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the ascent before the fall

Toss a rock up in the air and, at the apex of its flight, it will stop momentarily before it thuds to the ground.

Toss a rock up in the air and, at the apex of its flight, it will stop momentarily before it thuds to the ground.

You are not likely to see the point at which the rock starts to drop. But, sure as hell, it does.

This is what came to mind while reading Globe and Mail columnist Gary Mason’s enthusiastic take on Whitehorse’s economy recently.

It’s easy to get positively giddy in the wake of Mason’s analysis.

And it will make a great insert in pitch packages for potential southern investors.

But those of us living here full-time should keep our wits about us.

To draw upon another stone analogy, Mason is simply skipping across the surface of a very deep lake.

“It won’t be long, realtors here say, before Rob Jack’s tony Whitehorse subdivision of Copper Ridge routinely sees homes going for a million dollars,” he wrote.

And for anyone living here, that sounds fantastic, especially when Mason compares Copper Ridge to upscale suburbs of Vancouver, Toronto and even Whistler.

But the city’s housing prices are artificially high.

They skyrocketed during a historic shortage of housing lots.

And this summer, driving around Copper Ridge, you might be struck by how persistent the For Sale signs have been on the lawns.

Indeed, while realtors may gush to visiting journos about how the sky’s the limit in Copper Ridge, those we know suggest the top end of the market has started to slow and even sag this last summer, even though few new lots have hit the market.

Those in the $600,000 range have fetched up to $60,000 less than the asking price.

Part of the problem is oil prices.

People are starting to wonder whether buying a 2,800-square-foot house is a good idea at a time when oil prices are so high.

Then there is the lot shortage, which was caused by the Yukon government’s failure to create more.

There is now significant pressure to do so.

And, as they hit the market — the much-discussed Whistle Bend subdivision springs to mind — housing prices are going to ease, and probably drop. That’s how the market works.

You only have to look at the local condo market, where a burgeoning supply is already taming prices downtown.

Which suggests the ubiquitous million-dollar home is a ways off in Whitehorse.

The second striking observation in Mason’s analysis is, “There isn’t a panhandler — a real panhandler — to be found anywhere.”

Mason was referring to men panning for gold — miners.

And that, too, is troubling.

Though Dennis Fentie’s government is unabashedly pro-development and has been in power for six years, evidence of real industry in town is in short supply.

True, the territory is benefiting from two operating mines.

Cantung, an aged operation, is located in the NWT. The Minto copper mine was permitted and ready for construction in 1998. It just opened.

The only reason either is operating is because world metal prices are sky-high. The current Yukon government had nothing to do with that.

But, as the world economy slows, the existing boom will lose momentum.

The questions people must ask is whether the current government capitalized on the current cycle. Or has it been squandered?

What new mines have been permitted?

Mineral exploration has hit $140 million, which is encouraging. But that investment came at a time when mineral prices were higher than they’ve ever been.

And that exploration funding only matched levels reached in the early 1990s, prior to the Bre-X scandal.

Indexed for inflation, there was less activity in the Yukon this year than there was back then.

So, while activity has increased, it is hardly something to crow about.

Gold, too, has spiked to almost $900 an ounce.

And yet, despite this, placer miners are complaining that oil and labour costs are eroding their profitability in the Yukon.

The one significant employment increase, apart from the service sector, has been in the size of government.

The key economic driver in the territory is a budget that has been boosted to almost $1 billion, most of it transferred straight from Ottawa.

“The funding increase has been used in part to build up the bureaucracy, creating more jobs,” wrote Mason.

They are easy jobs to create.

But it’s hard to reconcile Premier Dennis Fentie’s pledge to “create an environment that opened up investment opportunities,” with a unprecedented expansion of the territorial bureaucracy, which exists only to monitor and regulate such investment.

And Yukoners must ask if this is the type of economy they want — dependent on Ottawa’s favour. Because the days of grand surplus federal budgets are over.

And if Ottawa dips into a deficit position, the cuts will come.

So, yes, on the surface, the territory’s economy looks pretty good.

But is it solid? Or an illusion?

Skyrocketing oil prices, cooling global markets, lot shortages, international housing and credit crises, dependence on federal transfers, the rising Canadian dollar and a host of other factors are going to have an effect on the Yukon economy. Soon.

The question is whether the Yukon government has laid the groundwork to weather a storm.

You can get swept up in the hype. Or you can consider the question. Carefully.

Because many people living in Whitehorse’s tony subdivisions — with their boats, RVs, trucks and $600,000 homes — are mortgaged to the hilt.

And world events suggest things are shakier than they seem.

Simply toss a rock in the air … it’s damn hard to see the transition between the ascent and the fall. (Richard Mostyn)

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