Yesterday morning we woke to the natural beauty of hoar frost covering all the trees, and I was reminded that each season brings its own feast for the senses and activities to enjoy. Somehow hot chocolate always tastes best after cross country skiing under a full moon. Spring colours always appear their most vivid after a long winter. And who could resist dipping their toes in a lake on a hot summer day? The fall harvest brings more colours, delicious fresh farm food, and that unmistakable crunch of leaves underfoot.
Did you know that real estate has its own very predictable cycle?—similar in some ways to the seasons. Do you live in a country with a free market system for real estate? Are supply and demand the most basic forces in play with real estate? Well then, you can expect a similar cycle. If you’re curious, you can read more in the Secrets of the Canadian Real Estate Cycle, by Don R Campbell, Kieran Trass and Greg Head, with Christine Ruptash. The book is jam-packed with great information, but is also quite a friendly read—and some of the proceeds of each book sold go directly to Habitat for Humanity. This article touches on only the broad concepts covered in the book.
At its essence, the real estate cycle is composed of 3 main seasons: Boom, Slump and Recovery. And if you really want to get down to the details, each phase or season has 3 stages: a beginning, middle and end. I think we can all recognize the recent Boom markets in Vancouver and Toronto. Many Albertans will recognize the current Slump. And recovery is that sweet spot where real estate prices start and continue to rise.
I can hear some of you yawning already! Isn’t this all academic, or obvious? NO! There are ways for strategic real estate investors to profit, create and grow wealth in each stage of the cycle.
In Calgary we are camped out in the current Slump. But how many times in 2014 (or one of the other recent booms) did you hear people saying, “if only I’d bought when….” In a perfect world, we would all like to buy low and sell high! If you’re looking to acquire more real estate, as part of your path to financial freedom, Calgary is at an almost ideal point in 2019 for buying more properties. Housing prices are down, while AT THE SAME TIME vacancy rates have dropped dramatically, and rents are slowly rising. Will you make money instantly? With proper planning and strategic investing, you should be able to find properties that will cashflow on a monthly basis. However, your greater wealth accumulation will happen over the longer term, as the Real Estate Cycle transitions to Recovery and eventually back to Boom. When will that be? Let’s be honest folks, no one has a crystal ball. But Canadian, American, Australian and other countries have a history of real estate cycles that are always repeating themselves: slump, recovery, boom, slump, recovery….
Just like some people have a hard time still enjoying winter when its May in Calgary, many people will find it difficult to seize the opportunities that Calgary’s slump offers to real estate investors. Think carefully about YOUR goals, and if buying houses at a lower price can help you get to your financial freedom. One thing we know for sure, prices won’t stay this low forever. Let us know if we can help or partner with you in your journey to financial freedom.
