Final answer:
Real estate cyclicality is driven by several factors including interest rate fluctuations, speculative investments, economic downturns, and regulatory changes, which can lead to unsustainable growth and subsequent market corrections.
Step-by-step explanation:
The question addresses the topic of real estate cyclicality which refers to the regular fluctuations in the real estate market, characterized by periods of rapid growth (boom) followed by a slowdown or a drastic drop (bust). Several factors contribute to these real estate cycles, including, but not limited to, interest rate fluctuations, speculative investments, economic downturns, and regulatory changes.
During the 2000s 'housing bubble', housing prices soared due to high speculative investments and easy credit conditions, which were not based on sustainable economic growth. These inflated prices were subject to a drastic correction when the bubble burst in 2007 and 2008, leading to many assets being devalued and triggering a severe recession. Similarly, during the technology boom of the late 1990s, confidence in tech investments drove high returns, shifting demand for financial capital. However, during the 2008 and 2009 Great Recession, demand for financial capital decreased due to the economic downturn, showing how shifts in the demand for financial capital can also be a contributing factor to the real estate cycle.