You’ve seen it. You’ve definitely heard it. Ladies and gentlemen, we’re in the Canadian real estate golden era. The question: how long will we be here?
Most say the real estate market is directly tied to current economic conditions. When one goes up, the other must follow, and vice versa. While this may be true to an extent, there is a little more to the story when comparing boom/bust cycles.
Due to the timely process of home construction, the typical real estate cycle lags behind that of the traditional economic model. Given construction can take anywhere from 3-12 months, depending on contractor availability, weather, and other factors, the real estate market is reacting based on the current levels of demand and not that which will exist when the building is complete. This delay in turn may cause huge price fluctuations by the time the project is complete and cause serious stress for sellers and developers.
The Canadian economy is slowing; however the real estate market continues to prosper. “Monthly housing starts rose to 211,916 units last month, up from 197,712 in October, with the 6-month moving average reaching 208,401 units in November.” So the question becomes, will the demand sustain all this building? The economic relationship would say otherwise.