Last post went viral, not the good kind
Some people got really angry
Last week, I wrote about the absurdity of a single family house listed for 9.8 million dollars.
I picked it to get the point across about the price gap between the Vancouver market and the Alberta market.
Was it a fair comparison, of course not.
Not all Vancouver single family houses are selling at that price.
But the craziness stands.
Little did I expect it would go viral on Facebook.
Since I posted it on Thursday, as of today at 3pm mountain time, over 230k people have seen the post.
It doesn't seem like it's stopping yet.
The post received some angry comments.
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Allow me to share a few here:
"It's crazy to think that a property owner in Vancouver wants their piece of the pie. A developer comes in and builds a high rise with how many units in it, selling at how much per unit? The developers are the greedy ones. Don't like it? Tough. Keep your money and more somewhere else. I have lived in the lower mainland my entire life. These properties were affordable before foreign interference in our market. You ruin your lands and then want a better life so you come here and make life miserable for all of us who have lived here for generations. Vancouver is a sh*thole now and all because of foreign investors making life unaffordable here." (edited for language)
"Developers and real estate agents are akin to ambulance chasing lawyers."
"Building housing and making ludicrous amounts of money doing it, are 2 very different things. If I were you, Id start worrying about what the ppl will do to you when they finally realize what you are doing to them. The bill comes due."
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Some blamed the foreign investors. Some blamed the developers, even the real estate agents!
Too bad the public doesn't know they were sold a lie by the politicians.
Too bad the public doesn't understand how economics work.
Too bad the public doesn't know what's really going on.
The only thing they know is that houses and rent keep going up.
It's making their lives more and more challenging.
While their standard of living is going lower and lower.
This reminds me of the song from Les Misérables:
"Do you hear the people sing?
Singing the song of angry men?
It is the music of the people
Who will not be slaves again!"
Maybe you have friends or family members who share those same sentiments.
If you're tracking the data as much as I have, I think there will be even more "angry men" and "slaves" (economically speaking) in the coming years.
If only they would take the time to understand what's behind this madness and stop believing the lies our dear politicians have sold them by blaming everyone.
It's wishful thinking I know.
I hope you will be able to share this with your families and friends.
Even if only a few would listen, it just may help them change their lives.
Here's hoping few would listen and try to understand...
Allow me to explain what's going on with Canadian real estate.
.
Real estate prices & rent goes up for 2 simple reasons:
1. Inflation
2. Supply and demand
I'll save #1 for future discussions.
Today, let's look at #2 - Supply and demand.
Let's use a made up place called Maple Town as an example.
For years, it's been a great community beloved by the local residents.
Maple Town has a major industry - making and selling maple syrup.
Just like many other towns, Maple Town has workers in restaurants, construction, government, health care, education etc.
Maple Town is a middle class town and it has plenty of jobs.
It's been a hidden gem for local residents to invest in real estate as rentals because of the strong job market resulting in people's ability to pay the rent.
.
20 years ago, the real estate market got "discovered" by people from outside the town.
A few "out of towners" bought some properties as their investment properties to rent them out.
Because of the healthy job market, Maple Town attracted people from nearby towns to move their families there for work.
The incoming people needed housing, which created competitions for the homes available for sale and rent.
The competitions resulted in buyers out bid each other, which drove up the price and rent.
As demand trumps supply, Maple Town attracts developers and builders to build more homes.
Some of those new homes were bought by investors locally and few from "out of towners".
They rent out those properties to fellow Maple Town residents.
.
Fast forward 20 years later, the biggest demographic in Maple Town are retiring from the workforce.
The mayor at Maple Town is highly concerned that businesses and town services will collapse if there's not enough people showing up to work as more and more people retire each year.
The mayor promoted Maple Town to nearby towns to encourage young people to move.
The campaign worked and brought lots of people moving to Maple Town.
On one end, the mayor at Maple Town saved the businesses and government services from collapsing.
That is a big deal, because if the businesses and government services collapsed, there won't be a Maple Town.
People will move away, and Maple Town will disappear.
