In the Canadian Economy we have many economic indicators to indicate when the economy is growing or if the market is on the decline. The fact is when the individuals in a country have a lot of money that they are spending, we see growth in the stock market and real estate markets. Investors whether in the stock market or real estate market are always looking for their highest return option, and diversification is the key to their financial success.
“Investors whether in the stock market or real estate market are always looking for their highest return option, and diversification is the key to their financial success.”
When there is a high influx of cash from investors into the stock market, a trend of real estate purchases increase as well. The individuals who are investing into the stock market, after getting their returns on their investment diversify and purchase real estate properties. Also, many Canadian house builders have their company’s on the Toronto Stock Exchange, thus when there is an influx of cash into their stocks they will be looking to spend their return in other investment avenues such as building new home plots.
When there is a decline in the stock market (stock prices going down, money being pulled out) we also see another correlation. The housing market is also affected as less building is now occurring as companies now have less money to expand their operations (Building new home plots/condos). Essentially the real estate market depends on how much individuals are saving/investing as that is where majority of our Canadians invest in as it is one of the safer financial investments.
When we are looking at the economy at a macroeconomic level, there are many factors that apply to determining what type of financial cycle we are in (recession, depression, recovery, prosperity). When the real estate and stock market are in the recovery and prosperity cycle they both in turn will be on the rise, and increasing in development. If the country returns to a recession, then there will be a decline in both stock market and real estate investments. Thus, there has and always will be a correlation between the real estate market and the stock market in Canada.