Crafting the Narrative

Real Estate Bulls in Full Force

Perhaps the most entertaining part about this Vancouver real estate bubble are all the crazy narratives and wildly different opinions floating around out there. Perhaps no more evident than in a recent article from the bullish Real Estate Weekly newspaper titled Eleven Ideas How the Fed can Improve Housing Affordability. This report comes from none other than the Canadian Home Builders Association.

Asking a Barber If You Need a Haircut

The Canadian Home Builders Association denies any kind of rumours about a Canadian Housing Bubble. “Do we have a housing bubble? No,” the report states. It adds, “There has been a lot of confused speculation about a Canadian housing bubble, fuelled largely by international economists who don’t understand the Canadian market. Talk of overvaluation in hot markets like Toronto and Vancouver does not consider underlying new fundamentals of supply and demand. High house prices do not necessarily reflect overvaluation if they are supported by fundamentals.” Well there you have it. New fundamentals, oh and because we are polite Canadians this could never happen to us.

The Irony

Despite The Home Builders Association saying there is no bubble, housing starts fell 52% year over year in Vancouver, while BC dropped 25%. Apparently the members of their cult don’t echo the same feelings. More on home starts plummeting in my post Developers Pump the Brakes on New Construction. Two of their underlying factors for further price growth are low interest rates and more foreign investment. Meanwhile mortgage rates have only gone up in the last few weeks with more increases on the way. Just four months ago they said foreign investment wasn’t an issue in Vancouver and it’s still not a factor in Toronto. But now they are saying it will continue to push prices up? But implementing a tax won’t do anything because foreign buyers don’t exist… Recent government stats in Vancouver say otherwise. Most prominently in Richmond, where foreign buyers went from 25% in June to just 5% in September. Coincidentally detached sales are down 48% since the tax was implemented.