“I’ve intuitively felt that our housing values in Vancouver, specifically here on the North Shore, are not artificially inflated but rather reflect desirability of the locale and the limited supply of buildable land that our topography permits. Our communities on the North Shore are delineated by a perimeter of mountains and ocean that creates one of the most beautiful locales on earth while preventing outward growth. The fact that we’re only minutes from a thriving, world-class metropolis suggests to me more than ever the adage “location, location, location.”
There are those who argue that the trap door will eventually drop but I suspect it won’t be anything so dramatic. My instinct tells me that we’ll be able to weather whatever market storms come our way.”
- Kevin Vallely, a ‘residential designer in North Vancouver’, North Shore News, 28 Sep 2011
[hat-tip vancouvercondo.info]
When it comes to markets, “intuition and instinct” send the very opposite messages to which one needs to pay heed, more often than not. – vreaa
The opening paragraph of this article is worth reading….good to see the Vancouver Sun do something other than praising the housing market. Incidentally check out the latest YatterMatters figures for Vancouver Westside (halving of houses sold compared to last month).
http://www.vancouversun.com/news/Addressing+need+affordable+housing/5482136/story.html
http://www.yattermatters.com/2011/09/vancouvers-west-sides-green-light/#more-26184
JS -> Thanks for the links.
Again, note that the Sun article on ‘affordable’ housing is all about band-aid patches (eg foregoing fees, foregoing parking laws(!)). There is not one mention of the major cause of unaffordability, namely the speculative mania in housing prices.
There will always be a need for programs to supply acceptable housing for those who are unemployed and need social support.
Much of the current debate is fueled by the fact that even wage earners are having trouble finding housing (and are priced out as prospective buyers).
When prices crash by 50%-66%, there will be a financial incentive for long-term professional investor-landlords to own and manage good, well maintained, fairly-priced rental units. This will go a long way to ensuring a supply of affordable housing.
The crash will be very disruptive (that’s baked into the cake, unfortunately), but it will go a long way towards ‘solving’ many of the housing challenges.
Another great article:
http://thetyee.ca/News/2011/09/30/Avi-Friedman/
Good one. Another to add to the annals, though I think a small piece of the prior art meted by local real estate bear blogs. That said, I welcome Friedman’s comments as an outsider looking through the looking glass, and the article was well-written.
Jeff ->Thanks for the link.
We’ve commented at the Tyee site, and we’ll note the piece in a headline at some point.
Excellent comment.
I marvel at the Tyee’s quality reporting. If only actual local newspapers were of this quality. (It reminds me of two news sources in the US that I like, NPR and the Christian Science Monitor.)
The quality may be high but I still think Friedman is missing the own-vs-rent issue entirely. That is, it should be cheaper to own than to rent, much like a car.
Funny how he doesn’t mention the availability of ultra-cheap money, government-guaranteed debt through CMHC and variable rate mortgages as factors… Then again, I don’t work with “intuition and instinct” when determining asset valuations…
These are the kind of fools we live with on the North Shore.
Looks like Vallely skipped all of Prof. Friedman’s classes.
There are some benefits to a bubble pop. For instance, “residential designers” have to find real jobs.
I read Stratafor Intelligence analysis of Brazil awhile ago and boy do we have it easy here with the so called lack of land. A lot of Brazilian big coastal cities are apparently developed right on a mountain range which means flat areas to homes on are in extremely short supply. As well the face of mountains there is almost verticle which means unlike North and West Vancouver where you can build up the slope of the mountain, the same thing just is not possible in Brazil because it would be like trying to build a condo on a vertical wall. That’s a really shortage of land. As many people have said, these RE bulls need to actually get out more and see the rest of the world. Or at least maybe watch some more travel shows.
Could individual municipalities ban CMHC?
Interesting question.
CMHC has fuelled speculation by mispricing lending risk; we’d like to see that factor removed.
Not sure if it’d be ‘constitutional’ for local governments to attempt to block what is a country-wide program. If not, there may be other ways around it. Could local governments put demands on buyers and their lenders that restrict speculation/overextended buyers, but that have nothing to do with the presence of CMHC?
However, those kinds of considerations always bring one back to questions about whether there is ANY level of government that would actively do anything that would cause the bubble to burst. We think not, as almost everybody is co-opted. No group is going to vote in a substantial decrease in their own net-worth. Witness all the talk about ‘affordable housing’ covering just about everything EXCEPT crashing prices.
The speculative mania will only end as a result of market forces (most probably the ‘under-its-own-weight variety: running out of buyers, Ponzi scheme style), not because of change in policy.
Unlikely but they could significantly increase property tax rates, which would have similar effect, promising to lower them when house values return to rental equivalency. All extra revenues can be reserved for when permit revenue dries up.
Won’t see it though; the City has painted itself into a corner, where homeowners can’t afford higher taxes due to high mortgage payments.