While some may argue that Canada does not have a national real estate market, I contend that we do.
According to CREA (Canadian Real Estate Association) an estimated $64,000 in spin-off economic activity is generated for every real estate transaction. Moreover, CREA also estimates that this spin-off activity creates 1 new job for every 3 home sales. So what exactly is this spin-off economic activity? Well, every time a home is bought and sold typically several 1000’s of dollars are spent/invested by both the purchaser and the seller. Essentially these funds fall into 3 categories:
- General Household Purchases(ie.furniture, appliances…)
- Professional Services (ie. Realtors, Lawyers, Tax Professionals, Appraisers Home Inspectors…)
In an active real estate market, more and more spin-off activity is generated resulting in a stronger economy and easier credit (ie. mortgages). Most mortgages are still funded by the big 5 banks, which of course are National in scope and regulation. We know that economic activity drives the credit cycle, which in turn drives the real estate market. Consequently if the banks aren’t lending than it’s difficult for the real estate market anywhere in the country to prosper.