Anyone involved in the real estate industry in Canada understands this is a cyclical business, especially after a recession.

Our most recent recession occurred in early 2020 as a result of the pandemic, which threw most individuals and businesses into chaos. We showed our resilience however, and we are slowly recovering from that experience.

In fact, there are four stages of the economic cycle here in Canada.

Although the parameters of these wax and wane depending on other factors, they are still generally accepted as broad market strokes.

Recovery

This typically lasts for a few years, and it involves the market slowly coming back, along with rises in both prices and hope.

During this time, new construction slows down, yet demand for housing at all levels is strong. Investors often choose this time to purchase as they foresee positive returns on investments.

Expansion

Once the market has recovered completely from the recession - usually up to five years or so after the recession - it expands.

We see low vacancies and higher rents, so again, investors may time their purchases to take advantage of high demand and the proliferation of potential new tenants.

Hyper Supply

Also referred to as the oversupply phase, this period sees a glut of houses on the market with fewer potential purchasers and rising prices again. This is a sellers’ market.

The number of vacancies will increase as rent growth slows. Interestingly, investors may choose to make their purchases in this phase, especially from owners who see a recession on the horizon and are nervous to hold onto their properties.

Recession

Here, supply exceeds demands, resulting in high vacancy rates and rent growth that is lower than the rate of inflation.

Once again, this is an attractive phase for investors who purchase at low prices or during foreclosures and then hold onto those properties until the next expansion phase. Individuals may also find this timing attractive but must take into consideration the uncertainties of economics.

How the seasons affect home sales

Of course, these are painted with broad strokes, as there are many factors that determine the market.

For example, we have annual phases that transform with the seasons. From January to March each year, we see potential buyers eager to look for homes and to sell their existing properties with the spring market in mind. Prices rise and demand still exceeds supply.

From April to June, home sales, both resale and pre-construction, are typically on the rise. There are usually great deals out there, but also stiff competition. This is a great time for sellers.

Moving on to July through September, we typically experience a slowdown of sales, with buyers negotiating more with owners who wish to sell before the fall sets in. Things pick up in September, October and November.

December brings slower sales and fewer price rises. Purchasers may want to make the most of lower prices in December, but the market is generally quiet at that time.

The thing is that understanding these cycles can help potential purchasers in their home shopping. Timing can be a major factor in affordability.

Now, to fully understand the situation, potential buyers must take into account the fact that markets also differ among provinces. In fact, markets often differ from area to area within a province, or even a municipality, and may be counter to the broader market.

For example, a convenient area with few houses for sale will favour sellers, whereas an up-and-coming area with local amenities to come may be a wise choice for buyers looking for deals. 

Other factors at play

Anyone working in real estate, as well as potential buyers and sellers, should do research to time their transactions wisely. They should also think about demographics, which evolve with time.

One interesting example is the proliferation right now of older owners selling their large homes and choosing to rent rather than purchase again. Renting may be a more carefree lifestyle that appeals at this stage in their lives.

Across Canada, 33 per cent of households are renting, and in Toronto, 30 per cent are over the age of 55. Some seasoned home buyers own properties they decide to rent out and opt, in turn, to rent themselves to live closer to relatives or in an area where they can walk to amenities.

Then we have interest rates, which of course have an enormous effect on timing for buyers. The recent key rate cut to 4.5 per cent may represent a small change, but it can have huge benefits when considering the length of amortization time.

Government policies are also important, especially for first-time buyers who may qualify for special financial perks.

The important thing is to make the best match while shopping for real estate. Personal circumstances dictate a lot.

Buyers, sellers and especially real estate professionals should do in-depth research to navigate the market wisely and with a sense of confidence.

Barbara Lawlor is CEO and Partner at Baker Real Estate Inc. Among her accolades are inclusion in SPARK’s Influential Women in Canadian Real Estate Development 2021. She was an Honoree at the 2019 BISNOW Toronto Power Women Commercial Real Estate Leaders event, a panelist at the Key Media International Conference in 2018 and winner of the pinnacle 2017 Riley Brethour Award from BILD, among other honours. She is also an in-demand columnist and speaker who is respected for her impactful industry voice. A member of the Baker team since 1993, she oversees the marketing and sales of new condominium and home developments in Canada in the GTA, Vancouver, Calgary and Montreal, and internationally in Shanghai. Keep current with The Baker Blog at blog.bakerrealestate.com