How important is construction to economic growth and employment across Canada?: Part 1

In a previous series we examined house prices relative to GDP growth across Canada.  That data seems to suggest that a significant level of overvaluation exists in many provinces from Ontario west (Quebec data was absent in that series).  Hopefully next week I’ll be able to post about the growth in house prices relative to incomes across the provinces.  From the preliminary work I’ve done with this data, it certainly seems to support the notion that house prices have outpaced fundamentals across much of Canada.

You may also recall that in previous posts, I’ve examined the impact of changing consumer attitudes towards housing.  In particular, the shift in sentiment towards home ownership can be seen in the rise in ownership rates across all demographics.  My belief is that house prices in Canada may have been modestly undervalued at the start of the millennium as house prices had largely been stagnant for the better part of a decade.  It’s hard to know exactly when house prices caught up with fundamentals such as incomes, inflation, GDP growth, and rents, but I would suggest from the data that we’ve seen so far that house prices began to separate significantly from fundamentals right around the middle of the last decade.  Incidentally, this coincides with a period of unprecedented loosening of CMHC insurance standards and downward trending interest rates.

Human psychology is a funny thing.  While we all love buying consumer products on sale, we find it a frightening thing to buy assets like stocks, bonds, or real estate when they’ve fallen significantly in price.  Bob Farrell reminds us that the public buys the most at the top and the least at the bottom in the stock market.  I will suggest that this is equally true in other asset markets like real estate.  Certainly the experience of the US bears this out.  Having watched their real estate market erase some $6 trillion in household wealth, Americans have a decidedly more bearish perspective on the long-term prospects for real estate.

While the credit crisis has played a large role in reducing the amount of credit available to be lent, thereby making purchasing a house more difficult in some cases, the fact remains that the perspective of the American consumers has changed greatly since the crash.  It’s an interesting phenomenon that rising house prices create demand for houses while falling prices destroys demand.  We saw this for ourselves in 2008-2009 as house prices fell, home sales stalled, and home builders quickly put on the brakes.  You’ll note the fall in house prices slightly preceded the fall in housing starts (source):

Granted the panic of 2008-2009 was an extraordinary event in its scope, but certainly not extraordinary in the manifestation of the great human emotion of fear.  It certainly highlights the reality that housing demand typically softens along with house prices.

This brings us to the topic of today’s post:  How much of a boost has this increased demand for housing had on employment and GDP growth across the country?  In answering this question we also get a hint at the potential economic and employment fallout from a realignment in house prices with measures of fundamental value.

In today’s post we’ll look at BC east to Ontario.  In part two we’ll look from Quebec east.  Note that the data set for the percentage of GDP derived from residential construction unfortunately ends in 2008.  You’ll note the sharp decline in some provinces in 2008 as the Great Recession began to pull at construction.  It would be a pretty safe bet that 2009 saw a flat to modest decrease in construction as a percent of GDP, with 2010 seeing a significant rise in most provinces in line with housing starts (Alberta being the notable exception as house prices and housing starts are well below their 2008 peak).

With that said, I’ll let the graphs do the talking…


British Columbia





Note that every single province is well above its long-term trend line in both the percentage of employment derived from construction and construction jobs as a percentage of total employment.

With interest rates set to rise, credit conditions tightening, and domestic demand arguably satiated, it’s hard to see where this sustained demand will come from to begin with.  Furthermore, housing starts have outpaced net household formation (immigration plus ‘organic’ household growth) for the better part of a decade now, to the tune of some 30,000 units annually.  I believe that this demand has been absorbed largely by the expansion in home ownership rates, a trend that cannot possibly last indefinitely. As a best case scenario, I see this as a drag on employment and economic growth.

However, the best case scenario is far from assured.  With the possibility of a significant nationwide housing correction far from negligible, the risk remains that demand could fall significantly which would have significant implications for economic growth and employment, as construction has been a major boost to overall employment, particularly coming out of the recession.

