Last Friday ScotiaBank became Canada’s first major lender to offer a toxic mortgage product. [1] [2] Then on Sunday my local broadsheet newspaper carried a compelling article [3] demonstrating just how crazy the housing bubble has become on the opposite coast from here in Vancouver, BC.
Previously, I had been looking mostly at the US mortgage finance industry and had largely neglected what was going on in my own country. Those articles provided a wakeup call. Now it seems that Canadians will need to sound the alarm about their very own bubble. Here’s the letter I sent to the editors of the paper that ran the Vancouver story.
For Chronicle-Herald editors,Thanks for publishing Mr. Bruce’s observations on howexpensive Vancouver real estate has become in recentyears. The image showing all the high-rises by theirwaterfront was astounding. This unaffordabilitycrisis is hitting many places all over the world. Alberta and BC are just a few months behind Californiaand Arizona in how this is unfolding, and it’s notpretty. Investors (“equity locusts” in the languageof us hard-core “bubbleheads”) need to sell, or”flip”, their properties to realize gains. When thishappens, a city’s real residents can mostly no longerafford to own homes.
Last Friday ScotiaBank announced new Zero-downmortgages. This is a clear sign that the end-of-daysis close approaching for our housing market. Lastmonth the US Senate held comprehensive hearings ontoxic mortgages and how they were hurting Americancitizens. It is urgent we learn from their experienceand protect Canadians from financial ruin from theseproducts.
Yours truly, John McLeod, Halifax, and contributor tohttp://HousingDoom.com/
Given that our friends in the US have provided a vivid example of how not to manage a housing bubble, it’s astounding that we are proposing to go down the same road.
________________________
Notes and References
[1]: “Scotiabank first to offer no-money-down mortgage”, CTV News, October 6, 2006.
[2]: “Scotiabank hikes risk with total mortgage financing: But can it padlock door?”, by Peter Koven, Vancouver Sun, October 6, 2006.
[3]: “Vancouver real estate hits stratosphere”, by Harry Bruce, Halifax Chronicle Herald, October 8, 2006.
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Applause!!!
I hope you get your letter published!
Any response back from them?
MikeC -
Thanks for the kind words. I did get a call from the paper on Wednesday to confirm the letter’s authenticity, but it seems not to have been published, at least it’s not on their web site.
John,
Recently I’ve heard talk that some big spenders from Dubai are planning to sink hundreds of millions of dollars into Vancouver, and “Do something like what they have done in Dubai” to Vancouver…
As if real estate in Vancouver isn’t expensive enough!
If this is true, and if enough “Big-wig” investments like that can somehow help Vancouver real estate prices stay afloat, you have to wonder at what point it becomes the responsibility of the provinical/federal government to step in and legislate rules that
(1) make homes in Vancouver affordable for the median salary earner
(2) make it very unattractive for investors to speculate on Vancouver property (ie: any property which is not their principal residence).
I understand that a great number of properties in Vancouver are held as investments by foreign owners, many of which sit empty for much of the year. Meantime, Vancouver is facing a housing crisis, as your average joe cannot afford to live there. This is insane.
I understand that some countries (Australia, S.Korea, China) have recently enacted laws which strongly deter speculative investment in real estate, and especially speculative foreign investment. Why cannot Canada do the same? At some point one hopes the Canadian government starts working for the interests of the average Canadian (BTW Yes, I am Canadian!).
Well Emaar now has an office in Vancouver. http://www.emaar.com/ During my visit they only had a couple projects and they are on hold. They do plan to buy land and expand though…..