Many of you who read REW.ca are looking for homes to buy in the Greater Vancouver area. Regular readers will also know that I am on a similar journey, hoping to buy a small rental unit so that one distant day from now I can afford to hang up my laptop and retire.
And I don’t need to tell you that it’s madness out there. The sheer volume of people coming through the doors of the open houses for one- and two-bed units that I saw was just staggering. And my well-over-asking offers have been laughed at by listing agents who are getting 20 or 25 per cent above list price. People seem to be panic-buying real estate, desperation in their eyes as they try to calculate just how much they can leverage themselves to make the highest bid.
Why such terror? Because the current conversation on the topic of Vancouver real estate and lack of affordability has reached such a deafening fever pitch, there’s hardly a person in the city who isn’t having palpitations about it. People are seeing diminishing supply and the continued skyrocketing in average prices, they’re told by mainstream media, or opposition politicians, that the situation has reached a catastrophic crisis point, and they panic. It’s like a stock market crash – everyone starts selling stocks, so then everybody else does. If you’re told there will be no more groceries in the stores, or gas in the pumps, you buy, buy, buy while you still can – it’s human nature. That’s partly what’s happening in our real estate market.
Add to that increasing population numbers, increasing international and provincial migration – simply more people, all wanting housing. Then you can further add to that the low cost of financing, meaning people are leveraging themselves to the hilt to get in, if they still can. The more all of that happens, the worse the situation gets – and then the more it happens. It’s a spiral, all fed into by these myriad factors.
So how can we stop the spiral? Well, you see which of those factors you can remove, of course.
1. Only the Bank of Canada can change interest rates, and it doesn’t look likely that they’ll do that any time soon, so no dice there. If and when that happens, it will make a big difference to the rate of price growth.
2. In my opinion, closing our borders and trying to suppress home-ownership for immigrats and interprovincial migrants is plain wrong. We’re not about to start building any walls around Vancouver, to keep “Vancouver for Vancouverites.” And let’s face it, unless you’re First Nations, we’re all immigrants here.
3. So, then, there’s only one lever left to pull – change the dialogue. Stop the panicking, everybody calm down, and let’s talk about practical, implementable solutions.
I’m far from the first person to suggest this. This week I attended the Vancouver Real Estate Forum, and there was one theme that came up again and again – it’s time to change the conversation. The keynote speaker, CIBC World Markets chief economist Benjamin Tal, arguably Canada’s leading housing market economist, was scathing in his assessment of mainstream media coverage of Vancouver’s real estate market (you can read about that, along with his interest rate predictions, here). Elsewhere in his speech, he used the phrase “self-fulfilling crisis” and I thought how perfect that was to describe what’s going on in our city. And later in the day, one session panellist, Beau Jarvis of developer Wesgroup, went even further, describing much of the mainstream media coverage of real estate as “sh***y journalism” that had a lot to answer for.
I see a lot of what Jarvis is talking about. Misinformation is being peddled right and left, and taken as fact by an understandably trusting public. Articles citing back-of-the-envelope guesstimates, flawed foreign buyer studies and nonsensical affordability surveys as fact. Muddled affordability campaigns and politically motivated housing rallies riling people up to boiling point. And a disproportionate focus on detached homes on the West Side – which is indeed a bizarre market – without putting this into the context of the whole of Greater Vancouver.
But to the average person, messages like that are very convincing. I used to trust them myself, expressing my middle-class outrage over dinner with my friends (before I actually learned about how real estate markets work).
It’s this kind of sensationalism that has been creeping insidiously into the collective public consciousness, creating fear and anxiety and doing the opposite of what it purports to intend – it actually make things much worse.
It stands to reason, therefore, that if the dialogue were to change, if the media and opposition politicians stopped peddling the blood-in-the-streets crisis messages, then everybody might stop panicking. People might stop thinking that if they don’t buy now, they’ll be left behind forever. Buying might temper its growth rate a little. Fewer investors might see Vancouver housing as a bandwagon to jump on. Price growth might slow, as we’re all hoping it will – would-be buyers and home owners alike.
What if, then, the dialogue turned to ways we can ease the massive shortage of housing, so that there’s enough to go around for everybody? No more open houses with hundreds lining up around the block, no more terrifying best-offer multiple panic-bids. Just enough homes for all of us, whether “local” or “foreign” buyers. And, for good measure, add in sensible taxation policies to capture some of the international and domestic wealth that’s coming into our market, to put towards non-market housing for low-income residents.
Now everybody take a deep breath…