print email stumble Digg

B.C.'s Blipping Real Estate Market

Tony Wanless

| July 16, 2009

Image by: iStock

Is this the beginning of a real estate recovery in B.C., or just another blip?

Last Fall, we were inundated with stories about how this recession was on par with the Crash of 29. This summer, it’s all about how it’s over and happy times are here again.

I’m talking specifically about B.C.’s favorite amateur investment – real estate. The media is breathlessly reporting that home sales are starting to boom again – rising 77 per cent in the second quarter over the first quarter.

This is being called a “housing rebound”. It isn’t. It’s the housing market crawling out of a deep dark hole excavated by greed and resulting fear.

Somewhere between the absolute gloom of winter and the more sober thinking of spring, people realized that prices had dropped from the upper stratosphere to somewhere in the vicinity of Earth.

This was merely a settling of a market driven too high, largely by amateur investors. But it seems that many didn’t get the memo, and so have now rushed in again to buy in anticipation of increasing prices.

This is speculation and it’s the B.C. disease. Every drop in house prices is thought of as a buy signal by the masses who listen to mantra that real estate is always a good investment.

It is — if you're lucky enough to time it right or hold it for 20 years like your parents did. But if you're a short term thinker, as most are, it could bite you badly.

Let’s go over this again. Real estate invariably has cycles of about six to eight years, with the first two thirds of that cycle being stagnant and the last couple of years accounting for most gains. The last cycle was longer than usual, which is why prices soared.

It’s also why they peaked and fell, although probably not far enough. A price drop for a crackerbox on the East Side from 700K to 600K doesn’t make it a deal.

But enough people seem to think so that they’re going for it.

As always, they’re likely going to have to wait a long time to make any kind of profit from it.

I'll ask you. Is this a sustainable rebound or a mere blip?

Tags

Having lived in Australia

Submitted by Anonymous on Fri, 2009-07-24 10:45.

Having lived in Australia and the UK, it's not so much the house prices are ridiculous (but they are somewhat for the size of the city and infrastructure here), but that the wages are SO POOR! Minimum wage in Melbourne is $14.25, and you don't really earn less than $20/hour unless you're still in school (high school!). Event staff earn $19-$26/hour!! Compare that to the $8 + tips (that you have to share out) in most places here, and it is ridiculous. Many employers there also allow you to Salary Package, deducting things like mortgage payments and child care from your salary before it gets taxed. The GST is 10% (the only tax) and we don't tip. At all. Maybe 10% if service has been truly outstanding. So although prices are similar, the cost to live here is extreme. Having lived in the centre of one of the most expensive cities in the world for 5 years (London), I can easily say that when taking wages into account, living there is cheaper than here.

Without an increase in

Submitted by Anonymous on Mon, 2009-07-20 10:10.

Without an increase in incomes, "affordability" all hinges on innovative mortgages and interest rates staying low forever. We know how this ended south of the border, but still believe we are immune from economic gravity.

I can agree that "$600K for

Submitted by Anonymous on Sat, 2009-07-18 11:47.

I can agree that "$600K for an eastside cracker-box" is hardly a bargain, and that the current real-estate recovery (whether you call it a climb or a rebound) may well be premature. However, if you look at the underlying supply-demand situation, the high prices (and higher) are going to be with us for a long time. British Columbia is a very desirable place to live: with a recession underway, many boomers across Canada are likely to pull the retirement plug and relocate to the west coast. Vancouver, repeatedly named one of the most livable cities in the world, will feel the pressure. And on a global scale, our prices are not high. So demand is strong. But our supply is limited, with mountains, ocean, and the US border to ensure that remains the case. Governments continue to place obstacles such as development surcharges, the ALR, and inadequate transportation. Pair strong demand with limited supply, and ... need I say more? So a short-term blip maybe, but long term, hang on for the ride!

Good comment, Anon. We'd

Submitted by jbucher on Mon, 2009-07-20 15:31.

Good comment, Anon. We'd like to publish it in the magazine, but I don't know your name. Please contact me at jbucherATcanadawide.com. John Bucher Editor, BCBusiness Online