Lest you’re inclined to suggest that immigration and investment from wealthy foreigners will replace the demand, allow me to remind you of the following:  1)  Even with current immigration trends in place, total population growth is set to slow.  2)  Even wealthy foreigners are subject to the same irrational thought patterns as everyone else.  I’ll suggest that much of the foreign investment we are seeing would decrease substantially in the event of a significant house price correction, exacerbating the problem.



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56 Responses to How important is construction to economic growth and employment across Canada?: Part 1

  1. mac says:

    “Lest you’re inclined to suggest that immigration and investment from wealthy foreigners will replace the demand, allow me to remind you of the following: 1) Even with current immigration trends in place, total population growth is set to slow. 2) Even wealthy foreigners are subject to the same irrational thought patterns as everyone else. I’ll suggest that much of the foreign investment we are seeing would decrease substantially in the event of a significant house price correction, exacerbating the problem.”

    You just don’t get it do you? Get on a bloody plane and spend a substantial amount of time here. Where do you live? Timmins? They have subsets of the market, hold and trade to each other! There are showrooms in China with YVR and probably Toronto newly bought condos there. There will be and already is a BIFURCATION that removes said subset inventory from the market. That inventory is what is needed to cause a bleedin’ collapse. The local folk are forced into a smaller subset of the market and that may or may not decline independently depending on gov’t policy, rates etc.

    Why stick with what you’re saying and not seeing over and over again? Talk to your friend John. Toronto can handle what we’ve seen in YVR price-wise. Get a house or an apartment because you, my friend, and your wife and kids are about to be SOL for a decade. After 20 years of waiting, maybe you’ll come out 100K ahead. Maybe not. Your wife will hate you and resent all the endless hours you spend compiling the same data over and over again. Cancel your new website and go make another baby while she picks out a 3-bedroom place she likes.

    • I guess we’ll see who “doesn’t get it”. The rich asian story is a tired, recycled story used in the past to justify sky-high housing prices in Vancouver (remember Hong Kong immigrant story back in the 80s?). Not to mention that rich Chinese investors have been suggested as the holy grail of high house prices in such places as LA, San Fran, etc. How’d that go for them?

      Is it driving prices higher? Absolutely! Will it continue indefinitely? Highly unlikely. Further to that point, the wealthy Asian story is much more likely to be supporting house prices by luring folks into the market with the exact same fear mentality you just described.

      Go ahead and say it, Mac: “This time it’s different!” Or how about this one: “Buy now or be priced out forever”.

      I also can’t help but notice how you hold other posters to a strict moral standard when it comes to taking things personally, a standard you clearly don’t hold yourself to when it comes to making personal attacks.

    • SAD says:

      Depending on where the home is located demand may maintain it value. No more price increases for the most part. Housing needs demand. That has been sucked up and stolen from the future. With the infrastructure program over many construction jobs will be lost. We are on a slippery slope in Ontario. Manufacturing expansion is dead. What Industry is going to replace the lost construction jobs? Back in 1994 there was a unsold inventory of built condominiums in Toronto of 74,000 units. If you think that has not been repeated and those clubs will keep flipping and trading than you are the fool. They bailed than and they will bail once again. Most of them are young and naive. If you have the answer to the upcoming employment crisis than I can agree with you. No jobs mean no housing demand means prices drop. It will also cause chaos in the service industries. The elephant in the room is becoming more and more visible everyday. Have you investigated the supply chain problems that are rippling through the world? The auto industry is going to be deeply affected for a while. So give us the answer. What industry is going to create hundreds of thousands of jobs shortly?

    • Joe Q. says:

      i.e. “Buy now or be priced out forever”. When has that actually been true?

  2. jesse says:

    Uh-oh trolls are getting angry. Yup… above-trend construction employment. Nothing to see here. Move along.

  3. Kevin says:

    In 2009, construction jobs were 8.1% of all jobs in the Saskatoon CMA area.

    Click to access 227.pdf

    Saskatoon housing starts in 2010 were 56% higher than in 2009 plus many big projects that were started including the 1 Billion dollar expansion at the University and a South Bridge costing almost 300 million. Just recently there was an article mentioning the record number of cranes in this city with private and public enterprise thinking that this is the place of endless growth.

