Thousands of Vancouverites have become instant millionaires – at least on paper
Earlier this week, we experienced the second major meltdown of world stock markets since 2008. It’s estimated that trillions of dollars worth of assets evaporated overnight.
Yet, for many of us living in Vancouver, all this talk of economic malaise still seems rather foreign to us. That’s because the real-estate market has transformed thousands of local homeowners into instant millionaires – at least on paper.
Despite all of this wealth generation, is it only a matter of time before what’s impacting other economies comes crashing down on our doorsteps? If you want to see what our future might look like one day, I’d suggest you take a glance at Phoenix, Arizona.
Only a few years ago, Phoenix’s population was booming and it was one of the fastest growing cities in North America. Housing prices were climbing year after year and there seemed to be no limit to its growth. Then, in 2008, the global economic meltdown hit Arizona’s capital city really hard. Three years later, it has yet to recover.
I was just in the American southwest last week and got a first-hand look at what life is like in a new era of foreclosures and business bankruptcies. I can report it doesn’t look pretty.
But, if you’re a Canadian looking to purchase property down there, consider yourself in the driver’s seat.
Last month, our family was able to purchase a nice two-bedroom condominium in a gated lakeside community for just over $60K. A few years ago that unit was selling for over $170K. Now, if that same condo were for sale in Vancouver, it would easily fetch at least $500K.
Although most economists argue Vancouver isn’t on the verge of a housing bubble, just imagine what would happen if housing prices suddenly dropped by 15-20 per cent. A lot of Vancouverites would owe more on their home than it’s worth. Does this sound familiar?
If you want to see what a moribund economy looks like, just visit home improvement store Lowe’s on a Saturday morning. At one point, staff actually outnumbered customers by a 2-1 margin. Now contrast that to the lineups of customers found at Metro Vancouver Home Depots on any given weekend. What emerges is a tale of two very different cities.
Unless you’ve traveled outside of Vancouver lately, it’s hard to fully appreciate how hard some economies have been hit by the recession.
And if you don’t think it could ever happen here, you’d best think again.