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Economy and Real Estate in Canada

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7/14/2015 5:44:29 PM
Posted: 1 year ago
As a second year student studying Fine Arts at the University of the Fraser Valley in British Columbia, my topic, "the state of the Canadian economy and real estate market", is one that incites a demand for, "research", "research", and more "research" for me. So here I sit, mouse in hand, keyboard ready and the Google search bar displayed on my monitor.

I sense and quickly confirm"after some reading"that the two subjects, "state of the economy" and "real estate market," are connected and entwined with each other and that a definite cause and effect relationship exists between them. What does not become clear is which one assumes the leadership role. History clarifies that at times the state of the economy drives the market, like Alberta"s strong economy due to its supply of oil, which led to an increase in the demand for housing as more people arrived to take advantage of job opportunities in the oil industry. However, this is not always the case. Often the real estate market, particularly new construction, can have a major impact on the state of the economy, such as the United States" demand for housing that boosted British Columbia"s lumber industry and economy. Both the economy and the real estate market influence and support each other.

I also learn that experts in both fields continuously disagree in projecting outcomes of the effect of a major reaction in one sector on the other. Economists and real estate experts spout common-sense cause and effect arguments based in historic fact, but the frequent unpredictable upsetting factor in the equation is "timing". For example, Edmonton"s housing prices climbed in spite of the collapse in oil prices. It is not that the predicted effect of a change in one sector on the other does not or will not take place. The problem is, the "fly in the ointment" becomes other unpredictable and offsetting factors. The world has become a smaller place with different countries" economies intertwined, making it all but impossible to predict with absolute certainty a prediction going forward for any length of time on the continuing state of any one country"s economy and/or its real estate market. The price of oil, or any natural resource for that matter, is world-wide and a rise or fall in the demand located far from the country of supply can quickly dash the predictions of the financial health of that supply country.

Another major factor in the relationship between economies and real estate markets in countries as diverse as Canada is the size and the diversification. The real estate market is based on demand. Demand in the real estate market is driven by location and by affordability, including interest rates. Consider how the world-wide spike for oil drove up the economy and the real estate markets of Alberta and then a few years later, the world-wide slump reversed the situation. People who had relocated to Alberta because of its strong economy and ample job opportunities may now choose to move back to other provinces"including British Columbia"because of the decline in Alberta"s economy. This could lead to an increase in real estate prices in other provinces, which could help offset the negative effects of the decline of the value of oil. Also, the economy of British Columbia was for so many years dependent on the lumber industry because of housing starts in the United States. Both of these examples are representative of regional economies and real estate markets in relation to the larger economies of Canada and the United States. Within these individual regions (provinces in this case) there is a varying degree of effect on both the economy and the real estate market.

Just as the economic situation both inside and outside Canada can, with somewhat unpredictable timing, effect the real estate market " be it most frequently regional with the overall effect on the country based on the total (regional) contribution to the economy of Canada " world-wide demand for the purpose of international investment, safe and stable living conditions, and climate can drive a real estate market and effect a regional economy. For example, Vancouver is experiencing a demand in housing from the citizens of Asian countries, which helps increase the value of property, particularly residential properties like condos and single-family homes, in Vancouver.

I have learned much, read numerous conflicting views, and come to understand the role "timing" plays in the world of economics and real estate, as well as how factors in the internal regions of our country and throughout the global community effect both our economy and real estate markets. I offer no conclusions or predictions other than that these two subjects will continue to be intertwined and affect each other. Their relationship is complex, intriguing and more and more affected by global influences.