    Historically, the average % of construction jobs is near 5% in Saskatoon. I am estimating that the number is close to 10% right now in this city.
    Is it no wonder why the Conference Board of Canada said that construction would lead our growth in 2011? How are other cities faring?

  4. Joe Q. says:

    Ben, try plotting all your %-of-GDP provincial data on one graph. The results would be very interesting.

  5. Sams Mango says:

    You need construction to build houses, prices are up and more houses got built. SO WHAT? Houses are not squeezed from stone. What do you exactly think the lower rates are designed to do? GET PEOPLE WORKING, which is what a housing boom does. It touches all sectors, from the house plant to the lumber in your couch, to getting that TV and setting up a Rogers account. Of course a house boom will help manufacture jobs – I have to agree with Mac’s frustration a little, the website is recycling data that is getting very stale in front a weaker and totally wrong predication about Canada’s housing market.

    As I have said before, why not focus on real and practical trades that will profit from your ideas, time and energy. No one has to comment on this blog, but we do to support/debate you. We all need to be paid for our time, including you.

    • “What do you exactly think the lower rates are designed to do? GET PEOPLE WORKING, which is what a housing boom does. It touches all sectors, from the house plant to the lumber in your couch, to getting that TV and setting up a Rogers account.”

      Bang on. The more relevant question is whether this is a sustainable boom or one driven, as you suggest, largely by an unsustainable expansion in debt caused by lower interest rates and loosening credit standards.

      “the website is recycling data”

      Find me where any of these graphs have been used before, either here or on any other web site. The only thing being recycled here is the tired mantra that “this time it’s different”. Enjoy the boom while it lasts.

    • Dmitri says:

      Except that, this is a miss allocation of resources. Instead of increasing productivity and quality we are producing overpriced consumables (yes, housing is a consumable). Instead of driving the costs down (ex: computer technology) we are producing something of the same utility at the increased price. There is no feedback into the research/technology/high tech sector from this boom. How long do you think an economy that wastes it’s resources on the parasitic, perverse endeavours can strive for?

  6. mac says:

    That WAS a personal attack. Out of absolute frustration. So you’re right in taking offence this time. You are one stubborn guy, Ben. And you’re keeping your head in the sand, possibly to the detriment of your family.

    There’s greed. Of which you perhaps justly accuse me of succumbing to. Then there’s the other side of a bad trade: fear. Is that you?

    I’m in favour of Mango and John’s idea. Let’s move to trading. Unless you think everything is in a bubble. In which case, how does one make money in your scenario? Cash? It’s really been the wrong bet for 2 years now, if not longer. If there’s inflation, it’s definitely the wrong place to be.

  7. “There’s greed. Of which you perhaps justly accuse me of succumbing to. Then there’s the other side of a bad trade: fear. Is that you?”

    I didn’t accuse you of subscribing to anything. I just pointed out that your comment was pretty ignorant and hypocritical based on your prior moral bluster.
    Frankly I’m not ‘afraid’ of house prices getting ahead of my ability to buy. Not at all. I’ve crunched numbers which I’ve shared here. On the basis of overwhelming probability, housing will underperform over the next decade, with a more than insignificant chance of a correction on the order of 20-30% nationally. Based on the fact that I can rent a house for a fraction of the cost of ownership, invest the difference, and build equity far faster than my 5/35 peers, why would I be in a rush to buy? The notion that house prices nationally will be pushed massively beyond the realm of affordability for the average Canadian family by a huge influx of foreign wealth, while hypothetically possible, is of such a ridiculously remote possibility that to make the largest purchase of one’s life on that premise is the height of irrationality. If anyone is embracing fear here, it’s certainly not me.

    This blog is about moving beyond the “this time it’s different” meme which is questionable at best, while analyzing the data from various perspectives. Your comments are always welcome, but dude, you’ve got to chill out. You’d think by your response that me questioning the sustainability of the current Hot Asian Money story is akin to me taking a pot shot at your mom. Chill!

    “how does one make money in your scenario?”

