Ottawa Real Estate - FULL STEAM AHEAD, DAMN THE TORPEDOES
A message from Patrick Walchuk - Jan 21st 2009
As some of you frequently feel the need to tell me, I'm an old guy. I worked in real estate in the 90's when the number of homes sold annually dropped from approximately 11,000 or 12,000 per year to about 6,000 annually. It was a significant recession. Here are the key issues that specifically negatively impacted Ottawa real estate:
1. Interest rates were in the double digits. (every time the rates go up by 1/2 %, it takes hundreds of people out of the real estate market in Ottawa, due to lack of affordability)
2. The federal government announced it was going to be laying off thousands of Ottawa employees........the unions rallied, there were demonstrations (I actually got caught in one on Laurier Ave) and nothing happened for the longest time. Meanwhile, the threat of layoffs virtually stopped government employees from buying and selling real estate. No one wanted to buy a house, take on a mortgage if they would be out of work tomorrow. This was really really bad.
3. The federal government finally cut the work force, fewer people were employed to be able to buy real estate.
So now we may be in a recession again. HOWEVER not one of the key factors above is present. Yes we've heard about Nortel going into bankruptcy, JDS Uniphase closing it doors, and I'm sure there will be more job losses. Ottawa is insulated from economic national and international conditions BUT not immune.
NOW........unemployment is still relatively low, the feds are now planning to spend BILLIONS to ensure employment, and interest rates are the lowest in history (re: mortgages) Ottawa is about to embark on a new transportation system, (hundreds of millions of $ and eventually over $ 1 B) and has started the final environmental study for a new bridge (about $45 million) in the east end. We are not a heavy manufacturing economy (how would you like to be a car worker in Oshawa?) which will continue to provide some insulation.
Bank of Canada cuts prime as recession looms WED. JAN. 21
2008 Ottawa Sun
The Bank of Canada slashed its key interest rate to the lowest level in history yesterday, pronouncing the country's economy has fallen into recession and needs help to recover.
The central bank cut the trend-setting overnight rate one-half point to one per cent -- below the 1.12% that had served as the bank's policy rate floor in 1958 -- while drastically revising downward its view of economic performance this year.
The decrease was in line with the expectations of economists, who have been calling for bold action on the parts of the central bank and the federal government in light of the quick and sharp downturn last fall that followed the destruction of savings in global stock markets.
At one per cent, the Canadian central bank is coming to the end of its ability to affect interest rates.
Shortly after the central bank cut its rate, the big banks, led by Bank of Montreal, TD Bank, Royal Bank and CIBC, also cut their prime lending rates by the same amount to 3%, effective today.