In 1976, the BC assessment authority set its value at $6,500. Last year, it was assessed for about $700,000 but a sale price today would likely be substantially more.
The Bank of Canada Inflation Calculator says $6,500 in 1976 is equivalent to $29,600 in 2021.
Something is wrong with BC’s real estate market and something is wrong with Canada’s official calculation of inflation. (Does anyone believe that inflation in the last year is 1.1%?)
I am certain both the real estate markets and government claims about inflation are defective.
My example demonstrates clearly what has been facing young adults in recent years. Property ownership, even on rural lands well removed from a major city, is impossible for people not extraordinarily successful in establishing financial resources or funded by the Bank of Mom and Dad.
People already on the property ladder might enjoy real estate price escalation but this fosters a sense of despair for excluded persons.
In my opinion, despair and lack of opportunity are factors that help drive substance abuse problems that have been killing thousands. For many of us, how we are housed is of extreme importance. The housing affordability crisis is growing worse in 2021 and shows little sign that it will ever improve, without radical responses.
The BC Liberal Government refused to address affordability issues because the real estate industry was a large benefactor of that party. In addition, property transfer taxes were putting billions of dollars into the public treasury.
I am not sure the BC NDP dares to alter the status quo. Anything that deflates the real estate bubble will leave victims behind. We have seen recent warning about personal debt levels and a sudden reduction in land and housing prices would be devastating to many. If government helps one large population sector, it may cause unacceptable pain to another sector.
According to CIBC Deputy Chief Economist Benjamin Tal, if you think housing is unaffordable now, just wait…
The solution may be found in Europe. By example, Vienna has more than 200 hundred thousand units of public housing, roughly one-quarter of the total.
It may be that only public ownership can solve a problem created by private ownership of the nation’s housing stock.
A good solution, Norm. We need to imcentize public and not for profit housing. But this involves all three levels of government working together and with non-profits, 1st nations, unions, etc working together to create a true national housiing strategy instead of the patchwork system we have now.
Quote from https://www.bankofcanada.ca/2021/03/fad-press-release-2021-03-10/
“The Bank of Canada today held its target for the overnight rate at the effective lower bound of ¼ percent, with the Bank Rate at ½ percent and the deposit rate at ¼ percent. The Bank is maintaining its extraordinary forward guidance, reinforced and supplemented by its quantitative easing (QE) program, which continues at its current pace of at least $4 BILLION PER WEEK.”
“While economic prospects have improved, the Governing Council judges that the recovery continues to require extraordinary monetary policy support. We remain committed to holding the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved. In the Bank’s January projection, this does not happen until into 2023. To reinforce this commitment and keep interest rates low across the yield curve, the Bank will continue its QE program until the recovery is well underway.”
QE is where the BoC indirectly buys bonds from Govt of Canada. The idea is keep the interest rate jammed down to near zero, which is reflected in low mortgage rates, which fuels the real estate bubble.
Something is very wrong with this picture. I remember the inflation in the early 1970’s, though I was about 12 years old.
The interest rate then went way up, to 18% by 1980. Today, this increase in the interest rate would crash the real estate market, I would think.
Crashing the RE market (and making housing affordable for normal people) is probably Govt’s biggest fear. Great.
“Does anyone believe that inflation in the last year is 1.1%?”
Or that, during all the concerns over offshore money driving up housing costs, in some situations doubling in a year, we were constantlt told the increase in the cost of houses ahd only risen %-7%.
Worse, we sat by and accepted it.
Just prior to past economic depression (ie. The 1929 Great Depression) there was a flurry of real estate activity. Is history about to repeat itself? As for the inflation rate Stats Canada changed their index back in the early 80’s. I was told this by a fellow who I volunteer with, who use to be a financial wiz-kid with some financial/investment firm. The investment industry use Stats Canada numbers when it’s convenient Rule of thumb: Government/Politicians lie; it’s in their DNA.
Our house in Chilliwack was valued at $600+ K in recent years — but I suspect would sell over $800K in the current crazy market. And then where would we move to, to realize the gains we had made?
I wouldn’t lose sleep if a government action stabilitiized the market and ‘poofed’ away the $200,000 in paper equity we had ‘earned’ in the past year… as long as it brought stability and sanity to real estate and rent.
I know speculators and recent buyers would be in severe pain, though I wouldn’t lose any sleep over the speculators.
The rise of old beater motor homes, campers and trailers being parked in pop-up camps shows us how a sector of the population is dealing with inflation in shelter costs. Unlike the truly homeless, if they can afford the fuel and insurance for their wheels, this group is clinging on by temporarily parking anywhere, till they get moved along.
Barry makes a good point and it isn’t just people living in beaters. There are a lot of people who can’t afford rentals anymore and buy R.V. equipment and live in their vacation trailers.
