Never in history has B.C. lost so much wealth so quickly – and intentionally.
A year and a half ago, British Columbians awoke to a startling announcement from their government: the BC NDP said it would enact whatever initiatives were required to reduce home prices.
This was a revolutionary statement. For the first time in history, a government in Canada announced that its policy was to proactively reduce the wealth of the majority of its constituents.
Approximately 70% of British Columbians own a home, and the majority work hard to slowly pay down large mortgages. These homeowners are careful and prudent families who are working to build an asset over time.
A year and a half ago, seven in 10 British Columbians found themselves confronted by a government that was actively, and openly, trying to make them poorer. It is worth looking at what this policy has achieved.
It cannot be denied that it has been wildly successful. Recent reports are that $90 billion has been lost in home value in Metro Vancouver over the past year alone. That is equal to roughly 65% of Metro Vancouver’s $137 billion GDP. It represents approximately $40,000 for every resident of Metro Vancouver, almost matching average annual salaries.
Behind this success is the fact that no rational person would make an investment into an asset where it is the government’s stated policy to make that asset worth less. Some observers point to other drivers of B.C.’s housing correction, especially the federal government’s tightening of mortgage lending rules.
However, the Greater Toronto Area has absorbed the federal changes, and the market there remains healthy.
The key ingredient in B.C. is that there is no reason to believe the market will recover as long as it is the government’s policy to ensure that it does not.
The real estate development and construction industries – which account for more than 20% of B.C.’s economy – are facing a significant downturn as a result.
An MLA Canada advisory on April 2019 pre-sale real estate insights stated that approximately 5,000 concrete units within 17 development projects have been postponed. Housing starts are down by at least 20%.
Further project cancellations are announced weekly. Billions in investment has already been lost, with job losses and associated decline in economic activity to follow.
One is hard pressed to find the winners of this NDP policy. Despite the massive wealth destruction and economic damage, few millennials are now celebrating that they can finally afford a home, nor would it make sense for any of them to buy a home as long as it is their government’s stated policy to destroy the savings they invest.
What else could British Columbians have done with the $90 billion destroyed in Metro Vancouver so far? Few homeowners will tell you they had excess wealth and had no plans or eventual use for the equity in their homes.
Collectively, British Columbians could have put the money to good use. For example, there is a lot of concern over the escalating cost of managing the growing number of wildfires scorching B.C.
The wildfire budget was increased this year by 58% to $101 million. With the $90 billion, British Columbians had the wealth to pay this bill for the next 891 years.
Or perhaps the money could have in part been directed to those actually in need of housing assistance. The NDP recently announced it would build 4,900 new rental homes for $492 million as part of the Building BC: Community Housing Fund – a cost of $100,000 per unit.
For $90 billion, we could have built enough of these units to house the entire population of Edmonton.
For the believers in the policy, the argument is that its benefits have yet to be realized because it has not gone far enough. With patience and perseverance, they believe, we can eventually destroy enough of our own wealth to be free of this problem.
Norm Streu is the president and chief operating officer of LMS Reinforcing Steel Group.
