Is This The 1990s Real Estate Market in Canada All Over Again?

Message from Tom and Nick

Hello from the island of Hvar, Croatia!

We’re out here on vacation in the middle of the Adriatic Sea.

That’s the morning view from the balcony I’m sitting on while writing today’s email.

We come out here every year. And every year I stare out at the coastline like it’s the first time I’m seeing it. It’s a pretty magical little spot.

There are little, family-run olive mills and wineries out here, and they take both very seriously.

Olive oil is treated with extra special attention out here.

They use it on everything. Fish, salads, steak, bread, vegetables…everything, you just pour it all over anything you’re eating.

And if you’re out here you always want to ask for the “domaci” olive oil.

Each restaurant has olive oil out on the tables but they also have their special “local” or “domaci” supply that they’ll happily share but you have to ask for it.

It’s a “if you know, you know” kind of thing.

OK, on to much more serious business…

With the real estate market in Canada gyrating around right now it’s catching anyone under 45 a tad off guard.

This is getting very similar to what we went through in real estate in the early 1990s.

In fact, the condo market, with more new condos being finished right through 2026 is reminding me exactly of that period.

But there are some very important differences.

Namely, what artificial intelligence is doing to the job market already.

And...

Global debt to GDP is much different right now and this presents an interesting problem.

Let’s go through both.

First on the white collar job front…we know of multiple young adults who have graduated with high-end engineering and business degrees who cannot find work.

There’s a rarely spoken about new trend of businesses not wanting to hire right now until they sort out the impact of artificial intelligence on their labour force.

We know this to be 100% true because we’ve had direct conversations with business owners about this.

There’s a fear of hiring until the full impact of AI is understood and it’s improving so quickly that it’s difficult to make these conclusions.

And the full impact of this will be hidden and out of sight for some time.

Especially as some large employers lay off hundreds of call centre jobs and entry level programmer type jobs.

Those companies will have huge boosts to their bottom line which will look impressive to the public stock markets but will mask what’s going on under the hood of these places for some time.

And although the real estate market is similar to the 1990s at this point and jobs were hard to find back then as well…we didn’t have AI stepping in to compound the issue.

And yes, of course, new jobs will be created.

But this pressure on employment and labour is unprecedented.

Anyone saying otherwise at this point is missing the forest for the trees.

The job market is in a weird spot and isn’t likely to drive new economic demand for some time.

So where will new demand come from to grow the economy?

Let’s move to the next topic…

Next, the global debt situation.

With global debt to GDP at 3:1, things get tricky when it comes to interest rates.

Think of it like this…

If the interest on the debt is 4% then after one year the 3 becomes: 3.12.

Now how much does GDP have to grow to add “0.12” to the equation?

The answer? 12%.

In this example, the current system needs something like 12% inflation annually just to keep the wheels on the bus.

It’s insane.

But it’s just math. And it’s why grocery prices, restaurant prices, insurance, everything, is going up so much.

So either interest rates come crashing down hard (hello, Donald Trump threatening to fire Jerome Powell) or prepare for steady flows of inflation/debasement for some time.

So where do we go from here?

We think the back half of this year is going to have the USA really beginning to stimulate (via rate cuts or otherwise). It’s almost mandatory at this point.

The administration there is clearly wanting lower rates to help with all of this.

And what the US does, Canada will follow…it won’t have a choice.

We’re not sure if it will be enough to really change what’s going on in the labour markets but it’ll be fascinating to watch unfold.

So what can we take from this?

1. Currency debasement, inflation, M2 Money Supply…whatever you want to call it…is going to continue. If rates stay high, they’ll need to inject new currency to keep things going. If rates drop, then new lending will bring newly printed currency into the economy. Either way we get currency debasement.
2. Those with hard assets and the ability to hold on to those hard assets through these choppy waters will likely be rewarded with higher nominal prices.
3. You should be playing, learning, using AI as much as possible. Grok, ChatGPT…pick one and begin using it daily…it’s the obvious future at this point (rightly or wrongly).

Here’s what we have going on for you right now:

First, next week we’re hosting a Student Rental Investing class.

These properties continue to produce some of the most steady positive cash flow we’ve seen in our 35+ years doing this stuff.

Click here to save your seat at the class.

Next, we’re getting more and more questions from Canadians about how to buy property in the USA.

We’ve put together a quick video breaking down exactly how Canadians are picking up Florida rental properties step by step.

Different rules, different financing, different taxes…but it’s absolutely possible and you don’t need a U.S. credit history to make it happen.

Click here to watch the video.

That’s it for this week!

Enjoy the summer!!

Tom & Nick