Anyone in the real estate field is acutely aware of the changing conditions in markets across the country. The Bank of Canada is working to rein in inflation and is set on doing so at any cost, even if that means a recession for the Canadian economy. Some say we are barrelling towards a recession if it hasn’t already begun. What follows could mean tough times for real estate professionals in Canada that will present new challenges for even the strongest agents.
Recessions are a well-documented economic phenomenon, and our current conditions have all the makings of one. With widespread inflation and increased interest rates putting a damper on Canadian household spending, we are likely to see a contraction in our economy that, if big enough, will put us firmly in recession territory. And, often, when a market sees unprecedented highs, such as we have seen in the last two years, it can lead to an even more severe turnaround, lending even more precedence to those raising the alarm bells.
“The economy is already starting to contract, we’re seeing inflation hit an all-time high, and interest rates are increasing,” said Ryan Coyle, broker and founder of Connect.ca. “Strictly speaking from a real estate perspective, we’re just starting to see a lot of buyers, sit on the sidelines to see what this all means, and take a wait and see approach to everything.”
In a recession, fewer buyers are going to be looking for homes, and the values of these homes will go down as well. With less market activity and less commission to be made, agents who haven’t worked to develop strong business skills may find themselves struggling to stay above water.
“I think what’s going to happen is there’s going to be a lot of real estate professionals who need to consider possible other streams of income. A lot of the market has been so good for so long that a lot of new professionals have not concerned themselves with building a sustainable business. Now, this is the time where people are going to either sink or swim.” said Coyle. “But right now, they also have the opportunity to educate themselves, get training, and develop those stronger skills to give themselves a fighting chance.”
And, Coyle notes, recessions are not localized events but rather occur on a national and global scale. Regardless of the area you work in, you should be aware of the coming changes so you can best adapt. More than anything, it will be the newest agents who need guidance.
“I think it’s gonna be the new guys who struggle the most because things have just been so good for so long that they haven’t really had to learn how to run and manage your business. Real estate really is about building a business, first of all, and if you build a proper business, you’ve got things in place to deal with times like this.”
Keep in mind that a recession is not some kind of apocalyptic scenario. Instead, it is simply a part of an economic cycle. Many agents with long careers have seen recessions come and go, and it is almost certain that there will be more in the future – such is the nature of markets. With a long enough career in real estate, you are bound to face down markets, and learning how to deal with them early will give you the best chance of success.
“Agents who have been around long enough, we’ve been through similar times before. One of the best ways to make it through is to be prepared to learn from adversity. There are certainly a lot of lessons to be learned.”
Though recessions are only one part of the economic cycle, there is no telling how long it will be until things turn around again. It is not uncommon for recessions to continue for years at a time, so waiting it out is no solution. Rather, agents must prepare themselves to survive so they can come out stronger on the other side when things return to more normal conditions.