Why do real estate prices keep going up?

sun coming up on doodle

Real estate prices keep going up.

In Kitchener Waterloo we have a strong and diverse economy, with lots of jobs and a good mix of public institutions like hospitals and universities, which are pretty much recession-proof and stable. Insurance companies too are big employers and always seem to make a profit regardless of the economy. Of course our tech and startup businesses are brining or keeping lots of people in the region and the many levels of government and private investors are pumping lots of money into the economy.

We are the tenth largest urban centre in Canada and we are on our way up that list. We unseated London a few years ago. They are 11th. Victoria is 12th. What is going on in those cities?

Real estate is local, but there are a lot of non-local factors driving our real estate market too. You’ve heard all this before so I won’t go into a lot of detail:

  1. Interest rates are historically low. Cheap money means more of it flowing through the veins of our economy and real estate is the heart of our economy.
  2. Foreign money from China and other countries. Yes. It is a world economy, the butterfly effect and all that invisible hand stuff.
  3. Low inventory of homes to buy. Low supply means high demand. High demand means price appreciation. Price appreciation means fear of loss and the opportunity for gain.
  4. Real estate reality TV, and real estate in the news. It used to be that a house was a place to live. Now it is all defining and shining and exciting. Real estate is like pants. It has to be stylish and comfortable and you have to own it.
  5. More realtors. The number of realtors in some cities (like Toronto) has increased by as much as 40% in the past 5 years. More activity is leading to more sales.

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