Canada's Housing Bubble

Feb 10, 2010 Marco A. Murillo

If I was asked what is the hidden message behind the inverted house in downtown Vancouver, my response would be simple; the sculptor is saying that houses are unaffordably expensive, they need to be grounded or else they will remain at sky high prices. Moreover, if that doesn't happen the house marrket will disappear.

Who or what is going to bring the prices back into the area were work wrestlers can finish the mortgage battle until the last round? The Globe and Mail seems to be making a good effort documenting the problem and adding substance through their articles, but to many, CanadianBubble.com facilitates a broader forum were to find first-hand information.

Available permanently, the dotcom explains why do we fear a price bubble and what could be the consequenses of it if we don't respond.

This week, the discussion centers in discussing the reasons why we know we are experiencing the peak of a price bubble in real estate. For this purpose, I grabbed the facts as they are viewed by the newsprint and tackel them with some recommendations.

1. Easy money, an excess of cheap credit that made very poor considerations qualifying clients. Much more than a cautionary approach on how to manage money sales, unprofessional lenders relied on having the perfect client, the perfect economy and the perfect environment to release as much money as possible in the form of credit.
Recommendation: The government should qualify people for credit.

2. Speculation. Nobody seems to be watching over the price tag of houses so in therms of profits, well the answer is simple, sky is the limit. Whoever sets the price of a dwelling needs to be grounded by a market regulator that inhibits the use of the most basic asset as a fortune-maker. Yes, it is a good investment, but the reason is because is low risk not a high-yield remember?
Recommendation: Just as in rent increases, home value should not exceed the bank's interest rate plus a premium for renovations. In deteriorating cases, price should be forced down as the asset depreciates.

3. Overheated demand. Since we live in “The Best Place on Earth”, British Columbia will always attract people to live in. The soaring demand of BC southwest is fuelled by the mildest climate and one of the most prosperous provinces in Canada.
Recommendation: Sell the prairies, or Alberta's interior, or eastern Ontario,northern Quebec is amazing, the east coast in so cool. Buy Canada-wide.

4. Short supply. With the current shortage of work force, labour needed for building new homes is scarce, expensive and if available, requiring to relocate or exposed to long commutes.
Recommendation: The government are not helping enough to create new settlements. We lack government programs funding present pioneers who can start from scratch. This would increase the potential of developing other areas in Canada were land use for agricultural and rural industries provide jobs and wealth.