    Already discussed….

  8. mac says:

    First of all, you used to call the Hot Asian Money, mythical. ie: they didn’t exist. Now, they exist, do they?

    Second of all, you can’t buy a house in a national market. You buy it on a street, in a neighbourhood in that market. I think it’s about time to say where you live dude. I’m sure you’d agree that when you read a book, an article or a study, you look at the author and publisher first to see “where they’re coming from”. So where do you come from? What’s your hood, dude? Timmins? Rideau? Abitibi? Yonge St? Because your blog also constitutes real estate advice and we’re all influenced by our experience.

    • Let’s clarify some misstatements there: I have never argued that there are no foreigners purchasing homes in Vancouver. That would be ridiculous. What I have argued against is the notion that it alone provides the full measure of buoyancy to the market and more importantly that it is enough to sustain house prices at current levels. If you are going to critique my position, at least get it right. The use of exaggeration weakens your credibility.

      As per your second ‘point’, does someone need to live somewhere to analyze the fundamentals in that area? Have you personally visited the facilities of every stock you own, or can you reference other metrics to get an idea of the value of that investment? If your point is to suggest that since I don’t live everywhere in the country simultaneously that I cannot possibly comment on the measures of fundamental value at any location other than the one square block in which my home is located, that is completely ridiculous.

  9. tw says:

    I am surprised at those that complain about the information contained here, and chastise the author for his opinions. Feeling some doubt are we? If you are looking for a smoke blower, the newspaper will likely suffice. One would note that this type of frustration becomes fevered the closer we are to an apex. So thanks for the heads up.

    It would perhaps be a good time to read, or re read “Manias Panics and Crashes” by Charles Mackay. I find it ironic to hear the same arguments again and again….and again that this time is different. Sure, maybe, but this book shows conclusively that our timeframe, and indeed understanding and knowledge of history is sadly bereft. Especially today, courtesy of the internet.

    Like the cry of catastrophic global warming, swine flu epidemics, no more oil for 50 years running, the evidence that “housing never goes down in value” will join the ranks of yet another brilliant pr campaign by interested parties, while debtors struggle with the shackles of their confirmation bias and impulsiveness.

    Enjoy it while it lasts.

    • Sams Mango says:

      It’s been lasting over 10 years and the bulls are laughing to the bank. What else is new, why would the bulls be frustrated – it’s the bears that need a head check.

      • ATP says:

        Keep laughing to the bank. Just let realists like Ben and us choke on our own cash or vomit or whatever. What I don’t understand is why someone like you who has apparently been profiting from the RE bull market even CARE to prove the bears wrong. If I have been profiting from, say, gold and silver, I wouldn’t bother visiting any precious metal bear sites to proselytize or argue. I’d just keep stopping by the bank with a G.W. Bush smirk on my face. Only you yourself know whether you have doubts about your own conviction. Why care about data and what others think when your faith is strong?

      • tw says:

        Taleb has several excellent passages in his first book called “Fooled By Randomness”. Recommended reading for those living by the “track record”.

        After 10-15 years of financial alchemy, courtesy of the central banking cabal, I assume that you are certain that they are omnipotent.

      • Dmitri says:

        “It’s been lasting over 10 years and the bulls are laughing to the bank.”

        Except they don’t, they still slave away from 9-5, carrying a bigger debt load while paying a higher property tax with stagnant wages on the “gains” they can’t even utilize.

        Other than the few exceptions, I don’t see anyone escaping the drudgery of everyday tasks through the purchase of RE a decade ago.

      • Sams Mango says:

        I guess you all rent and have been priced out of the market

        @ atp – to be not aware of what is going on with your investments is not smart investing. Good luck to you. If you can’t see why someone who is long would be concerned about a downturn, then you must have no real investments.

        @ tw, the Canadian real estate price boom over the last ten years in not random. It’s real, prices have gone up. Good luck finding that random house with a 10yr old price tag

        @Dmitri – the debt load has to be adjusted for lower rates. Long term growth rates in Canada on real estate are fair.

