Housing is hot. Some biz is not

CRANBERRY 1931: The economic depression of the 1930s somewhat skipped Powell River, thanks to international demand for paper from the mill, and planned expansions to its infrastructure. Transients from other parts of Canada found work here in the mill, and in resource industries. There was also a relief camp near Duck Lake. Learn this history, and much more about “Powell River and the Great Depression”, in an excellent 10-minute video by Powell River Public Library adult services coordinator Mark Merlino available on YouTube, https://youtu.be/nw7ih1lpCPY. Photo courtesy of the Powell River HistoricalMuseum and Archives

Prepare your household for COVID’s economic slowdown

BY MORGAN PÉPIN

In the past 100 years Canada has faced 12 official recessions. As the pandemic stretches on to an unknown end, it appears more and more likely that we are facing our 13th recession.

“The economy has definitely slowed down,” says René Babin, a financial advisor at Raymond James, “and I don’t think it’s going to turn anytime soon.” He says that since the start of the COVID-19 pandemic most people are spending significantly less money than they were a year ago. This results in a decreased GDP, or gross domestic product.

Another indicator of a recession is unemployment. Unemployment rates in BC are higher than the 4.4 per cent they were in July 2019, according to Statistics Canada. In contrast, today’s unemployment rate is 11.1 per cent. This is a recent drop from 13 per cent earlier in the summer.

The last recession to hit the Canadian economy was the 2008-09 financial crisis, caused mostly by the housing market in North America. The current situation is very different.

“This time it’s a global pandemic,” says Colin White, a portfolio manager and founding partner at White-Leblanc Wealth Planners. “Nobody seems to be at fault.”

LOOKING BACK: A RECESSION TIMELINE

April 1929 – February 1933: Category 5 “The Great Depression”

November 1937 – June 1938: Category 5

August 1947 – March 1948: Category 2

April 1951 – December 1951: Category 3

July 1953 – July 1954: Category 4

March 1957 – January 1958: Category 3

March 1960 – March 1961: Category 3

December 1974 – March 1975: Category 2

January 1980 – June 1980: Category 1

June 1981 – October 1982: Category 4

March 1990 – April 1992: Category 4

October 2008 – May 2009: Category 4

thecanadianencyclopedia.ca/en/article/recession

GET SMART: Raymond James financial advisor René Babin wisely suggests that no one knows how long the CO- VID pandemic or its economic impacts will last. This is a good time to review your assets, he advises.

“Many people saw that one (the 2008 collapse) coming,” René says. But the COVID-19 pandemic adds an element of surprise and uncertainty that no one could have predicted or prepared for accurately. “We don’t know how long this storm is going to last,” says René. Like any storm, however, there are ways that individuals and small businesses can prepare for a recession.

“Review what you need,” René encourages, “and review your asset allocation.” Asset allocation refers to how much of your investments are in cash, fixed income or equities. Colin advises people to manage their money well. “Keep your short-term money short-term, and your long-term money long-term,” he says. He points out that in 20 years you will still need to buy milk and pay your rent.

Susan Cooper, Lending Services Officer at First Credit Union, encourages anyone worried about credit card debt to speak to someone about it.

“We would want to chat with them about eliminating that debt,” she says. “The difference in interest rates between most credit cards and personal loans can be significant and it makes sense to pay out the balance on the higher interest rate product, such as a credit card, with a lower rate product.”

Susan suggests using a regular blended payment and paydown to start eliminating the debt.

Susan Cooper

“The difference in interest rates between most credit cards and personal loans can be significant and it makes sense to pay out the balance on the higher interest rate product, such as a credit card, with a lower rate product.” - Susan Cooper

One sector of the BC economy has experienced a recent rebound, despite the difficult economic times. Across the province, residential unit sales jumped 26.6 per cent from July 2019, according to the British Columbia Real Estate Association (BCREA), with 10,090 in sales in July of this year. The average MLS price rose about 13 per cent year-over-year, at $770,810, and sales dollar volume hit $7.8 billion, up 43 per cent from July 2019.

