An editorial in The Vancouver Sun 11 Feb 2010 reassures us that there isn’t a housing bubble in BC, and suggests that the explanation for the outrageously high price/income measure is simply that incomes are too low. Incomes would to rise by a factor of 2 or 3 for housing prices to make sense, but The Sun doesn’t get into any details as to how this could happen. They hint that taxes should perhaps be less burdensome, an ironic observation given the levels of provincial and federal debt, and the high likelihood of increases in taxes going forward. At vancouvercondo.info tincup (11 Feb 2010 8:08 pm) pointed out that the editorial reads “like a grade 8 english essay.” -vreaa
No policy change is needed to prevent the housing bubble: There isn’t one
It’s not clear what problem Canada’s chartered banks want the federal government to solve by toughening mortgage rules. But the Big Six are urging Ottawa to take measures, such as raising the minimum down payment and shortening the maximum amortization period, to avert a U.S.-style bubble and bust and the broader economic consequences that would bring about. However, there is no bubble — Canada Mortgage and Housing Corp., the Bank of Canada and the federal finance department all seem to agree — and an ill-timed move to dampen the housing market could set back the economic recovery.
To be sure, housing in Canada is expensive. The 6th annual Demographia International Housing Affordability Survey released last month found only five markets in Canada that it described as affordable, meaning the median price was three times the median income or less. Vancouver’s multiple was 9.3, the most unaffordable of the 272 markets covered. Perhaps the problem to be solved then is not high house prices but low incomes. In 2008, the average Canadian family earned $71,764 and paid 44 per cent of it in taxes. That’s more than the proportion of income spent on food, shelter and clothing combined.