prediction came true. I think it will have a positive effect on the Ottawa housing market, for these reasons.
First of all, it’s a majority government and that provides certainty. A minority government causes uncertainty, and to a certain extent, paralysis within the public service. No one knows in that situation when the minority government may fall, and when there may be another election. Some pundits were saying that if it was a minority Conservative government, it could be toppled immediately. That kind of uncertainty has a depressing effect on the housing market.
A Conservative majority seemed pretty much out of the question, so the fact that it was a Liberal majority was good. If the NDP had won, I think we would have seen stock market turmoil that would have taken at least until Christmas to resolve. The day after the election, there’s been no negative effect on the dollar or the markets, and that’s notable. People do not take on the major expenses of home buying when they are losing money in the stock market, when their pensions are insecure, or when the companies they work for are losing share value. (Think Nortel.)
Furthermore, Ottawa, of all Canadian cities, is especially reliant on the public service. There’s no denying that the public service has felt under siege in recent years; I think we all know public servants who have felt very demoralized because of the actions of the Harper government. I keep hearing people say they feel like they can breathe again. And that psychological effect has a huge impact when it comes to retail and home sales: when people feel good, when they feel confident about their futures, they are far more likely to take chances on big investments like housing, new cars and so on.
In terms of spending commitments by this new government, I expect that a good chunk of the funds held back from programs to balance the budget heading into the election will finally go where they were supposed to, like Veterans Affairs and Aboriginal and Northern Affairs. That means recreating positions that were cut and expanding service delivery. And once again, when the public service is hiring, those are new jobs in Ottawa, which is good for home sales.
We know that infrastructure spending is a priority of the new Liberal government as well. That creates jobs, even if they are not long term ones. That short term work, though, will help carry us through the slowdown that we’ve been struggling with. Are we still in a recession? No one knows. But it can’t hurt to spend on infrastructure — it’s long overdue. Further investments in light rapid transit, in particular, and the Ottawa River cleanup that Mayor Watson is calling for, will help make Ottawa an even more appealing city to invest in, and to live in.
Put all this together and my prediction is that the housing market will start to recover from the long slow slump it’s been in for the past two to three years. I’m hoping the condo market has now hit bottom as well and that we’ll see sales start to uptick soon.
So — this is the time to start thinking about getting your house ready for the spring if you’re thinking of selling. And if you’re a buyer, it may be time to get off the fence — I think we’ll see house prices, which have been moribund or down, begin to recover very quickly and once that happens, interest rates may well start to trend up. Those are my thoughts — what do you think?