Front page headline in the Vancouver Sun last Tuesday: Billions in home equity lost! According to a recent report, housing prices actually fell by about $90 billion in the past year.
Panic, Panic, the Sky is Falling
Think of all the other businesses that will be affected! The cause? “Demand-side taxes.” Whatever those are. But they’re taxes, sure enough, so they must be the NDP’s fault, with a quick swipe at the Federal Liberals’ increased mortgage stress testing rules. Yep, it sure sounds like the government messed up, allowing this terrible situation to develop.
Then we go to the editorial page. What? That wasn’t an editorial? No, that was news. You know, the unbiased reporting of facts. On the editorial page we get opinion. In the form of a diatribe from the head of “one of the largest commercial real estate appraisal and property tax consulting groups in Canada.” Oh, yes, it just happens that he wrote the report. Well, at
least we know where he’s coming from. And where he’s coming from sounds a whole lot like the fox who suddenly got told he was no longer in charge of henhouse security. Apparently this new turn of events is “a serious threat to our economic well-being.” Whose well-being?
Well, his company’s, of course. And his own. Reading between the lines, nobody else really counts. Oh, except that senior in Delta who “lost” $67,000 on his home assessment this year. His million-dollar bungalow that he paid $300,000 for twelve years ago is now only worth $930,000, and he “faces much greater uncertainty about (his) future.” Yep, life is tough for
the poverty-stricken.
Let’s Take a Closer Look
What are the factors affecting house prices?
1. General demand; people need housing, the population is increasing.
2. Money laundering; criminals with huge amounts of money to throw around create a self-licking ice cream cone, where the more they pay, the higher the prices go, and the more they make.
3. Foreign investors buy houses here because prices are rising, then they leave them empty, creating more demand, and up we go again.
4. Real estate agents (the ones who actually do have consciences) are caught in a conflict of interest. They may want to do the best they can for the buyer, but they are getting a cut of the profits, so they’re hardly motivated to play hardball.
5. Local investors see the prices going up, and they jump on the bandwagon. Why shouldn’t they?
What’s Really Going On?
What’s really happening is that several levels of government are tweaking the laws so that house prices do not rise to the unrealistic and unaffordable heights that the real estate business would like them to reach. Also so that people don’t invest in too expensive a house, exposing themselves to a downturn in the economy or the housing market. Also so that international (and local) criminals can’t use real estate to launder their take. And so that foreign investors can’t leave houses sitting empty without at least paying a tax for the privilege.
And for a change, the government actions worked. Prices are down, but because of the higher stress test levels, fewer people are exposed. The general economy is holding on and unemployment is at record low levels, so people aren’t losing their houses because they lost their jobs.
This is Now. What About Then?
Did you hear any great uproar from the profit-takers about these problems when the housing prices were soaring? Somehow I don’t think so. The real estate industry and related jobs, the offshore investors, the organized crime figures and the local speculators were quietly raking in their profits, driving up the prices even more until normal people couldn’t afford to live here.
While I have all sorts of sympathy for the people that stretched their budgets to afford a house that now is worth less than the mortgage they owe, I have no sympathy for the rest of the vultures. It makes you wonder what happened to their sense of values when they were lucky enough to get rich.
What we are seeing here is a wonderful example of untrammelled money-grubbing. These people have been making so much money for so long they have lost all sense of perspective. They have absolutely no idea how greedy and selfish they sound.
The Solution
I have a great idea. Why doesn’t the Alberta government tweak their tax laws so that all that outside money is best laundered through the oil companies? All sorts of problems solved at once. Think about it, Jason Kenney. Your big oil companies and our big real estate companies deserve each other.