Canada's Housing Bubble

April 26, 2011 Gord Goble, Vancouver Sun

Re: Cam Good's The new real estate protectionism is misguided, April 20

Joe Average Vancouverite drives home at the end of a long day. He fills the tank of the family cruiser at $1.40/litre and buys a few essential groceries, and he feels the pain of crushing price escalations just about everywhere he turns. He hears the cost of electricity is set to rise, and he knows he'll shudder again when he sees the bill at the local steak house that evening.

Joe Average Vancouverite is maxed out. Yet the pressure to buy a home is stronger than ever. He switches on the TV or flips open the paper and sees stories of Asians descending on spots such as Richmond and White Rock. By helicopters they purportedly arrive, untold wealth at the ready to sink into what the real estate industry would have us believe is not rainy old Vancouver, but the New Global Hot Spot. "Buy now or be priced out forever," is the unrelenting mantra. "Real estate is the best investment you can make," shouts the loudest voice of all, local condo marketer Cam Good, who then questions the very manhood of those who don't buy by claiming they suffer "real estate impotence."

And Joe Average Vancouverite, wife begging him to get in the market before it's too late and all is lost, picks up the phone and calls a real estate agent, knowing full well that one million dollars will buy him nothing more than a decrepit shack in a hideous neighbourhood. Joe knows he'll be indebted for the rest of his natural life, but real estate prices always go up, right? Right?

Wrong. Dead wrong. In Scottsdale, Ariz., a palatial home in a stunning setting currently runs one quarter the price of Joe's crack shack. In the Okanagan, where valuations are off 25 per cent from their 2008 highs, lakeview beauties priced sub-$450,000 languish on the market for months at a time. In Chilliwack, where you can buy a brand new view house for less than $350,000, and more recently in Abbotsford, listings have exploded and price reductions are commonplace, yet few are buying. In British Columbia's's north, in Squamish and Whistler, and on Vancouver Island, real estate is not doing well.

So what's really happening here? Yes, in certain, select areas of Greater Vancouver, crazed bidding wars still exist, and yes, people of Chinese descent do seem to be at least partly responsible. But Good, the fellow who flew three or four potential Chinese buyers over his condo project in White Rock as a media stunt, would have us believe all of China is on its way and that we should accept our new Chinese overlords. Indeed, if anyone is driving a racist groundswell, it is Good himself. But that's another story.

The truth is that the few wealthy Chinese who opt for Vancouver rather than any other city in the world where housing is generally far more affordable, cannot save this country from the real estate devaluation that's already begun. Why? Because bubbles always deflate from the outside in. And, just like the U.S. circa-2005, even while the real estate industry is cheerleading in Good-like fashion, we are most assuredly at the beginning of the end of the most dramatic housing bubble of all time. No bubble in time immemorial has ever remained inflated, and the cracks we're now seeing even in adjoining municipalities such as Langley and Coquitlam serve as stark reminders.