      • tw says:

        Randomness refers to the idea that something appears to be known, and therefore a given practitioner appears to be a genius for knowing and profiting from whatever they “knew.”

        Randomness is the factor that one fails to appreciate as a huge factor over time. That housing has gone up for 10 years is a reinforcing concept which is a big reason why people can talk about a bubble and a bust.

        If the government had not stepped in 3 years ago your assertion here would of course be false. Fooled by randomness applies. Just because you can identify with the recent past does not project into the future, although retailers, politicians and various salespeople use it to their infinite advantage.

        In the book a bond trader makes substantial sums of money for close to a decade in emerging market debt, only to lose it all and more in a span of several weeks. Read the passage.

  10. jesse says:

    Moody’s downgrades China’s property sector to negative:

    No problem here either. Much Ado About Nothing.

  11. mac says:

    If I asked a person providing me with stocking advice where he stood personally on a stock, he would have to divulge whether he owned it or not. But let’s not shift the conversation. I am not saying anything about anything in general or as a rule. I am asking you specifically and personally, where do you live? Where is this blog written from? What’s next to the copyright mark? Timmins? Quebec City? Oshawa?

    • ATP says:

      You do know how to Google, don’t you? Warning: Logical deduction skill required.

    • Well, I live in Southern Ontario and I rent….neither of which has been hidden from my readers. Would you like a specific address so you can stop by for tea? Even better, would you like to now explain how my place of residence in any way affects my credibility?

    • jesse says:

      LOL yes when the data are presented, question the motives. Data don’t have motives, mac.

      I’ll disclose my situation to you, and you will certainly disclose yours I hope. So here is me: I do not rent. My family is heavily invested in real estate. I am bearish.

  12. Brett says:

    Mac, its great that you comment on this blog about an opposing view and you do add some value, however with your comments today I think its time you back up some of your opinions with data analysis. Just because you come on here and state that housing will sustain or increase its value based on living in Vancouver and observing Asian buyers purchase property is completly baseless. Until you gather and compile data like Ben has been gracious enough to provide us with (for free), I suggest you continue to gaze in awestuck reverence at Vancouver Asians and keep praying to them nightly that they will continue to support your views.

  13. mac says:

    OK Brett, I’ll nip out and go get some race-based data and while I’m at it I’ll ask for the ill-gotten-gains data too and let’s not forget the money-moved-secretly-between-families-with-undeclared-to-CRA-worldwide-income-data. I’ll be just a minute or two.

    • That’d be great, Mac. Thanks. Could you also get the US and Australian data for us? I’m sure we could then make some sense of why it’s propping up our market but not theirs and more importantly why it’s going to continue here indefinitely when it hasn’t in so many other places that used to use believe that rich foreigners would hold property prices at extremes relative to fundamentals. I’m sure the answer must be more complex than saying that much of that money is likely chasing self-reinforcing and temporary momentum.

      • Brett says:

        Who am I more likely to beleive? Someone who has provided me with multitudes of various charts and data sets all combining different variables, laid out in an easy to understand format coupled with an extensive commentary and valuble insights?
        Or someone who lives in Vancouver, has nothing to back up his claims, and generalizes his views of the entire market on only what he has seen physically with his own eyes in one section of one city in one province?

      • Sams Mango says:

        Brett – in spite of all the fancy graphs, the prices continue to soar. Deal with it. The data is useless

    • jesse says:

      Thanks for taking that on, mac! I’m looking forward to your report.

    • Dmitri says:

      So your premise is that housing is supported by some mythical, unproven gray/black market transactions (in lieu what CHMC data shows) ? What’s next, the fairy tail about Santa Claus?

  14. mac says:


    BC real estate data is easy to find. SFHs skyrocketing up, as would have been obvious to any casual RE observer in YVR. All data confirms it. Check the Vancouver real estate boards. But we can’t listen to them, right? Because it’s a conspiracy to keep the bear down. Stick to your self-made charts and data, guys. And if you really love them charts and data, get in a time machine back to 2003 when these fool-proof (or foolhardy) graphs originally pointed to imminent collapse. 50% decline coming your way any minute now. Just keep your money in GICs while your house is bought by Mango and her kids. Remember, you can’t save as fast as her kids can spend. She warned ya.