It happened to many old mining towns.
Once the mines shut down, those places become ghost towns.
The mayor knows that.
.
On the other hand, because the newcomers are all needing houses to live, the sudden influx drives up the local real estate prices.
Even though every developer and builder saw this coming years before, the mayor ignored their warning years after years.
Because of the mayor's poor planning, the property price and rent go straight up.
The young people who grew up in Maple Town are now turning into adults.
Unfortunately, the houses are so high now they can't afford to buy.
Even rent is barely affordable.
Requiring many to work extra hours after work just to be able to pay rent.
They are angry because Maple Town wasn't like this for their parents.
As a way to hang onto power, the mayor blamed those "out of towners" for buying local Maple Town real estate.
The people at Maple Town believed the mayor without realizing that the "out of towners" only own a small percentage of properties in town.
Not to mention, the properties these "out of towners" own have been rented to local Maple Towners which helps provide housing to local people.
Seeing the developers making money from building houses and selling them at a price many cannot afford, the Maple Towners also blame the developers and builders.
If someone is making money when I'm feeling miserable, they must be at fault right?
Even though these developers and builders are also adding more housing for Maple Town.
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Now, replace Maple Town with Vancouver, Toronto, Burlington, Victoria, Halifax, Ottawa, etc.
That's what's happening TODAY with the Canadian real estate market.
People blame the foreign investors, the developers, even the real estate agents.
Too bad the public doesn't know they were sold a lie by the politicians.
Too bad the public doesn't understand how economics work.
Too bad the public doesn't know what's really going on.
It's a really sad case study of extreme supply and demand imbalance that's caused by years of poor planning.
I don't like Kevin O'Leary as a person, but I agree with what he said:
"Canada is the richest country on earth run by idiots"
It doesn't take a rocket scientist to guess where the real estate prices and rent will go next.
As long as we are in a severe supply shortage and demand is overly strong, house prices and rent will continue to go UP, UP, UP*
*This is not financial advice to buy any real estate property. Everyone should do their own homework to understand how to best invest in real estate.
Just because the upside is there, it doesn't mean the real estate market doesn't go through up and down cycles like what we've seen in the past few years.
If people think housing prices and rent are high today, in a few years they may be shocked by how "cheap" they are today. This is especially the case for markets like Alberta.
Until we reach supply and demand balance, I believe the future has been written for us.
Feel free to forward this to people you care about.
If you missed the “drama” from last week, here it is: 2008 Crash Again?
Have a comment or question? Want to share your thoughts on the Canadian Real Estate market? Reply to this email to let us know.
Not all comments were angry though.
“Great post! My opinion is really specific to Calgary. I don't forsee a crash like previous, although anything is possible I guess. For a long time the sole economic driver was oil but during COVID it became a good choice for many start up companies with plenty of office space at a reasonable cost. We have had many larger companies also expand here along with new industries like Tech and the Film industry which have grown substantially here. I believe Calgary is in a much better position to handle a downturn as there are multiple economic drivers now besides just oil. Calgary has really diversified it's economic drivers, just my 2 cents...Lol” - Reader Amber R.
.
“The time for Alberta has come. We can’t wait.“ - Reader Rachel H.
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“Great post! Thanks for sharing. Some people think they might be late to the party in Alberta, but the way things are going in ON and BC, the AB party is probably going to continue. With lower cost of living and higher salaries, it’s a natural choice for many people specifically if they like the outdoors!“ - Reader Ali N.
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“Alberta has the lowest buying costs and operating expenses in the country. Alberta has the highest median income in the country. Alberta has net positive migration.
Worried about a market downturn - buy/build for cash flow!
One of 2 markets in Canada you can still do that!" - Reader Denise E.
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“I would move to Alberta for many reasons, but my life is here and I am fortunate to have a nice home to live in. If I didn't have as many ties, I'd definitely consider Alberta for financial freedom (or at least very close to).
Others should really consider what Alberta has to offer.” - Reader Bert L.
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Eric Chang
Calgary, AB
June 25, 2024
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