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Bubble or Schmubble Canadian Real Estate Market and what you should do with your relocation policy

November 26, 2013:

Recently there have been conflicting reports about the strength of and/or risks to the Canadian real estate market.  The Globe and Mail has reported that economists have noted that the housing market looks resilient, if not downright strong.  Then the Financial Times quoted economist David Madani of Capital Economics, who said that “Canada’s housing market teeters precariously.”  Just days ago Fitch agency estimated that home prices in Canada are 26% over-valued, but still feels that any correction will have a soft landing.

So what is one to make of this?  First, it should be noted that there is no such thing as the Canadian market.  There are many different markets.  The economies of Alberta and Saskatchewan are strong right now, and can likely support price increases, but they are also more subject to the whims of commodity markets than are other economies.  Vancouver and Toronto are the ones that would concern me, and there is likely to be continued softness outside of major centers, in communities with fragile local employment opportunities (one or two key employers in less than healthy industries).

Time to review your Relocation Policy

Regardless of where you stand on this debate, it is another good time to look at corporate relocation policies for domestic relocation as well as cross-border relocation and global relocation.  If you have Guaranteed Home Sale, it is warranted to look at its provisions to see if they have an appropriate balance between employee support and corporate risk.  There are a number of tools that Canadian companies have never employed in significant numbers to reduce corporate risk, that have been well deployed in the United States.  Of course, any time you reduce corporate risk you tend to decrease the quality of employee support.  The company must be comfortable between any trade-offs it makes between the two.

For those without Guarantee Home Sale policies, but nonetheless have bona fide relocation benefit packages that have not been reviewed for some time, these should also be reviewed.  How does your policy deal with employees with longer marketing periods in some locations, while others can sell in a matter of days in their cities?  Can you extend temporary accommodation for longer periods to assist employees who may not be able to sell their homes?  Should you?  What does this mean for employee productivity?

For those with a laissez-faire approach to relocation, wherein the employer reimburses costs or provides lump sums, are you sure that there is no possibility of stealth costs (such as a hiring manager agreeing to extending temporary accommodation benefits) obscuring the true cost of relocation?

Vancouver and Toronto are possibly safe from serious correction if interest rates do not climb, but there are so many possible shocks in the global economic system, that no one knows what the future holds.  All we can do is control what we can control and that is our relocation policies.

Read our latest blog from the relocationgeek: Economic Externalities, the spreadsheet and Relocation Support

Posted on November 26, 2013 in Relolert

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