Canada's Housing Bubble

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The housing market is teetering. Happy now? Print E-mail

June 23, 2012 PETE MCMARTIN Vancouver Sun

How long has it been since we last heard complaints about offshore Asian buyers driving up Metro Vancouver house prices?

Eons? Last month? Is there a difference when it comes to the short attention span of urban folklore?

Whatever the time, suddenly the shouting has stopped. From the enclaves of our tonier neighbourhoods, where angry residents were forced out of their homes after first cashing a cheque several hundreds of thousands of dollars above their asking price, nary a peep is heard. They’ve moved on. Probably to a spec-built neo-Craftsman mansion in the suburbs.

Of affordable-housing alarmists who laid the blame for Metro’s rising prices solely on those offshore Asian buyers — without any hard numbers to back it up — their exclamations haven’t punctuated a newspaper story in ages. Maybe something else has caught their attention. Maybe they’re revisiting 9/11. You know, it really was an inside job!

Meanwhile, Metro’s real estate market is holding its breath. Or possibly it’s stopped breathing. It’s hard to tell.

Sales in May for all forms of housing across the Multiple Listing Service were down over 15.5 per cent from last year, and the lowest for the month of May since 2001.

The news for detached homes sales was even worse: They were down 25 per cent for the same period last year.

(Commenting on these numbers, the resolutely sunny Real Estate Board of Greater Vancouver decided this was “indicative of balanced market conditions.” But then the board would have viewed the crash of the Hindenburg as the result of “normal deflationary conditions.”)

While sales have fallen, the number of listings has risen. In the Vancouver westside, which is held up as the main beachhead for the Asian invasion, the total of active listings — those homes for sale that haven’t sold — has risen to 1,100 properties at present from 600 a year ago. That is, during all the time the alarmists were certain that Asian buyers were pushing up house prices across Metro, the market in that neighbourhood most cited as the cause of those rising prices was already languishing.

The future?

Place your bets. The Toronto Dominion Bank has predicted prices in Toronto and Vancouver will drop by around 15 per cent “in the medium term” — the medium term being the next two or three years.

And the long term?

It’s too volatile and spooky to put a number to. The bank economists did say, though, that a “severe shock from abroad” — the euro crisis, the lingering U.S. recession, a cooling Chinese economy, pick your nightmare — could result in “a quicker and more pronounced correction.” As in the Hindenburg.

So the moral here might be:

Be careful what you wish for. Real estate is a two-way street, and while the issue of high housing prices has been dominated by Yellow Peril alarmists and affordable housing advocates, and by those who despair at the effect high prices have had on their neighbourhoods, there are many, many more homeowners, I’d suggest, whose financial security and that of their children are inextricably linked to their homes, and who regard the erosion of their biggest asset with real fear. They won’t care who buys their home, as long as it’s for a good price. And if the projections of the TD Bank’s economist come true, those days when an offshore Asian buyer came calling will be remembered wistfully.

In the meantime, in the very near future, on Monday, Mayor Gregor Robertson’s Task Force on Affordable Housing will deliver its recommendations. After months of consideration and research, city hall will finally reveal how government can make housing more affordable, despite the fact that the market has been busily doing just that. In real estate, timing is everything.

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