In Powell River, totals for July 2020 were about $23 million, compared to about $13 million for July 2019.

“Increased demand for more living space combined with an undersupplied market is producing significant upward pressure on home prices, particularly in the market for single-family homes,” BCREA chief economic officer Brendon Ogmundson said in a statement.

Neil Frost, president of the Powell River Real Estate Board (PRREB), says about 50 per cent of buyers in Powell River are from out of town these days.

Powell River has the highest price gain by real estate board in the province – up 30.7 per cent on last year’s prices, to an average sale price of $450,882, according to the BCREA. The PRREB reported a median price of $451,000 in July for residential homes.

STICK TO THE PLAN: Colin White of White Leblance Wealth Planners is confident global economy will adjust.

“Wait until the year ends and all the numbers come in or do a year-to-date analysis,” says Neil.

For anyone thinking of buying a home right now, René encourages them to live as if they own.

“Look at what you paid out in rent, versus what you will pay out on a mortgage, property taxes and any strata fee,” he says.

“Buying or renting is more about a lifestyle choice, based on lifestyle stability and desired standard of living,” says Colin. He adds that the decision to buy a home is based mostly on your own personal finances.

TOUGHER THAN CERB: Unemployment Relief Camps such as this one in Kimberley, BC (and the one here at Duck Lake) offered single men room and board in exchange for labour..

Advice on how to get through a recession

Review your finances before making major decisions

Buy only what you needDon’t overspend – stick to your budget

Take a long view – this is a period of time to get through

Make do with what you haveBe flexible

Ask yourself how you can build your business stronger

Just as individuals and families are preparing for difficult economic times, small business owners also need to take steps to ensure they weather this unusual storm.

“I’m planning on trying to maintain the status quo,” says Vic Spreeuw, longtime owner and operator of Valley Building Supplies in Powell River. Vic says he is cautious about hiring new staff because he’s not sure how much business might slow down and wants to keep his current staff employed.

Vic encourages new businesses to not overspend. “Always try to make do with what you have,” he says. He advises owners to think in terms of years, not months and weeks.

Ron and Dianne Pfister, owner/operators of Mother Nature, say they’re always working on their systems, and trying to be more efficient.

“And we’re always cautious about our finances and budgeting,” adds Dianne. Ron and Dianne try to create a welcome and safe environment that customers enjoy coming to. “Work on your business, and not in the business,” says Dianne. She says that you can lose focus when working in the business, instead of looking at the bigger picture and long-term goals.

Ron and Dianne also encourage people to support local businesses when they can, both during recessions and times of economic growth.

Powell River Chamber of Commerce president Telis Savvaidis also stresses the importance of supporting local business and shopping at home. “If and when you can, refrain from online shopping and source out a local business instead. I understand you might pay a little more on the odd occasion but you are keeping local jobs in motion and those jobs help support other business. If we band together as a community, I know we will see great success and well-being for all.”

Like any storm, a recession doesn’t last forever. Eventually the GDP will start to rise again and the economy will recover.

“Treat this as a period to get through,” says Ron.

“The global economy and the Canadian economy will adjust,” Colin says. “These things happen all the time.” But are we heading for a recession? A recession is defined as a length of time when the economy has declined – production, trade, income, stock markets, consumer spending, and employment. A recession is officially announced when the total economic output (or GDP) has dropped significantly over six consecutive months. The C.D. Howe Institute’s Business Cycle Council classifies recessions in five categories. Category 1 is a short and mild drop in GDP, while Category 5 is an extremely rapid drop of GDP that lasts an extended period.

Because the decrease in GDP has not passed the six-month mark yet, an official recession has not been announced by the Canadian government.

“We are likely going to find out that we are in a recession,” says Colin of White- Leblanc. If the quarterly numbers at the end of September show a continued negative GDP, Canada will then be in a recession.