New Year Delusions

As house values fall and hockey returns to the rinks after a long work stoppage, it’s absurd to think that everything will remain the same as it was. In 2013, your world will become smaller.

Now that the New Year has come, it’s time to look at the state of Vancouver’s favourite sports. By that I mean, of course, hockey and real estate. Both are obsessions here in B.C., particularly in Vancouver. And both are buoyed by delusion.

Hockey’s back, or soon will be, and the extended work stoppage, strike or whatever word those involved have dreamed up to describe it, will soon be a thought of the past. Fans may claim they’re upset or indifferent, but many will continue to pay exorbitant prices for seats in the nosebleeds just so they can “share the experience.” And they’ll continue to enrich the billionaires who own the teams and extract subsidies from cities because they’re such a great “economic generator,” although that’s debatable. (Many sports teams actually reduce economic activity, in that they suck up dollars that would have gone to other pursuits or goods.)

However, there may be a cough or two (or more) in that economic engine because of the delusion many people in Vancouver have that the price slide in real estate is going to be slight in the aftermath of last year’s frenzy.

Just be a few per cent, the industry says, soothingly.

Sorry, but that’s ridiculous. There hasn’t been an inflationary cycle in history, whether real estate, stocks, tulips or anything else that people bet on, that hasn’t burst with more than “slight” results. Nothing stays up forever, especially if it’s kept there by a lot of hot air.

When the real estate balloon stops inflating, prices start falling and people are hurt.

Sure, I’ve heard the argument that prices will stay high forever. Yes, they will, unless there’s some catastrophe coming down the pipe that we can’t see right now. But they’re not going to stay as high as they are now.

The original drivers of our real estate market – foreign investors – have moved on, so we’re likely in for a hard drop and then stagnation for years as incomes catch up to house prices.

People who spend 70 per cent of their incomes to maintain homes, while watching their value fall, are not inclined to spend on non-essential frivolities.