Canada's Housing Bubble

May 15, 2010 Max Fawcett maxfawcett.wordpress.com

Ten days ago I left Vancouver for the second time in ten years, and for many of the same reasons that prompted my departure the first time. The news that I was leaving Lotus Land for Edmonton was greeted with a mixture of pity and perplexion by a lot of people I know – after all, why would anyone leave paradise by the sea for a concrete jungle that’s frozen solid eight months of the year? But stereotypes aside – Edmonton is far more beautiful than anyone gives it credit for, I think – it is that very comparison that explains why I’m leaving, and why I’ll probably never be back.

Having been born and (mostly) raised in Vancouver, I’m not ignorant to its charms. But it long ago became obvious to me that the average citizen who lives there pays a high price for those pleasures, one that’s only gone up in recent years in advance of the 2010 Winter Olympics. More importantly, perhaps, it’s a price tag that’s attached to an experience that most Vancouverites enjoy only a few times a year, at most. Yes, it’s difficult to match the splendor of second beach on a warm summer day or the proximity of the local mountains in the winter time, but for the average person those are rare indulgences. Are they worth the price that’s being asked? Not for me, they aren’t.

Frankly, I’m happy to exchange Jericho Beach and Cypress Mountain for a city in which there is both real economic opportunity and the chance to finally get ahead in life rather than constantly playing catch up, a game that’s underwritten by VISA cards, lines of credit, and other punishing forms of short-term financing. In Edmonton, and I suspect in Saskatoon, Winnipeg, Ottawa, Halifax, and every other city in this country that doesn’t fancy itself as “world class,” it’s actually possible to build a life without either inheriting a small fortune or sharing a 300 square foot basement suite with two other people.

It won’t surprise anyone who’s ever read this blog that I lay most of the blame for this state of affairs on the overheated real-state market. When the average couple – one without trust funds, inheritances, or seven-figure jobs – can’t afford to buy the average home, there’s a price to be paid. In the short-term, that price will be paid (in a cruel irony) by those very same average couples, who will leverage themselves into knots to get into the market. From there, only two things can happen, both of which will prove catastrophic for our average couple: the real estate market can either correct, in which case they’ll be sitting on negative equity and lifetime of crippling mortgage payments, or it won’t, and they’ll just be sitting on those equally debilitating mortgage payments.

Eventually, though, those average couples will start to look elsewhere, to the Edmontons, the Saskatoons, and the Halifaxes of the country, places where middle class people – teachers, journalists, nurses, and tradespeople, for example – can afford to live middle class lives. They’ll move to places where they can afford to save money, to have children, and to plan for the future, rather than remaining on the economic hamster wheel of places like Vancouver and Toronto, where wages remain stagnant while prices shoot ever higher.

They might even discover that they like these new cities, too. Certainly, from where I sit, Edmonton looks like a perfectly civilized place to spend some time, and I don’t know when, if ever, I’ll leave. But I do know this: until its economy returns to some semblance of normalcy, and until middle class people can afford to live middle class lives, I won’t go back to Vancouver.