I’ve Never Been So Sure of a Market Crash
The comments above & below is an edited and abridged synopsis of an article by Justin Spittler
During bubbles, people lose touch with reality. It happened during the last US housing bubble, and now it’s happening in Vancouver. It’s a problem for local real estate investors, and a threat to people across Canada.
Vancouver’s population grew just 5% between 2011 and 2016, and local real estate prices soared 75% over the same period. This rate of price appreciation is unnatural and unsustainable. It’s only possible because foreigners are buying up property in the city left and right.
Local government officials are now scrambling to make housing more affordable. One year ago, they rolled out a 15% tax on foreign buyers. This slowed the housing market, but it didn’t fix the problem.
British Columbia’s new government, which takes office in September, plans to do far more to make housing affordable. But any sensible regulations aimed at improving housing affordability won’t just cause housing prices to top out. They will cause prices to crash at least 20%.
In June, sales in Vancouver fell 4%. Housing sales are now more than 30% below their February 2016 high, and homeowners are running for the exit. If this continues, supply will soon outstrip demand, causing local housing prices to plunge.
Most people in Vancouver don’t realize this. They feel that Vancouver’s housing market hasn’t crashed in decades. Therefore, it will never crash. This isn’t just foolish; it’s reckless.
Spittler recommends getting out of Canadian housing stocks. “You should also lighten up on Canadian banking stocks if you haven’t already,” he says. “They could take a big hit when the Vancouver real estate bubble pops.”