John Horgan’s weekly newsletter #42, addresses housing affordability in southwest British Columbia and points at the Clark Government’s past denials and its continuing reluctance to take effective action:
Christy Clark and her government have dismissed, mocked and outright ignored the housing crisis facing this province.
Last year, Housing Minister Rich Coleman called the Lower Mainland’s housing prices “actually pretty reasonable” just days after a report found Vancouver to be the second least affordable city in the world.
Premier Clark suggested that those who can’t afford housing in Vancouver should move to Prince Rupert and Fort St. John.
Just two months ago, when asked about the province’s lack of support for affordable housing, Minister Coleman told a reporter: “I guess some people just have to get up and whine every day.”
The Liberal’s public response to irrational exuberance in BC’s housing market was denial, then acceptance:
There has been no housing market bubble, but, if one is developing, it is good for the province, attracting much foreign money to Vancouver and encouraging the city’s pathetic whiners to move far away from here.
In reality, Liberals are pleased with things the way they are. Politically, they will feign action, but as with usual practice, it is the appearance of activity that matters, not results.
BC has a government owned by special interests. Natural resource companies and private power producers were large winners for most of the last decade but, in recent years, real estate speculators and developers have been at front of line. Government has been bending over backwards to reward its generous friends.
Liberals moved BC Rail’s vast land banks into private hands; it altered the Agricultural Land Commission’s role from protecting farmlands to ensuring orderly and profitable conversion of reserved land to industrial and residential use. To claim “balanced” budgets, government sold valuable crown land to developers for cents on the dollar. Ignoring warnings of illegal gambling and money laundering, Liberals eliminated the provincially funded police enforcement team investigating the gaming industry. Government also permitted the real estate industry to self-regulate even knowing the supervision was inept.
Award-winning news writer Douglas Todd commented:
Unlike most jurisdictions around the world, the governing B.C. Liberals refuse to even provide data on foreigners who buy Metro Vancouver property, let alone restrict the extent to which they can do so.
The B.C. Liberals have also been regularly accused of overlooking shady real-estate practices and failing to enforce Canada’s tax-residency requirements, leading to wealthy migrants gaining advantages over domestic buyers.
Almost every person not a Liberal partisan has recognized a dangerous financial state exists. Barry Nielsen, in Why Housing Market Bubbles Pop, explains:
The laws of finance say that markets that go through periods of rapid price appreciation or depreciation will, in time, revert to a price point that puts them in line with where their long-term average rates of appreciation indicate they should be. This is known as mean reversion.
Prices in the housing market follow this law of mean reversion too – after periods of rapid price appreciation (or depreciation), they revert to where their long-term average rates of appreciation indicate they should be.
Famed Wall Street investor Mark Cohodes, a California resident, is betting on British Columbia’s bubble bursting soon. Talking to Toronto real estate blog Better Dwelling, he mentions a perfect storm in Toronto and Vancouver housing markets, “a mixture of rising home prices, foreign money laundering, and an unregulated sub-prime lending system most Canadians don’t even know exists.”
The entire article is well worth a reader’s time so follow the link above and read the story. It includes:
“Home Capital Group has admitted to $1.9B in fraudulently underwritten mortgages last year alone,” he explained. “FSCO, who regulates the brokers, hasn’t punished the brokers. The problem is when there’s criminal behaviour going on—and originating fraudulent mortgages is criminal behaviour… you’re allowing one class of individual to benefit another. If you allow it to go on, what’s the deterrent?”
Find that a bit confusing? Marc broke it down for us, “if I went to your town and robbed a bank and broke the law…and you caught me and know who I am. My punishment is ‘you need to leave town tomorrow, I won’t name you but you can’t do this around here no more’, what urges me to stop? Me and my whole crew should be put in jail, there should be an investigation by the RCMP on exactly what happened, and who was involved.”
How crazy has the real estate market become in Greater Vancouver? I imagined a couple seeking a 3 bedroom home in the region. Here are examples of properties offered for $1 million.
Imagine two people in a household that has a single earner with a salary of $100,000, an amount considerably above the 2016 mean income level in BC. After tax income would be $75,000. If the couple managed a $250,000 down payment, their mortgage and property tax payment would be $50,000 or 65% of take home pay. That calculates interest at 3.39%, which is VanCity’s 3-year fixed rate.
Obviously, with so little left for clothing, transportation, food, health care and other exigencies, that’s not doable. And, when fortunate people cannot afford a low rung on the property ladder, the situation must change. Christy Clark and Rich Coleman may regularly shake hands with the province’s most wealthy residents but, the ground upon which they stand has grown dangerously unstable.
I pulled photos of housing available in other parts of North America for $1 million. Unlike property in southwest BC, most of these are built on large plots of land.
My sense is that these photos are almost proof that our bubble must soon burst.
Categories: BC Liberals, Gambling
in-sights.ca 
Norm, the grandkids will be living with you when they are adults because they can’t afford to rent or buy. was at a gathering on the weekend with highly employed people and those who didn’t own homes for some time, well they couldn’t afford to buy and can’t find places to rent and that $4K figure isn’t that far off the mark already. $2K for a decent apartment in Vancouver isn’t that far off the mark, so we know what the houses go for. A decent house in Vancouver will rent for $4k to $5K per month.
