Originally Posted by blankall
IMO, the issue is threefold:
1. Foreign investment.
2. Generational income equality.
3. Low interest rates/high household debt.
Basically something is going on that detached housing prices from local incomes. Vancouver will always be an expensive place to live, and as density rises, this will only get worse. However, when it gets to the point where people earning six figure incomes cannot afford entry level 1-bedroom condos, there are bigger factors at play.
While I think that foreign income is what drove real estate to the massive highs, there were also contributions through locals trying to keep up. This money is coming from:
i) baby-boomers who've stockpiled wealth via decades of taxation/monetary policy designed to allow them to do just that. They are buying housing as investments and for their children. This further erodes social mobility, as now only people with wealthy parents can get housing. And no, it's not fair, those people didn't "earn" the money. As stated, it was largely monetary policy and taxation rules that allowed them to accumulate it, pushing the bill down the road. Despite this access to wealth, many baby-boomers themselves remain highly in debt with no viable retirement plans; and
ii) generation X-ers/millennials who are doing their best to enter the market and borrowing far beyond what's safe. This is particularly true as younger people have virtually no job security.
Removing foreign investment should be the first step, as that is the easiest way to bring things down quickly. The interest rate issue is trickier, with Canada heading into a recession, but the stress test was a good start. People should never borrow to their max, and if it requires government intervention to get people to act rationally, then so be it.
Prices are actually already down as much as 40% in some segments, which is a good start. Things couldn't have kept on going the way they were. When you have entry level detached homes going for north of $2 million, there's a major problem that is going to lead to some kind of collapse, either now or in the future. Not to mention the swaths of empty homes, that were not contributing to the economy, but required all sorts of financial input from the economy to keep up the infrastructure around them. Overall, having your housing market tied to the the welfare of the Chinese economy is an absolutely horrible idea. The Chinese economy remains both corrupt and command driven.
To bring this back to the main topic, yes the housing issues is forcing many people onto the streets, as is the ghost town economy it creates. Everyone gets caught in this crisis, but those on the edge are very exposed to being pushed over. The housing/debt crisis has also resulted in other consumer goods, such as food, skyrocketing in price.
|
