"Secrets of the Canadian Real Estate Cycle" -book review

[Clayton Gray]

Just had a read of this book written by REIN (Real Estate Investor’s Network) creator Don R Campbell, as well as Kieran Trass an expert of real estate cycles and Greg Head and Christine Ruptash of Strategic Real Estate Solutions. Thought I would share a few nuggets that I’ve gleaned…

The central premise of the book is that every real estate market is cyclical and follows a predictable sequence in 3 distinct phases: boom (rapid appreciation, mania), slump (lower prices/difficult financing) and recovery (transition); all of which have their own qualifications as far as appreciation, vacancy, market confidence and so on. It goes on to say that, if an investor has the knowledge of this cycle and is able to discern where one’s particular market sits on the “Real Estate Cycle Clock” (ie which phase) they can make more successful investment decisions thus earning the moniker “Strategic RE Investor”. In layman’s parlance one could say it is a book about timing the market.

It follows the Trass Methodology developed by the author of the same name which basically states that the cycle is driven by 16 specific macro-economic indicators (key drivers) and by monitoring the ongoing trends in conjunction with one another, one can successfully predict the markets future movements. Some key drivers are net migration, GDP, employment rates and RE affordability indices. These are not to be confused with short term market influencers that, while they do have effect, they don’t necessarily sway the course of the cycle in the long term, some examples of market influencers are: interest rates, foreign investment and legislative amendments.

Following this are two case studies of historic examples of cycle transitions in Canada, Toronto '89 Boom-Slump and Calgary '97 Slump-Recovery-Boom in which they demonstrate the key drivers collectively moving in relation to average MLS price at the time.

I’ve been working to compile the data in my home market (Toronto), it’s a little tricky to find exactly the info I need and one should be proficient with excel to get the graphs that are shown in the books but It’s a compelling methodology.

Attached is the key drivers scorecard which has the list of the 16 drivers and their expected movements year over year in each phase.

Anyways, hope that is interesting for some of you, would love to hear your thoughts!

What are your methods for analyzing markets? Where are your favorite sources for gathering data? 

[Samuel Sedore]

Great book! Read it twice. @Luc Boiron it depends in what stageof the boom there are 3 phases you're ideal strategy is to hold and watch the market for a the main PEAK and sell or continue to hold.