As we try to process the new environment we’re living in, we are inundated with media coverage, data from conflicting sources, and opinions fraught with personal bias and uncertainty.
Hillmount Capital has been canvassing the sentiments of industry leaders, economists, government and scientific-community representatives, and our advisors to better decision-making and establish our practices in the near term.
Almost all sources believe that we are on the precipice of a deep recession as a result of the near standstill in many sectors of the economy. Lack of consumption, supply chain disruptions due to restricted travel, and the resulting spikes in unemployment are combining to drag down demand for non-essential goods, productivity, and purchasing power. They also point out that the capital markets freefall we saw in March created a substantial wealth shock for older Canadians nearing or into retirement.
Real estate will not be immune to the bite of social distancing. Construction of new homes has been dramatically curtailed as non-essential, and prospective sales have slowed without the ability for vendors to show their homes. In the longer-term, the leading driver of residential real estate in Canada—immigration—will be affected for an indefinite period. Commercial real estate will also be affected by new remote-working conditions and tighter controls over the number of visitors to non-food retail outlets (after social distancing regulations are eased).
We are reassured by the following:
- The Government and Bank of Canada have been taking extraordinary measures to help Canadians most affected by this crisis to weather the storm. The fiscal and monetary policy measures (lowering interest rates, buying up institutional debt, providing wage subsidies to businesses, giving debtors the ability to defer payments, creating income stop-gaps, etc.) are absolutely the right move and will help us avoid compounding negative effects through the next year.
- This is a recession with a defined end, unlike previous recessions. We wait, along with every other sector, for the development and distribution of a viable vaccine, which will help us put the standstill many are experiencing behind us and usher in a new normal.
- There continues to be a lot of latent capital sitting on the sidelines, and there are many who will be looking for opportunities both in capital markets and alternative investments in the expectation of a healthy (if long-term) recovery.
Financial services are deemed an essential service by the Government of Ontario. Hillmount Capital is responding by remaining fully operational during this difficult period. As a result of the current economic outlook, we have taken a more cautious approach to lending. For more information on our position, read A Message to Our Partners which highlights our interim lending guidelines.