As per Russ Froese’s vision of journalism and the way he sees life in general, while the 5 W’s (who, what, where, when and why), all compose a curious personality, the Why is certainly the key ingredient when it comes to good journalism. Following the curiosity of just wanting to know things, to be informed, to understand the context of the situation, and to hear many sides of the story, comes the importance of speaking up and getting involved somehow. It is important to be able to basically dissect the information in a simplified way and really get to “how” to believe in something and not only “what” to believe in.
In this context, critical thinking is one of the most important skills for engagement, and this is not different in the real estate context. Nationwide Canadian housing market is under pressure from all sides, due to elements such as mortgage rules changes, surplus of inventory in some places and foreign investment in large cities such as Vancouver. All these elements combined make up the everyday reality of real estate professionals, home owners, home buyers, tenants, bankers, lawyers and even homeless people. The urge for a realistic plan for housing affordability has never been more important than now. But why are we all allowing this to happen in a society where citizens have access to earn a university or college degree? Why is this happening in a place like British Columbia where land isn’t scarce at all?
In order to answer all that we must go back to the basics of the 5 W’s and really, maybe just for a moment, disregard so much market intelligence in regards pre-sales insights or how much detached home sales have gone down while condo sales have stabilized and, in some areas, even grown. As per Statistics Canada, the fundamentals on major economic trends show that British Columbia and Alberta are the top two provinces with highest GDP growth. But how much does this really matter when it comes to housing affordability and stable real estate market?
In the international context, so far in 2018 a nation like India has recorded a 7.4 GDP while Canada and USA have both recorded a mere 2.3 GDP. Does that mean the overall population quality of life in India is better that in North America? The answer to that question is No. GDP measures the value of a country’s overall output of goods and services, typically during a fiscal year, at market prices and excluding net income from abroad and it can be estimated based on the Production Approach, on the Income Approach or on the Expenditure Approach. GDP, however, may not be a realistic guide to a nation’s well being. Amongst other things, GDP focuses on indiscriminately production and consumption and includes the cost of damage caused by pollution as a positive factor, while excluding the lost value of depleted natural resources and unpaid costs of environmental harm. Therefore, GDP is seen by many as a poor measure of social progress overall.
A high or rising level of GDP is frequently associated with increased economic and social progress, but this does not necessarily play out in many instances. As a matter of fact, an increase in GDP does not necessarily lead to a higher standard of living, particularly in areas such as healthcare and education. Furthermore, GDP doesn’t account for distribution of income among residents of a country, or a province or state, since GDP is merely an aggregate measure. In this context, an economy may be highly developed or growing rapidly, but still contain a wide gap between the rich and the poor. Some of these inequalities are often associated with race, ethnicity, gender, religion, or other minority status within the countries. Even GDP per capita can have the same downside if inequality is high.
All these facets of GDP calculation bring us to the conclusion that the fact that both British Columbia and Alberta have the highest GDP growth in Canada doesn’t necessarily mean that more people will have access to affordable housing. The growth in GDP doesn’t mean that a college graduate who earns an average yearly salary of $ 35,000 will be able to have a down payment for a 1-bedroom condo in the suburbs in a decade. Even a professional with a master’s degree and an average annual salary of $ 75,000 may not be able to accomplish such task.
In the Real Estate realm of British Columbia in 2018 the now is represented by high property values and low incomes which means the affordability issue is strongly stained by lower home ownership and increase in rental rates. None of these factors will help the population achieve a cheaper access to housing. The desire for higher income levels and consistent prices to make house ownership easier might help in the long run.
For over 3 decades the local real estate market has been exposed to the opportunity to become a global market and this of course comes with many challenges as well as disappointments for those who can no longer afford a living. The speed and dynamics of real estate development in the province plus the openness to foreign investments have been great in many ways as we try to become a recognized sustainable and forward spot in the globe. However, I think in the midst of this process the industry and the government lost touch with the local average income reality and living expenses, which means they forgot to balance the books.
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