    Ah, I’m glad you’re saying it straight Dimitri. They’re mythical and don’t exist. Just like Santa Claus. Hysterical. You’ve learned it all from a guy in rural Ontario. Brill! Hey! Didn’t Australia just pass… now what are they called….oh yeah… laws restricting foreign buyers? Didn’t see that come up as an election issue.

    In fact, both leaders seem horny to keep the housing game going. Harper’s bragging about his success resuscitating the economy and Iggie wants to give you money for green renos. More of the same to come. And by that I mean decline, of course. Just wait until they jack up rates by 3%! That’ll happen any day now. Just ask Carney. He’s not pleased the increasing dollar is offsetting inflation leaving him free to keep interest rates pretty low for a time to come. Nope. He’ll be tinkering with interest instead.

  15. jesse says:

    We don’t have much data on the finance rates of recent marginal buyers. There have been unsubstantiated claims of buyers from China buying in cash, which I would not doubt, yet I see a ton of ads in Chinese for mortgages from the Big 5. Lending can also come in the form of finding investors; that a bank issues a “loan” is only one of the many forms of financing available.

    There was a “step change” in sales in the Vancouver area after March 18th. That was mighty coincidental with CMHC revoking 35 year amortizations. So taking on faith that there is causality there, we can take a guess that around 20% of purchases in March were due to people “beating” the rule changes, meaning 20% of recent buyers are levered more than 5-1 through traditional means.

    When mac is talking about BC, he’s really referring to Vancouver, just so we’re clear. Parts of the province have inventory sales rates measured in years, not months.

    I’ve done the math on the supposed injection of foreign capital into Vancouver’s market. We are talking about $20-30BB in annual capital injections just to keep current valuations at current sales rates. With recent run-ups one could argue that onus just increased a few more $BB. We’re talking about a MASSIVE proverbial lens focusing capital into BC, which roughly equals the magnitude of those construction GDP number Ben has cited. It really is a wonderful petri dish for rampant capital inflows that, until recently, used to be exclusive to the developing world.

  16. tw says:

    ….blackberry mafuntion….

    What I was attempting to write was: are these property purchases all cash? If not are other leveraged assets utilized to obtain loans? Or is the property obtained through leverage subsequently used as collateral for other asset purchases?

    It is important to consider the complex nature of finance and financing when evaluating an asset. In other words, if a major disruption occurs in a large foreign economy will such complex arrangements result in unexpected and unanticipated liquidations in other countries? How might this affect housing prices?

    …Ben could you remove my comment above this one?

  17. Alex says:

    Mango: “weaker and totally wrong predication about Canada’s housing market.” Wow. Another pearl.

    Just tell that to the people of Kelowna. Or Penticton. Or Pricne George. Or Nanaimo. Or Chilliwack. Or Whistler. Or Squamish. Or, now, Abbotsford and even parts of Langley and Coquitlam. It’s getting closer all the time to the core.

    Bubbles defate from the inside out, and this is one of the last bubbles on earth. Vancouver (west side) and slowly sinking Richmond are NOT AT ALL representative.

    Even the mainstream media, supported heavily by the real estate mob, is getting it. With the exception of the ultra-rich, whether they be offshore or not, not bloody many can afford the insanity any longer. Food? Up. Gas? Up. General cost of living? Up. Property taxes? Up. Restaurants? Up.

    Imagine spending a half million for some typically ugly greater Vancouver suburb box in Langley or Surrey, and then imagine having to mortgage it to the hilt, so you’re actually paying back $800,000. And then add in the repairs, and the upkeep, and the property taxes, and the price increases in virtually every other aspect of life. Good god, what a horrific thought.

    There’s a breaking point, and we’re already there.

    • Sams Mango says:

      You must have missed all the data on this website and conversations. We are talking about National levels of housing, which is going up and being attacked with Ben’s work.

