BC Business Magazine - 'Housing Has Become Vancouver's Toxic Asset' - "As a result of this massive monetization of housing, the entire city’s social and economic scene is under intense pressure and is threatened with collapse."

“Housing is becoming a toxic financial asset that threatens the entire region.
Before we get into it, let’s look at what a toxic asset is. In the U.S., sub-prime mortgages were a toxic asset because they were converted into financial instruments (derivatives) that had no real value, but were continuously traded for ever-increasing prices until, eventually, the banks that were promoting them couldn’t back them any more. We’re all familiar with the results – massive writedowns and a whopping recession that’s still playing out.
Vancouver is undergoing something similar… because it’s allowing housing to be bid ever higher and far beyond its intrinsic value. As a result of this massive monetization of housing, the entire city’s social and economic scene is under intense pressure and is threatened with collapse.”
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“The houses had become just another abstract financial instrument.”
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“Well, eventually, it has to stop. When houses are continually traded for ever higher prices, the entire balance of population and housing becomes extremely distorted. Eventually it reaches such a distortion that it breaks.
Throughout history, we have seen that asset inflation can’t go on forever. Either a giant crash comes eventually, or – if there’s some sense around – authorities step in to slowly deflate the bubble to prevent catastrophe.”
- excerpts from Tony Wanless’ commentary [BC Business, 2 Dec 2011] on Sandy Garossino’s 28 Dec 2011 blog post.