Here is Gord’s reply to Flaherty’s reply:
“Thanks for your reply.
But here’s the thing (and I’ll make this short and sweet). Right now, one cannot buy a single family home anywhere near Vancouver or its immediate suburbs (Vancouver, West Vancouver, North Vancouver, Burnaby, Richmond, Ladner, Tsawwassen, New Westminster, or White Rock) for less than a HALF MILLION DOLLARS. Moreover, the few homes that are available between $500,000 and $600,000 are in such a state of disrepair they typically need to be torn down and rebuilt. The situation is, in a word, insane.
I know the housing industry is critical to Canada’s GDP. But through the availability of cheap up-front money and sub-prime lending, and the ease with which offshore investors can purchase homes in this country, your government has allowed a fiscally perilous, fully unsustainable situation to unfold. You have, in essence, funded the growth of a ready-to-burst bubble that’s no less onerous than the bubbles we saw in many US cities before that country’s massive crash. You continually warn us not to go even deeper into debt, yet you facilitate the very debt burdens (now at record levels) you warn against.
Thank you in advance.
Thanks to Gord for sharing this exchange with all of us.
The Minister of Finance talks of the steps that he has taken to “protect and strengthen” the housing market; most of them are simply reversals of steps he himself had put in place in the years before (40 year mortgages are the most blatant example).
It sounds innocuous, but note how Flaherty confidently states: “A home is a family’s most important investment”.
See how easily that statement passes as truth?
It’s not just a home, it’s also a financial instrument.
This is the kind of thinking that has encouraged Vancouverites to overreach and then overreach some more; it’s the fuel of the speculative mania.
Why pay ‘3x’ for a house that by all fundamental valuation methods is worth ‘x’?
Well, it’s not just a home, it’s an “investment”, and next year it’ll be worth ‘4x’.
Anyway, it’ll all play out, we’ll get a price collapse, and only then will the structure of the bubble be obvious to all.