      National = Average
      You have pointed out some towns that suck, I can point out towns that have done well, what is your point?

      Yes prices on assets have gone up, but Alex, so has the housing markets and investments. For some reason Ben and the others continue to avoid talking about investing. CARNEY IS TELLING YOU SOMETHING. I have been telling people on this blog for so long now, while I am watching my stocks and RE soar, it is offsetting the things you mentioned as Carney is robbing from GIC holders (YOU) and giving it investors (ME)

    • Declan says:

      Alex – you’re way off … because you forgot Vernon, Port Moody, Port Coquitlam and Victoria…

      Jesse, yes the trolls do seem a little angrier than normal on this post. “The Data Is Useless” will make for a nice epitaph on this bubble (as always, with bubbles).

      I guess we’ll just have to get Bev Oda to add in the ‘not’ (i.e. “The Data is ->Not<- Useless") after the fact.

    • jesse says:

      Yup Carney is telling people in Vancouver and Toronto that low yielding assets are a good investment. That’s exactly what he says. Well not really. But read between the lines. Think about how great and magnificent a concept that is: Carney caused permanently high prices in specific parts of two cities using interest rates and his magical mind control powers emitted through press releases and speeches to businessmen.

      Do you see what’s going on? Do you see?

  18. vreaa says:

    Thanks for the post, Ben.

  19. A. H. says:

    Another great post with excellent data and analysis Ben, keep up the good work!

    I can’t believe how rude and obnoxious some of the comments are today. I don’t know why someone who’s mind is already made up (data be damned!) would follow your blog only to get high blood pressure and have a hairy fit. I think the tide’s going out and some folks are getting nervous about swimming naked! (and/or being realtors 😉

  20. Sams Mango says:

    Daily Special – love the names of the two brokers at the end of the clip – Goldman and Barry the “Player”

  21. Ridiculous says:

    I would have to think that based on his reaction, Mac is probably either:
    A. Heavily invested in real estate
    B. In construction
    C . Both

    I have 2 observations:
    First, for the most part, it is nearly impossible for one to understand something if their income depends on them not understanding it, so this little wrinkle in human nature may be causing him some grief.

    Second, and not as common a mention on the ole’ RE blogs is the human reaction to change.
    The second stage = anger. Im sure Mac enjoyed the denial stage until Ben came along and made denial of the truth virtually impossible (thanks Ben!). I mean let’s get serious- NO ONE can really afford to live in Vancouver at the moment and expect to retire comfortably and raise children. It really quite a long running joke.

    That being said, the more one has to lose from change ( ie a diversion from what is perceived to be “normal”) the more extreme a persons reaction at each stage. Next comes bargaining, then acceptance.

    I would expect that once he cools his jets, look for more attempts from him to convince himself that the Chinese are still coming, which “will soften the crash” as it’s happening only to be followed by absence in defeat as the market finally crashes.

    • jesse says:

      D. Troll

      No data; instead we get platitudes. He ignores the valid arguments and pulls out trump arguments that cannot be refuted with any temporal means. Gets angry when ignored. Uses previous unrelated criticisms in an attempt to weaken the issue at hand.

      D. My final answer is D.

  22. Joe Q. says:

    Looks like you struck a nerve with this one, Ben!

    What always fascinates me about bulls is their approach to the “herd mentality” in general (“everyone wants to live here”). The upside gets a lot of attention (“there are 1.2B people in China, and they all want to live in Vancouver”) but the downside is completely ignored, despite ample evidence of its catastrophic potential.

    What would happen if even a few % of the mainland Chinese homeowners in the GVR area decided to get out at once?

  23. John in Ottawa says:

    There is going to be a housing correction.

    Google world’s safest economy +canada and you will get 5.7 million matches from some of the best economic sources from all over the world. Recent stuff.

    All those people from all those countries are, of course, extremely stupid. They can’t see the financial devastation that is just around the corner in Canada. Banks destroyed, bonds running 15% above US Treasuries, CMHC sitting on a corner on Yonge St with a baseball cap on the sidewalk in front of it, Canadian thirty something families living in tents in public parks, and the courts backlogged for years processing foreclosures and bankruptcies.

