“British Columbian couples with young children are being squeezed in an economic vice because of high housing and child care costs, according to a UBC family expert who dubs the group “Generation Squeezed.” Paul Kershaw says the high cost of housing coupled with skyrocketing child care costs is making it nearly impossible for young parents to raise a family in B.C.’s Lower Mainland.”
Derek Atkinson, a 28-year-old university educated dad who lives in Burnaby, said he has a bleak outlook when it comes to buying a home.
“It’s something that is getting closer to being a pipe dream than any sort of reality,” he said.
With a combined income of $92,000, he and his wife could qualify for a $500,000 mortgage. But Atkinson said the minimum $25,000 down payment is too rich for him and his young family.
“We’d have to save up for at least five, six years just to get a decent down payment…and that’s really frustrating,” he said.
The average B.C. couple only makes $66,700, enough to qualify for just a $300,000 mortgage. A November search of the residential real estate listings in Metro Vancouver (MLS) turned up only seven two-bedroom properties in that price range.
Tom Davidoff of the UBC Sauder School of Business said that young Vancouver couples simply don’t have a right to own a home in the city they grew up in. “There’s not going to be any free lunch in Vancouver. There’s no entitlement to own a nice home in the most beautiful place on earth. So I think people need to be prepared just to accept that reality,” he said.
- excerpted from ‘Housing, child care sting ‘Generation Squeezed’, Darcy Wintonyk, ctvbc.ca, 1 Dec 2011
Noting that there is a speculative mania in Vancouver housing is not the same thing as asking for a free lunch. – vreaa
ADDENDUM, 2 Dec 2011, 7:50am:
Dan, writing in the comments below, asks “Can someone explain what Prof. Davidoff said that was so objectionable?” and then segues to talk of a speculative bubble (which Davidoff did not mention) and asks “What’s so terrible about renting?” (Davidoff did end up mentioning renting, but that was not the statement he made that has been objected to).
We’ll share our response to Dan’s question here.
Davidoff said: “There’s not going to be any free lunch in Vancouver. There’s no entitlement to own a nice home in the most beautiful place on earth. So I think people need to be prepared just to accept that reality”.
Here’s the objection, Dan -
Davidoff reiterated a sloppy, tired argument that deflects from the issue at hand:
Young couples (or any other prospective buyers) point out that housing prices are extremely overextended in Vancouver.
Davidoff retorts with an argument that directly implies that prospective buyers are asking for something for “free”, that prospective buyers feel “entitled” to get something for nothing. Where did any of these buyers make such ridiculous claims? [They did not!]
Davidoff’s fallacious implications are a straw-man argument; they have the effect, by design or otherwise, of dismissing the prospective buyers’ initial (and very valid observation): Housing prices in Vancouver are very overextended.
Customer: “How much are your sandwiches?”
Storeowner: “$50 each.”
Customer: “$50! That’s a little steep…”
Davidoff: “What do you expect? For someone to give you free food?”
Davidoff is supposedly an academic with, we’d imagine, some claim to expertise in the area of housing markets.
We are in the midst of a global housing market disaster; we have housing prices in Vancouver that are preposterously higher than fundamental values determined by income and rent; we have personal debt levels that are higher than they were in the US before their bust; we have a local economy that is overdependent on real estate … and the only analysis that this School of Business can march out is flaccid non-arguments in favour of the status quo? (Davidoff’s “reality” that has to be “accepted”.)
Are there no sensible academics in this business school that can do back of the napkin math?
‘The Economist’ has just published an article implying that Canadian housing is overvalued by at least 25% (A remarkable 71% as determined by rental rates). Numerous other respectable commentators have pointed out the unsustainable housing valuations in Vancouver.
Has anybody seen any commentary from anybody at UBC’s Sauder ‘School of Business’ that in any way attempts to discuss or analyze these arguments?
When the speculative mania in Vancouver RE collapses, it will be remarkable to look back and see how deficient local economists and financial commentators have been for not warning about this obvious bubble.
The fact that Davidoff even threw in “the most beautiful place on earth” canard just makes his statement that much more pathetic.
Come on, Sauder.
Have any of you studied anything about ‘speculative manias’?
Is the 2011 Vancouver housing market not a wonderful, soaring example of such a beast?
What are you telling students who ask such a question?
See also ‘Tom Davidoff Knows About RE Cycles’, VREAA, 4 Dec 2011