We’ve heard how many people from the prairies and Ontario came to B.C. with their “rigs’ to over winter here because of COVID in the U.S.A. Yes, we have quite a few of them, but when you have a closer look, have a look at the license plates and where the vehicles and equipment where purchased. All in B.C. Its April and the amount of equipment going up and down the Inland Highway on Vancouver Island is astounding. (O.K. the house over looks it can even see the radar traps). Working people can’t afford their apartments anymore and have moved into their 5th wheels, gone to auctions and bought nice trailers. Some of the equipment with slides are almost 400 sq. ft. which is a lot less than a condo of that size in many places. 400 sq. ft. condos can run $1,500 a month for rent.
Some people thought they’d travel for a few years and then get back into the market. Can’t. If you’re out of the market in some areas for more than 30 seconds, you’re out for good. I’ve know some people who were out of the market for 2 weeks, couldn’t get back in. Our financially astute sibling ensured they sold and bought in the same half hour. No risk taking.
We might also want to look at the cost of lumber which I’m hearing has almost doubled so that is making building houses more expensive. But actually a plan old build without all the fancy stuff isn’t that expensive. its the land and that is why I do not expect the prices to go down much. Nice land, in a nice country, priceless.
Yes, and in the Netherlands (Holland) the government owns 40% of all housing stock. Back in late 1960s you could not live in downtown Rotterdam unless you worked there. those already living there were fine. They had all these game rules because the housing stock was still suffering after WW II. Now of course they have a problem because the population is about 18M in a country the size of Vancouver island.
Now what can we learn from these experiences. Government owned housing works, especially if it isn’t in ghettos. government owned housing works when its kept up.
What we used to have in Canada until some government cancelled the program was Co-op Housing, It worked. Lived in it for many years and then bought a town house. Co-op housing, which is an alternative to home ownership, allows many to save money because your housing charges are from about 25% to 30% of the units gross income. it also works because its a mixture of incomes, family sizes, family make up, etc.
There was an agency in Vancouver which assisted co-ops forming and getting them through the start up. Probably the best person in the province, who still knows these programs is Elaine Duvall who ran that organization and has always been involved in non profit housing. She deserves a lot of credit for putting roofs over a lot of heads in Greater Vancouver. Her contacts were good and some large construction companies gave co-ops a good deal, that includes Olga Illich who as I recall was with Progressive Construction. What it demostrated was the private sector could work well with the government to provide decent housing.
as to the increase in land values, that is fine, as long as salaries go up accordingly. When I was 25 in 1974, I was making $25K a year. In the late 2000s my friends kids were making that much but costs had gone up. Once we got into the 1980s salaries didn’t go up the way they once had and between the 1960s and 1980s the tax burden shifted from the corporations to the average citizens.
A couple of years ago at a dinner ran into women who, like me had lived in Richmond. When they started building town houses in Richmond in the 1970s, they were being sold at approx. $30K to $35k. Nothing luxurious, but nice. some of the women, single moms working at VIA, governments, B.C. Tel bought those places and raised their kids there. that can’t happen today because those townhouses are out of reach and the salaries didnt’ continue to go up.
As to the rate of inflation, as with the unemployment rate, its always been kept artificially low because as we who worked for the government realized, OMG, how would the government pay for all those pensions if they had to keep up with the rate of inflation and that included big corporations who still provided pensions for their workers back in the day. In the 1970s, some parts of the province had “official’ unemployment rates of 15%. then you asked the UIC staff, what is it really? oh, close to 30%. That is why we had grow ops all over the place. they had to support their families some how. The former mayor of Grand Forks actually wrote an article years ago about all of that.
Inflation rates aren’t any different. I know what the feds say the inflation rate is, but I know what it truly is, I shop for groceries. Pre COVID i shopped for all sorts of things, It was a hobby,.
It may be the time has arrived that government starts having a serious chat about housing people. Remember if children aren’t housed decently there could be problems alter and they won’t become tax paying citizens and that will impact a lot of other stuff.
Having lived in a co-op from 1982 to 1996 I saw the benefits of decent housing at an affordable price. the impact on adults was really some thing. They’d still have a roof over heads. People could save to buy a home.
When I look at that nice big chunk of land by Little moutain that the BC. Lieberals sold off, I’d just expropriate it and build co op housing and open it up to people who made $150K a year or less and worked in the city of Vancouver for starters. I’ve noticed governments never had problems expropriating land from working people such as farmers, ranchers, etc. when they wanted to build roads, dams, etc. but have yet to see them expropriate from big business. yes, big business donates money to the political parties, but some one ought to tell political parties there are more voters than there are CEOs.
We have a perception issue on North America. Home ownership is a privilege most people around the world save their entire lives for. The majority of Austrians, for example, rent their homes. We need to support rental and co-op alternatives to purchasing homes and reduce the expectations of everyone owning a building.
Inflation does not include house prices, because houses are not consumer products. The interest payments do get bundled into inflation and interest rares have never been lower.
First solution to this problem in any jurisdiction is to immediately re-zone all office space to allow for residential rental apartments to be built in them. We no longer have a need for cubicles, but we do have a need for homes.
Very soon, all parking lots will become redundant and unnecessary when autonomous transport becomes the norm. All of this land can also be repurposed as rental or co-op housing.
End cubicles. End parking. Build for living.