Influences of 2021 Canadian Federal Election on Real Estate Market and CAD

The 2021 Canadian federal election on September 20th will see whether Justin Trudeau, the prime minister of Canada, can be reappointed, which will decisively account for the socioeconomic development of the country. The domestic real estate market even the currency will be affected in particular. According to the opinion poll for CBC by September 13th, the popularity of the ruling Liberal Party led by Trudeau dropped to 31.9%, whereas the figure for the opposition Conservative Party rose to 31.3%. As such, the Liberals only holds 0.6% over its rival, making it hard to secure the victory. On the contrary, the Conservatives is likely to take the lead, boasting a chance to win over half of 170 seats and become the ruling party.

Shown by the other poll, 68% of citizens object to Trudeau bringing the federal election forward when the pandemic is exacerbating. In addition, his diplomatic policies are criticized by Canadian voters. The domestic real estate market has surged over the past year with trading volumes soaring, which has given rise to residents complaints. During his election campaign, Trudeau, the current prime minister, has pledged to introduce many effective responses to the overheated housing prices once reappointed, such as restricting foreigners from buying properties within two years, curbing property management providers from speculating and selling, strengthening the regulation on real estate brokers, increasing housing supply, and extending the coverage of vacancy tax to vacant lands even owned by foreigners.

However, the opposition Conservatives has explicitly provided its compliance for restraining the craze for properties earlier, including the restriction on foreigners from carrying out purchases within two years. Therefore, it will be inevitable for the housing market in Canada to experience adjustments regardless of which party to play the ruling role. The potential control of the real estate market in the country will be conducive to the national economy, cushioning inflation especially, as property prices skyrocketing in the past have adverse impacts on not only the livelihood of residents but the business environment. Higher rents are bound to take a heavy toll on the business climate in question that embraces industrial and commercial sectors. In this regard, their counterparts in Hong Kong have suffered enough over the past decade. According to the Real Estate Board of Greater Vancouver, housing prices in this region have increased by over 40% on average, which is staggering.

The Bank of Canada has embarked on the withdrawal from the quantitative easing(QE). It will face the pressure of conducting interest-rate hikes ahead of schedule, given the economic recovery, the growth of housing prices, and the escalating inflation. All this, coupled with oil prices bottoming out and rising, is beneficial to CAD. Nevertheless, if CAD turns to be strong, it will be CAD/JPY crosses that can be chosen for the carry trade. The reason for this is that only the sale of weak currencies is appropriate to crosses when the trend of CAD is bullish, whereas USD doesn‘t fit the bill as it isn’t doomed to a bearish market when the Federal Reserve always has a chance to commence its withdrawal from QE in advance.