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Economist blames media, not foreign money, for high housing prices

Last Updated Aug 26, 2016 at 8:12 am PDT

(iStock Photo)
Summary

A US economist blames journalists for focusing on flashy headlines

Local experts are split on the American's take of the local housing market

BC implemented a foreign buyers tax on August 2nd

VANCOUVER (NEWS 1130) – Is it really foreign money? Or is it the media whipping up a frenzy about our real estate scene?

An American economist is pointing a finger at journalists for focusing on flashy headlines instead of market fundamentals, blaming news outlets for the recent run-up in housing prices.

But local experts are split on just how much of an effect the media has had on the Metro Vancouver market.

“I think that when we look at housing markets — particularly at times in which we have accelerating demand and rising prices — the term ‘housing bubble’ rears its ugly head, and perhaps we see a lot of emphasis on that rather than on the actual fundamentals in the marketplace,” says the BC Real Estate Association’s Chief Economist Cameron Muir.

“Housing markets tend to move rather slowly and it doesn’t make for exciting copy. I think, to some degree, the media tries to get the more exciting parts of the story out there and those tend to be the more extraordinary examples or narratives. The reality is that housing markets over the last 30 years have been relatively buoyant while prices go up,” Muir says. “When they’ve gone down we really haven’t seen any catastrophe and it’s unlikely that’s going to happen in the near term.”

However another local real estate analyst disagrees. “I don’t think the media is responsible for house prices in Vancouver being totally out of whack with wages. Blaming the media for that is, I think, pretty presumptuous,” says Tsur Somerville, Director of UBC’s Centre for Urban Economics and Real Estate at the Sauder School of Business.

“You can’t deny that there has some been some role from the flow of foreign money here. Whether or not it’s the whole problem or only part of the problem is a subject for some analysis, but I think the notion that everything is all because of loose money misses the other factors on the demand side.”

Somerville points out the American economist says it’s wrong to look for one reason for the housing affordability crisis. “And then he points to one reason. To some extent he’s guilty of what he’s accusing the media of doing. I think the media has reported on how the public feels and has looked at the issue, but it’s kind of like blaming the mirror because you don’t look good.”

The BCREA’s latest figures show Metro Vancouver’s housing market slowed to a simmer in July, just ahead of the implementation of the province’s 15 per cent tax on foreign homebuyers.