    The IMF will step in and save us, naturally. They will partition off our water rights and our oil and sell them to Goldman Sachs at pennies on the dollar, establish an overseer and liquidator for the Bank of Canada and establish a new tax regime that will keep our grand children in financial servitude for their entire lifetimes. Oh, and of course, they will sell off the Canada Pension Plan to pay our foreign debts.

    Ah, wait. I see my error. We have the Canada Pension Plan to sell to foreigners if they lose money investing in Canada. Oil and water too, not to mention mineral rights. No worries, mate! We are the world’s safest economy, if you are a Hot Asian with Money!

    A little morning levity to brighten your day. Now I really must get back to chopping firewood for next winter.

  24. John in Ottawa says:

    Slightly dated information (March 3, 2011), but pertinent to the investment climate in Canada, is this report from the Fraser Institute on the ranking of which jurisdictions/nations are the best in which to conduct mining operations.

    The report covers 79 jurisdictions from Alaska (21st) to Zimbabwe (71st). It assesses how “mineral endowments and public policy factors such as taxation and regulation affect exploration investment.”

    Alberta topped the list and Saskatchewan, Quebec, and Manitoba made the top ten. Surprisingly, only two US states, Utah and Nevada made the top ten. One state, Wisconsin, made the bottom ten.

    Australian states populated the middle of the pack, as did British Columbia which scored 36th.

    This little investment tidbit brought to you because cutting firewood is really wearing me out.

  25. mac says:

    You guys are getting close to figuring it out. Take arguments from 2003, add all the blogs you’ve visited for the last 8 years, subtract every quarter you were wrong and voila! 50% price decline. Especially in Vancouver. Those SFHs are going to go for a song. Back to 440K. You guys will make out like bandits.

  26. mac says:


    “…yet I see a ton of ads in Chinese for mortgages from the Big 5. ”

    It seems everyone is horny for Chinese money. I too wonder if the local Chinese/Hong Kongers/Taiwanese are trying the best they can to keep up with mainlanders with borrowed money. But it is impossible to know, so I don’t speculate on numbers. It would be a relief to me if it was a mania caused by a bit of offshore money but I fear it’s not.

    “We’re talking about a MASSIVE proverbial lens focusing capital into BC, which roughly equals the magnitude of those construction GDP number Ben has cited.”

    So are you actually saying that it could keep prices up? I’m not fully getting your metaphor.

    As for tw’s theory of disruption in, say China’s economy, I mean seriously. I was expecting that with all their ghost cities, it would implode. Certainly you’d expect construction to dry up but now the gov’t announces they’ll build 10 M units of social housing over the next few years. How could you even see that coming from here? You know nothing about China’s ability to manipulate and control its markets. The only thing you know for sure is what they tell you and that’s not knowing at all.

    All real estate markets are local. I bet yer all spinning that I’m saying this. But. But a bifurcated local market is a bifurcated market. You only have to look at London. Foreign money going back to the 80s and city bonuses is what keeps it up. And please don’t quote me Shiller recently saying London is going down. Not yet. Not so far. This month up. And don’t quote me Mish’s one building in god knows where Australia going down with a developer taking a haircut. I need to see a real and substantial decline in desirable Syndey/Melbourne house prices to feel comfortable comparing it to a Vancouver scenario. I’m still waiting. And yes, hoping it will decline. But so far, I’m wrong. It’s time you guys admitted same.

    • jesse says:

      “Foreign money going back to the 80s and city bonuses is what keeps it up”

      Foreign money in London puts the stuff trickling into Vancouver to shame. We’re talking an order of magnitude difference, no comparison.

      Real estate is local because locals buy real estate. No city bonuses, only local incomes and capital inflows, that, for BC, must equal or exceed the province’s entire health care budget on an annual basis to keep prices high. I don’t know if a crash will happen but let’s just say I won’t be surprised.

  27. Pingback: How important is construction to economic growth and employment across Canada?: Part 2 | Financial Insights

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