4 ms·

Given the current supply constraints in that market, it will take a very long time to build up a level of inventory that will cause a crash. The solution to the

Given the current supply constraints in that market, it will take a very long time to build up a level of inventory that will cause a crash. The solution to the problem you're describing is more units, not less. Also, this transition in real estate's role is a result of globalization. Without some kind of capital controls it's very hard to undo it's effects. Your best bet is a supply-demand oriented solution.

roymurdock 11y ago
When I talk about a crash, I mean a global correction in property and equity market values akin to the correction post-financial crisis. This would probably be triggered by a withdrawal of liquidity from public markets due to non-performing debt, or simply a prevailing market sentiment that investments have been channeled into the wrong assets following the great recession - not enough gov investment into TFP-raising infrastructure and decreasing lack of aggregate demand is a recipe for stagnation. I don't see a mechanism whereby an increasing level of inventory causes a crash. I'm saying that when a crash happens, we'll be left with wasted excess capacity as investors rush to sell off ill-thought out high rise complexes, micro apartment buildings, second and third homes they can no longer afford to pay taxes on, etc.
- andrewjl 11y ago
  The North American correction in property values post the 2008 financial crisis was due to two factors: 1) Increase in inventory levels as subprime borrowers tried to exit their mortgage via a fire sale 2) Total shut down of the mortgage markets, meaning only cash buyers could get deals done. Given the profile of the typical buyer at the high end of the market in Vancouver, an outsized effect like the one described above is unlikely. These homes are not mortgaged and their owners have savings they draw upon instead of income from employment. Job losses a la 2008 do not affect them as much. For these reasons I doubt we will ever see the kind of corrections in Vancouver like we saw in places like Phoenix and Las Vegas in 2008. Finally, a somewhat normative question, what's wrong with cheap housing? I agree with you that ill-thought out planning is detrimental to the city's quality of life. But to me at least it seems that the planning and permitting process is overly restrictive.

roymurdock 11y ago

When I talk about a crash, I mean a global correction in property and equity market values akin to the correction post-financial crisis. This would probably be triggered by a withdrawal of liquidity from public markets due to non-performing debt, or simply a prevailing market sentiment that investments have been channeled into the wrong assets following the great recession - not enough gov investment into TFP-raising infrastructure and decreasing lack of aggregate demand is a recipe for stagnation. I don't see a mechanism whereby an increasing level of inventory causes a crash. I'm saying that when a crash happens, we'll be left with wasted excess capacity as investors rush to sell off ill-thought out high rise complexes, micro apartment buildings, second and third homes they can no longer afford to pay taxes on, etc.

andrewjl 11y ago
The North American correction in property values post the 2008 financial crisis was due to two factors: 1) Increase in inventory levels as subprime borrowers tried to exit their mortgage via a fire sale 2) Total shut down of the mortgage markets, meaning only cash buyers could get deals done. Given the profile of the typical buyer at the high end of the market in Vancouver, an outsized effect like the one described above is unlikely. These homes are not mortgaged and their owners have savings they draw upon instead of income from employment. Job losses a la 2008 do not affect them as much. For these reasons I doubt we will ever see the kind of corrections in Vancouver like we saw in places like Phoenix and Las Vegas in 2008. Finally, a somewhat normative question, what's wrong with cheap housing? I agree with you that ill-thought out planning is detrimental to the city's quality of life. But to me at least it seems that the planning and permitting process is overly restrictive.