The 1990s were a bleak period in Canadian history. The country was mired in deep recession and urban poverty affected a disquieting number of Canadians, particularly in Montreal, where 41.2% of the population lived in poverty during the first half of the decade.
Tailing Montreal for the dubious title of Canada’s poverty capital were Vancouver at 31%, Toronto and Ottawa at 28%. As is often the case, Canada’s poorest were hit hardest by the recession. The real estate market also nosedived, and the industry, like much of the country, was in shambles.
Nick Kyprianou, president and CEO of Riverrock Mortgage Investment Corporation, remembers it will. He joined Home Trust in 1992 and noted that, while times were turbulent, it was through such difficulty that he learned how to handle crisis.
“You don’t learn tons when the market does well because it corrects mistakes, but when the market goes poorly, it magnifies mistakes,” he said. “What you learn in a bad market is so valuable that I wouldn’t give it up for anything.”
“You learn to manage crisis. You learn to manage collections and negotiate. You have a much better understanding of risk, real estate, and exit strategies. The bad market gives you all of your foundation of knowledge. A good market just makes you think you’re smart, but surviving a bad market makes you realize that you’ve learned something.”
The recession began during the second quarter of 1990 as the result of sluggish economic growth during the previous year, and while growth began by Q2 1991, it was marginal. Given the persistent poverty in the country between 1990 and 1995, hardship in the real estate market was especially acute. The interest rate nearly doubled from 8% to 15% and unemployment in Ontario rivalled levels not seen since the Great Depression. Between 1989 and 1995, residential property values dropped 25% and commercial values fell by as much as 50%.
“You learn to be extremely disciplined to your underwriting model,” said Kyprianou. “That’s what you learn first and foremost because bad things happen to good people. Bad times always come, and if you build your book with that in mind, you’ll learn to survive.”