JUST WHEN YOU THINK YOU UNDERSTAND THE RULES OF THE GAME …
Holy landscape adjustments Batman! If “unprecedented” was the annoying word of 2020, then “Pivot” is quickly becoming 2023’s word. Is this a good or a bad thing? Only time will tell.
This week’s news includes inflation numbers, and the one that is most challenging for real estate investors is that mortgage interest rates rose 30.6% year over year. Huh, that’s an 80’s throwback if we ever saw one! More than one source this week suggests that if mortgage interest payments were removed from the CPI, then Canada’s inflation rate would already be sitting around the targeted 2%. Investors have adapted to rising rates by densification of their properties, and with a different business model: short-term rentals.
But also this week we’ve seen a giant “uh oh” for that investment model. The BC government announced new legislation, province-wide (some exceptions), that will impact the estimated 28,000 short term rental properties in BC. The Canadian government also announced a planned “crack down” on short term rentals. Business owners just got thrown a giant curve-ball in the form of government regulations.
Why do governments think this is an appropriate measure? Because there is a time-delay between recognizing the problem (lack of affordable housing) and the solution (building that housing). Theoretically, fewer short-term rentals could mean more long-term rentals back into the market, and fast. In contrast, CMHC just released their numbers that suggest housing starts are up a bit in September (month over month), but those numbers are nowhere near enough or fast enough to start really solving the problems.
We don’t invest in short-term rentals, but we sure have compassion for people who had their real estate business plans effectively turned upside down. The idea that real estate investors are making buckets of money, and should be the scapegoats for the lack of affordable housing, is simply a blame game, not an effective solution.
How many people do we know that would LOVE to be building more rental housing? Between our investor colleagues and our builder friends, A LOT!! Banks don’t seem to want to lend, CMHC is ridiculously backed up, and even alternative lenders are denying applications or asking for huge interest rates. From where we sit, financing is the key stumbling block.
In these challenging times, what are we doing? Honestly? Some days we simply keep our heads down, our mouths shut, and work hard. Oh yes, and minimal news consumption to avoid getting drawn into the drama!
But the other thing that keeps us going is our WHY. If you’ve even attended one real estate investment course, this expression will be familiar to you. Because when the going gets tough, the TOUGH remember WHY they’re enduring all the challenges. Tough investors change, pivot and make adjustments – they figure it out. In many ways we are now grateful for that long Alberta recession while other areas in the country were thriving. We already have resilience; we’ve already problem-solved through sudden and dramatic changes to our real estate investing business. We’re lucky that we KNOW we can figure it out, again!
If your real estate investments are on the receiving end of a wild card problem, a wild fire, or government regulations, just know that you too will find a solution. It might not be your first choice, or even your second or third choices, but there is a way out or a way forward. Keep asking questions!!
