For the past 250 days it has sat looking at the distant mountains. Its gleaming hardwood floors never walked on, save by realtors during showings. Its stone countertops never feeling the press of a tomato’s firm roundness. Its glass and slate patios disturbingly empty. Its beams and flourishes so far uncoveted by a perfectionist owner.
Unlived in, unloved, this west coast masterpiece has sat since the day construction finished almost a year ago, in mute testimony to what happens when a housing market goes south. It’s now back on the market, 2,500 square feet of luxury on 16,000 feet of landscaped perfection, for $50,000 less than before. If it were in Vancouver, it would sell for $3.5 million. In prestigious Nanoose Bay, on Vancouver Island, it’s now $838,000.
In fact, this area is one of the barometers of Canadian real estate. The demographics and income levels are similar to Oakville in southern Ontario, but with a higher number of wealthy retirees. In recent years builders have put up more and more high-end houses, excessively finished and architecturally unique, often clustered around exclusive golf or yacht clubs.
And prices have continuously arched higher. Until about the time 2307 Bonnington Drive was finished.
The waterfront communities of Parksville and Qualicum Beach on the Island’s east coast have only 20,000 residents. But, incredibly, there are currently 122 houses for sale between $500,000 and $1 million, and every week the inventory grows a little larger. Every week sellers get a little more desperate. And every week on Bonnington Drive, the market value of a minor masterpiece erodes.
Where are the buyers here, or in southwestern Ontario, Halifax, Kelowna or Airdrie? In reality, the Canadian real estate market is already correcting, hit by price fatigue, swelling debt and a swampy economy. Strip out the fanaticism of Vancouver or the irrationality of condo-crazy Toronto, and the picture is one of languishing listings. And that should surprise nobody.
On the Island, for example, people are awaking to the fact cash-heavy Boomers from Mississauga or Calgary will not be coming to buy if they can’t sell their digs back home. In fact, it’s not even different here! A study by the Victoria Real Estate Board found that 70% of all properties sold last year went to locals – only 15% were from other parts of the country, and a minuscule 3% went to those fancy rich international buyers.
Why does this market matter to the rest of the country?
Because it’s a harbinger. It shows us what happens when people start believing their own crap – that local real estate has intrinsic value because everyone else wants to move there. This, of course, is what powers the delusional Vancouver market, why average prices in boring Calgary actually topped those of Toronto (which has a diversified economy), and why people in Leaside will pay $1.2 million for a lot too small to park on.
The average SFH price in Victoria is $630,000. There is no economy to speak of. In Vancouver it’s $1.2 million, where incomes have flatlined. In 416, the average detached is now almost $800,000, and the city’s mushrooming debt means a tax rush.
This is one reason housing is disintegrating from the edges. It’s simply, purely and unmistakeably unaffordable. Even with emergency interest rates which, of course, have only one direction in which to travel. And were it not for oceans of cheap credit, real estate would cost far less than it currently does. Property values and mortgage debt have risen with an equal velocity, which means national real estate net worth has barely budged.
Worse, when prices fall – as has started in places like Nanoose – the debt remains. It’s a lesson millions of unsuspecting middle class Americans have been gobsmacked with. Today one family in every four owning a home in the States is underwater – owing more than they own, and not because they borrowed excessively. Certainly not by whimsical Canadian standards.
At some point the McBoomer mansion on Bonnington will find a buyer. Let’s hope they love it.
It could be a museum, housing expectations circa 2010.