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LETTER: When will the housing bubble pop?

The Housing Sector has been the prime mover in our economy, but it too will falter unless the government becomes involved in actually making "homes" for Canadians, letter-writer says
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BradfordToday received the following letter from Steven Kaszab regarding the recent housing market:

Toronto and all of Southern Ontario, along with much of Canada has experienced an awesome increase in prices for their homes. No matter the type of housing, whether it be free homes, twins, condo's or townhomes their prices have skyrocketed in price, but certainly not their true value. What? How can a house price increase but its value does not?

Materials used to build new housing used to cost the same over time. That rule no longer exists. Seen the price of a 2"x4" lately? If you can find such material, its cost has pretty well doubled. Labor to build these houses remains the same. 

I am talking about older homes. These were often built at a cost of say $100,000-200,000 but now sell for over a million dollars. Condos and townhomes sell for half a million dollars and upward in Southern Ontario. If one inspects a new house being built and can speak to a builder of these homes you will find materials that are often inferior in thickness, durability, and lasting value. 3/8"-1/2" chipboard instead of 3/4" thick plywood, parts of bricks instead of whole bricks. The men and women who work on times schedules are often contractors who are pressured to finish their work quickly and move on. The trades often work through the evening and night trying to finish their mission, often accomplishing their tasks by cutting corners like doing one coat of paint instead of the approved two coats. 

A home built in the 1970-80s that sold for $250,000 then is not truly worth a million dollars, but the demand for a home has escalated the price and profits for their owners. Sure many people look to their homes as a retirement fund, but their need, their greed is leading their region towards a building bubble, a balloon forever inflating until it will pop one day. The developers and their allies in the real estate sector do whatever they can to increase prices and profits for themselves. Like a municipal government that continually institutes more services for their population knowing they can increase the fees and taxes over time. Build and they will buy. Our financial institutions will continue to issue mortgages and loans to these buyers.

Then one day the economy will begin to fail. Three per cent growth in our national economy is a difficult thing to accomplish in Canada. We have a resource-based economy, with our manufacturing sector shrinking.

Real wealth cannot be created within the service sector. The Housing Sector has been the prime mover in our economy, but it too will falter unless the government becomes involved in actually making "homes" for Canadians. Relying upon the private sector is foolhardy. 

Canadians need to move away from large urban areas and inject themselves into smaller cities, towns, and villages creating a need for housing in these communities. An "if we build they will come" attitude may be needed, with a good mix match of quality rental and ownership options. Private Developers will not build affordable housing. The whole reason there is a housing bubble in Southern Ontario rests upon the lack of supply. Why would a private developer build something without the promise of maximizing their profits? The solution on how to make affordable housing a reality throughout Ontario and Canada rests upon the shoulders of our elected officials within the Municipal, Provincial and Federal spheres.

Ontarians, go north, young and old. Create living communities where people are more important than profits. 

Steven Kaszab

Bradford, Ontario