Typically, real estate runs in cycles of a 5-7 year duration. During the late 1980’s we saw prices double in approximately a 3 year period. There was a frenzy of activity during that time as many potential buyers felt a sense of urgency to enter the marketplace. Consumers felt that if they didn’t buy a home “quickly”, they would never be able to afford a home in the Barrie and Surrounding Area. Of course, shortly thereafter (1989-1990) the real estate market became unglued and prices started their descend. This was a bleak period for real estate in the Barrie and Surrounding area. Activity was limited and each year prices continued to fall. The recession hit Barrie and the majority of Ontario hard and the job market was also very compromised.

It wasn’t until 1996-1997 before the market started to post some positive figures. We all breathed a sigh of relief as the market was finally showing signs of a recovery. Unfortunately for people who bought at the peak of the market (1989), it would be many years before their investment would be at a breakeven price.

Today a lot of people ask me to comment on the state of the real estate market as many are wondering if this present cycle is nearing its end and if so will prices start to drop.

There are many fundamental differences between today’s real estate market and that of the late 1980’s. During this present cycle, prices have appreciated between 4% - 8% per annum. This kind of growth, in my estimation, is sustainable (unlike the 1980’s where the bubble was bound to burst). In fact, it has only been in recent years that prices have climbed back to the peak levels of 1988-1989. When you adjust for inflation, then we are in many instances not even at the same levels of the late 1980’s.

Additionally, in the 1980’s when the market was “red hot”, many real estate “investors” never contemplated the worst-case scenario of a market correction. These investors bought numerous properties and often times were only hoping to “assign” these properties for a profit. (Assignment means to transfer the right of a property without having to close the transaction.) When the market crashed, many of these investors were not in a financial position to close the deal. Consequently, this created a tremendous supply of inventory which contributed to the decline in housing prices.

Today, investors are mindful of the need to evaluate the worst-case scenario. Additionally, builders will no longer allow the assignment of properties. Consequently when you purchase a brand new property you must close the transaction. This change has helped ensure that the problems of the 1980’s will not resurface.

Furthermore, interest rates in the late 1980’s hit double digits (10% or greater). Today we are still fortunate to experience incredibly low interest rates. For example, a five year term at the time of writing this article can still be secured for under 5%.

All of these factors lead me to believe that even though the real estate market has been “bullish” for many years, reasonable prices and affordability are still very much present. Additionally, the Barrie & Surrounding area has been the “preferred” place of residence for many new immigrants, and commuters, this combined with a healthy job market should help pave the way for continued real estate growth in the Barrie & Surrounding area


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