What we are seeing with the gating of Canadian real estate funds is a textbook example of a liquidity illusion coming apart in real time. For years investors were told they could have the best of both worlds steady income from long term real estate assets combined with the ability to cash out when they pleased. That premise was always structurally fragile because the underlying assets were never liquid to begin with. When the market turned the promise collapsed and investors discovered that what they actually owned was an IOU tied to assets that might take years to convert into cash.
This is not just about individual misfortune. The scale of the freeze means the effects will echo through the real estate and construction sectors and into the broader economy. With C$30 billion locked up developers are being starved of the funding they rely on to start new projects. That funding gap will not only slow construction now but may plant the seeds of a housing shortage in the next decade precisely when demographic and economic pressures will demand more rental units and homes not fewer.
What we are seeing with the gating of Canadian real estate funds is a textbook example of a liquidity illusion coming apart in real time. For years investors were told they could have the best of both worlds steady income from long term real estate assets combined with the ability to cash out when they pleased. That premise was always structurally fragile because the underlying assets were never liquid to begin with. When the market turned the promise collapsed and investors discovered that what they actually owned was an IOU tied to assets that might take years to convert into cash.
This is not just about individual misfortune. The scale of the freeze means the effects will echo through the real estate and construction sectors and into the broader economy. With C$30 billion locked up developers are being starved of the funding they rely on to start new projects. That funding gap will not only slow construction now but may plant the seeds of a housing shortage in the next decade precisely when demographic and economic pressures will demand more rental units and homes not fewer.