“Investing is easy,” goes the old saying, “all you have to do is buy low and sell high.”
If only it were that easy.
The saying comes to mind as you read the Yukon statistics bureau’s latest housing price data from Whitehorse.
The average single house price in the second quarter was a whopping $427,600. That’s excluding condos, duplexes, trailers and tents on the legislature lawn. It’s also a $59,000 or 16 per cent surge compared to a year earlier.
The median was around the same, at $417,500. The total value of sales for condos, mobile homes and duplexes also hit record levels.
All this suggests a broad-based surge in house prices, in line with the talk you’ll hear at every bar in town.
Even my kids have noticed it. One saw a show on Home and Garden Television and wondered why aging split-levels in Riverdale seem to sell for more than spacious new five-bedroom homes in leafy Chicago suburbs.
Housing markets are notorious for boom and bust. It’s because of the long lead times. Demand rises for some reason but the stock of housing is fixed, so prices surge. Everyone decides to get rich, and starts building. A few years later, after permits and construction delays, a flood of new units comes onto the market and prices sag.
Soviet economic planners used to mock the system. (Read next sentence in heavy Russian accent.)
“In Soviet Union, population goes up same amount every year. So it is logical for state to build same number of apartments every year. In your system, greedy capitalists and their running dog realtor collaborators conspire against the workers to raise cost of housing!”
Of course, most former Soviet economic planners are now probably investing in Moscow real estate.
Anyway, Soviet planners would also probably be amused by what the Yukon’s political parties are promising in the current election campaign: that is, to throw everything but the kitchen sink at the housing crisis as it hits another peak.
In recent weeks, all parties have made comprehensive housing pledges. The policy wonks in the blue, red and orange backrooms have been busy. We can choose from more government lots, more First Nation lots, sale of vacant government land, selling lots at cost, private lot development, subsidies to build new units, subsidies on existing units, new Yukon Housing programs, and so on. The only idea I haven’t heard so far is that a government truck will show up at your house and drop off some diamond drillers or newly hired government policy analysts to live in your TV room.
By the time the next government, moving at government speed, gets around to implementing all these policies the Yukon News headlines will probably be “Yukon Housing Prices Slump: Many Homeowners with Mortgages Worth More Than Their Houses.”
Hopefully I’m wrong about that and the Yukon government will get the timing and scale of its housing market interventions exactly right.
One thing I’d like to know more about is who exactly made the decision to delay Porter Creek D a few years ago. I’m in favour of protecting the identity of Young Offenders, even ones who set fire to recreation complexes, but there’s no need for a Witness Protection Program for senior government officials. I think a bit of accountability for public decision makers would be in order.
Mike Gau, a Whitehorse city planner, put it this way in the Yukon News’ special housing report a few weeks ago: “The Yukon government pulled its support because of opposition that was expressed ... we had a rough feasibility concept for as many as 400 units. And if that process hadn’t stopped, we’d have those 400 units and likely avoided this housing shortage that we’re in.”
Sounds sensible to me, and I’m sure former Soviet planners would agree too.
Will any ministers or senior officials be held accountable, or even admit their mistake, for a decision that has had huge costs for Yukoners?
We already know the answer to that question, so let’s move on to what we should do now. Many of the proposals put forward by the political parties have merit. But to really work, they have to take place as part of a longer-term housing supply policy. And because housing booms and busts are so hard to predict, this means we should not rely on governments trying to predict demand and then releasing lots.
As a foundation for a housing policy, I like the idea of a “lot bank” where there is a large inventory of lots that people can buy whenever the market gets tight. It’s like the old days. If you don’t like what the realtors are telling you, then you can buy a lot and build a place. This will keep housing prices tethered to what it actually costs to build a new home, which makes sense. And it also prevents oversupply since once prices dip, people will stop buying lots.
You’ll need a few safeguards against lot hoarding, such as charging full property taxes and requiring construction within a certain time period. But those details are not hard to figure out.
Hopefully, the large numbers of lots coming from Whistle Bend will work like this and our housing crisis will go away in a few years.
Time will tell. In the meantime, the combination of Whistle Bend lots and the next government’s housing platform (no matter which party wins the election) probably means softer prices ahead.
That’s an unpleasant thought for the average Yukoner who just bought the average house for $427,600.
Keith Halliday is a Yukon economist and author of the Aurore of the Yukon series of historical children’s adventure novels.