In September B.C.’s Finance Minister released its first fiscal update on this year’s budget and forecasts that property transfer tax revenue will surpass revenue from B.C.’s top five resources, making residential real estate the top source of revenue for the Province of British Columbia.
British Columbian consumers, too, have directly benefitted our province’s real estate frenzy. Our homes have increased significantly in value, increasing our net worth, while a significant number of British Columbians rely on real estate to make their living, from builders and home renovators, realtors, home inspectors, lawyers and many others. And these worker have seen increased wages thanks to brisk home sales.
However, based on numbers released by the Real Estate Board of Vancouver, real estate sales declined sharply in August. In fact, economists have been seeing a significant drop in the market since a 15% foreign buyer tax was introduced in July.
With real estate representing such a significant part of British Columbia’s economy, all signs are pointing to a major slowdown in activity in the province and we haven’t even factored in what will happen when interest rates begin to rise again. What we need to be aware of, is that in a real estate downturn, business activity will also slow down, salaries will become stagnant and jobs will become scarce. This is an economic risk that British Columbian consumers need to be aware of.
Fortunately, there are some simple steps that British Columbians can take to be more financially prepared for a shift in our economy.
Much of B.C. has been enjoying low unemployment and high wages, especially those working in the real estate industry. Homeowners have a higher net worth due to a significant increase in the value of their homes. We’ve been in a very happy place for several years now and all this happiness has fueled consumer spending. It’s time for us to take an honest self-inventory and get spending under control. Unless you are free of consumer debt and have appropriate cash reserves, it’s best to avoid spending money on non-essentials as it could lead to significant financial trouble.
Address debt problems
B.C. families who are already struggling to meet living expense while paying creditors are simply unable to save money. For those in this situation, it’s important to get that debt under control now with an appropriate debt repayment strategy, so as to free up some cash flow. Speak with a Licensed Insolvency Trustee which options might be available and best meet your unique financial situation.
Create a cash reserve
Whether struggling or not, all B.C. families should begin to build an emergency savings fund to help weather any personal financial crisis. It is recommended that families have emergency savings equivalent to six months income if possible. If coming up with six-months income isn’t doable, try saving up for three. Either way, something is better than nothing and a cash reserve will only help you in the end.
This article first appeared on www.mnpdebt.ca. You can access the original post here.
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