Fall is just about ready to show her face and take us through the paces into winter. Leaves are changing, temperatures are dropping, and so are mortgage rates (small decrease last week!). With the constant changes in the real estate market, you have to stay on top of all the information that is being distributed across the country. ‘Secrets of the Canadian Real Estate Cycle’ is designed to turn myth into fact and help you understand exactly what is going on around you. A calm perspective is your best ‘chance of survival’ amidst media noise and market changes, so take the chance and be enlightened.

I’m happy to present part three of the series unveiling chapter two of my latest book ‘Secrets of the Canadian Real Estate Cycle.’ You have to consider all the facts in real estate, so now is your chance to get a head start on the masses.

Real Estate Cycle Exceptions

As noted earlier, there are a few exceptions to the rules of the real estate cycle. First, some properties within a city or region may continue to command a premium irrespective of what is happening in the real estate cycle of a nation. These properties are likely to have some sort of serious “X factor.” Perhaps they have historical significance or a combination of uniquely superior attributes. Speaking in terms of real estate investment fundamentals, these are likely to be the best properties situated in the best locations on the best streets in the best neighbourhoods of a city. Whatever the reason, these properties (and the investment deals that involve them) are largely immune to the phases of the real estate cycle.

Another exception involves the emergence of specific localized hot spots. Regardless of the real estate cycle phase a nation, region or city may find itself in, these hot spots can defy the real estate cycle’s impact on prices in the region in which they are situated.

These hot spots emerge for a number of reasons, including the rezoning of land to allow more population-intensive developments to be constructed (therefore effectively increasing land values), or proximity to significant new projects planned for an area. Such new projects can include new infrastructure resulting in the creation of numerous employment opportunities, major transportation improvements like light rail rapid transit development, or a significant increase in the level of public amenities available. But strategic investors should be forewarned: these hot spots will eventually be subject to the real estate cycle because they will reach a level relative to surrounding or similar locations.

Exceptions to the cycle can also emerge as a result of culture shifts driven by lifestyle demands. The impact on real estate values can be positive, negative or both. One example of a culture shift is when baby boomers seek new lifestyle opportunities or abandon previous lifestyles. This could increase real estate values in favoured new lifestyle locations and reduce real estate values in former hot-spot locations. Again, such exceptions to the real estate cycle will eventually complete their adjustment to the culture shift and will then follow the real estate cycle once again.

Statistics and the Real Estate Cycle

Real estate investment is a numbers game, and no discussion of the real estate cycle could be complete without a review of how real estate–related statistics are reported and how we need to view them in order to better understand which phase the cycle is in.

As strategic real estate investors, we want reality, not fiction. That is problematic because most real estate statistics are presented in way that serves a predetermined purpose or that lacks context. And make no mistake: the strategic investor needs to take a hard look at the numbers. We want to make sure we understand what they tell us. We seek context

Click here for Part One.

Click here for Part Two.

Click here for Part Four.

Secrets of the Canadian Real Estate Cycle will give you insight into the economic fundamentals that you may not have realized before. Make sure to look out for the next post in this series, coming out next week. Good luck and happy investing!

Cheers,
Don