Last week had several long articles in the Globe and Mail which focused on a range of real estate issues.
On Tuesday and Friday of last week, they stated that the price of land had been rising, fast. The articles differ in whether it is a good thing or a bad thing. The first article notes the source of the data, and it contains a lot more information. It implies that high prices are a bad thing because they make it difficult for buyers. Three days later, the same prices have become a good thing (for owners and investors).
Any student of Intro to Econ should have recognized that each article was incomplete because every market has two sides: buyers and sellers. In one crucial way, the demand for land differs from the demand for the goods frequently discussed in other university classes. People buy goods, such as beer or pizza or iPhones or clothes, because they consume them. People buy land because they use it for something else: the demand for land is derived from something else, such as residential housing.
Improved housing can occur through new building or through improving existing housing. Partly as a history lesson and partly to gain insight into different ways to create value, this story discusses how the relationship between certain buildings and people has changed over five decades and how it needs to change to continue to be relevant.
Stories about the relationship between people and buildings can go in many different ways, especially when the people are neighbours and the building may or may not satisfy the neighbourhood’s rules (such as squeezing an 11,000 square foot building onto a lot previously occupied by a 2,000 square foot house).
For student looking to learn from one of the industry’s leaders, consider the interview with Daniel Fornier. (For more like this, you may also wish to read Market Discipline published by REALpac; available in the University of Guelph Library)
Finally, an important history lesson for people who are too young to remember: interviews with key players about what really happened five years ago during the financial crisis. This was a time when even the most knowledgeable people had to make decisions knowing that they did not have all of the facts and that the opportunity cost of waiting was very high. Some major decisions were made over a single weekend. If they had chosen differently, it would have affected tens of millions more people than it did. It is easy to play Monday morning quarterback. It is easy to act aggressive and say that you are willing to take a risk, until faced with a big one. As Andre Kuzmicki has said: “People are not defined by a crisis but by how they handle a crisis.”