This has been an uncertain year in the world of housing. Looming above all else has been the vaporization of the American subprime mortgage market and its increasing impact on housing starts and prices in all sectors and regions. There can be little doubt that the era of cheap money that pushed U.S. real estate higher and higher has come to an end.

But if the Americans are in meltdown, why have housing prices been able to thrive in Canada, and boom here in the West? I would like to report that this was solely because of sage policies by our governments and lending agencies, but they have played a relatively small part.

We should all note that Canada Mortgage and Housing Corp. and other Canadian lending agencies have shown some signs of the U.S. contagion — quick approvals for ever-lower down payments combined with increasingly elaborate mechanisms to reduce payments temporarily. The U.S. housing market is sick in bed, maybe headed for hospital, while in Canada we are feeling a little off but keep going to work. And we worry that this decision will come back to haunt us.

It will.
Dwelling
Enlarge Image

A housing lull would allow us to contemplate affordable and creative housing. Pictured is a courtyard in the Salvation army’s Belkin House apartment complex in Vancouver. (NEAL STANISKIS DOLL ADAMS ARCHITECTS)
The Globe and Mail

Housing has hung on here not because of some inherent strength of the housing sector north of the 49th parallel but because the world regards us as a commodity-based economy, and Canada's most commodity-linked economies are west of Manitoba. So it's no surprise that that is also where the gains in housing prices and sales numbers have been steepest. The inflow of money and residents have kept our housing markets sprightly — but the good news is unlikely to continue in 2008.

Every first-year business school student learns the historical facts of the global business cycle — the booms and busts that can be charted back 150 years and more. More than anything else, the ups and downs of the business cycle are tied to commodity prices. As industrial economies shift into high gear, the prices of raw materials get pushed up, eventually getting so high that they start to choke off growth. The huge rise in construction costs in recent years, especially in Western Canada, is but one sign that a reckoning is coming. Even now, escalating costs are making new investments ever trickier for developers and purchasers both.

We have yet to see the real economic impact of what appears to be a collapse of the B.C. forest industry, and no one dares to think how much our housing markets have been sustained by a huge blip of baby boomers lining up the homes and recreational retreats for their retirement years.

But we will.

When the next business cycle commences, it will take a long time for commodity prices to recover, even once the industrial economies of Eastern Canada, the United States and Europe start firing on all cylinders again. Alberta and British Columbia are now full of swagger, apparently convinced that economic swings are things of the past, that our boom will continue forever because of Asian demand for the raw things we pump, mine or cut down. But in a year or two we will slump while others rebound, and in our sulk we will blame others and then, eventually, ourselves.

Western Canada is too blessed and optimistic a place, in the scale of things globally, to suffer much more than a 10-per-cent decline in housing prices, I predict.

Moreover, there are advantages in these contractions, a time to consider quality, think about the direction of our cities, get down to actual solutions to homelessness and affordability.

I have written about B.C. housing 52 times over the past year, and in my entire career as an architecture critic, I have never had so many innovative, amenable and all-round creative dwellings to write about as in 2007.

There was some welcome investment by our provincial government in supportive housing for our most vulnerable, and let's hope the new year finds similar attention to the needs of the working poor, single-parent families, students and the so-called cultural creatives who have been priced out of adequate places to live, and just as worrisome, places to work.

At the municipal level, and thanks in large part to a heroic effort by our city planners, we are at long last starting to see the clear outlines of what Vancouver's EcoDensity policies will mean for the city and, later, other places in the province.

These ideas are too important to stand or fall with Mayor Sam Sullivan's political career, so I hope all factions of our fractured polity can come to agree on action. Whether it is Mr. Sullivan, Carole Taylor or some champion of the left who, as the city's next mayor, makes the final push toward a sustainable future does not really matter — so important is the issue.

With the correction ahead, we will learn something about economic sustainability. That will help us make parallel decisions about environmental sustainability, too.

BlogScope: Related Content