/does Christy care? Not so much and neither do the rest of the b.c lieberals. so if they don’t care about us, why should we care about them? time to fire the bunch of bums.
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Norm,
I can see the big difference between the US listings and the lower mainland ones.
Are you comparing $1million US homes to $1million CAD homes?
The difference is significant if you haven’t already converted into a common currency.
In either case your point is well made.
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Simple comparisons are often faulty but I did not adjust for exchange difference because those vary considerably over time. In the last ten years, the Canadian dollar has averaged above 91% of the U.S. dollar.
However, most couples in the USA get an income tax deduction for interest on residential mortgages (up to $1 million of borrowing). That results in higher home values than would be the case without the deduction. Canadians, of course, do not routinely deduct home mortgage interest from taxable income.
The point here remains obvious. An out of control market is putting dollars in the pockets of a few people but the impact will affect a great many. My three children grew up in North Vancouver and have been able to make their homes here. My grandchildren, who are 10 and under, will probably not find living here affordable when they are ready for their own homes. That applies to renting as well because that stock eventually reflects market value. So landlords will soon be asking $4,000 a month for a crappy 1,200 sq. foot bungalow.
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That is a striking photo comparison, Norm. Despite the current dollar exchange, I suspect a wise U.S. investor would see little value in buying property in Vancouver.
In the automotive market, it’s like paying the same for a Mercedes E-class or a Nissan Micra. Ridiculous.
As well, the calculations for a couple with $100,000 income — and a $250K downpayment — to buy a starter home… scary. Throw in “normal” wages and daycare for our future citizens and that’s enough cold water to kill that sale for most citizens.
My only wish is that it will be mainly the money-launderers who get taken to the cleaners when the bubble bursts.
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Just wait until municipal governments get a windfall of new tax revenue from the inflated property taxes next year, then there will be a mass exodus.
My family pile was assessed at $925K for 2016; then in Feb. a cold call by a Chinese investor bought a house 11 houses down for $1.6 million; and a house, just 7 houses down (smaller and on a smaller lot) sold for $2.6 million ($100K over the asking priced to a Chinese investor) in June.
My assessed value will rocket to around $2.5 million for next year, as will my taxes which I cannot pay.
A note on corruption.
In the muni where i grew up (lower mainland) I understand why we now turn a blind eye to it because those who gained wealth by illegal and nefarious means, including murder, now hob nob with the established elites. Their children have married into the elite society, and they become sizable donators to winning politicians.
In short, they have bought their way into society and in fact have become the “elites” that run this province and country.
We didn’t (nor the media) ask questions like, where did your wealth come from and/or how many people have you killed to gain your status?
Corruption exists in Canada on a massive scale and the public turn a blind eye to it, as many are ‘on the take’ on a lesser scale such as ‘cash’ deals or buying items that “fell off a back of a truck” at great discounts.
This, of course, has lead to minor inconveniences like shootings in Surrey or an occasional lifeless body found in a parks, school grounds, city streets, or the Fraser.
BC has turned into the great con-game, run by grifters, for grifters and he/she who has the most marbles when he/she dies wins and to hell with everybody else.
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nobody mentions the corporate media’s role
in a constantly shrinking ad revenue world real estate has been one of the few constants of revenue – who will bite the hand that feeds?
proof? look how they handled leaky condos
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This is about me, I am diabetic but the MSP refuses to support several medical issues. Podiatry not covered, living on a small fixed income, means eventual amputation of my legs, because of a condition that rendered me disabled, Spinal stenosis, which prevents me from personally practicing podiatry on myself without a license. Traveling on BC Ferries for medical attention, TAP forms are available for some but not all mandatory medical treatments. How they decide what’s covered and what’s not, and which regions qualify, is a big mystery, which is part of this point. Bury it on a BC Govt. web page that only the late Steve Jobs could find. I need new glasses, my eyesight due to diabetes is failing me. Not covered by MSP. Support medical devices, like a place to put my used needles, $50.00 a year for special containers. Not Covered. Psychiatrist wants me to take a drug he feels I need. History going back 35 years required by MSP to establish that I have tried every other depression medication known to man before they will endorse this. Psychiatrist, totally exasperated dealing with MSP. Vitamins that I need for my health, not covered, several hundred dollars a year.I have severe sleep apnea. Confirmed by no less then two doctors, and the sleep clinic at UBC. Respirator to use during sleep, Not Covered My spinal stenosis, is aggravated daily, because MSP does not support proper footwear for diabetics. You see, they want to cut of our limbs, it is more expensive in the long run, but Christy doesn’t do long run, she is a short run person, unless of course you are talking about destroying nature.I am going to end with dentistry although there are several other circumstance, Diabetics have a much tougher time fighting infection. So if you need dental work, well guess what, MSP doesn’t cover that. So much hideous pain and suffering, how do these anonymous people who make life and death decision behind a veil of secrecy, sleep at night?
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