Random Thoughts – 06
Dec 20, 2022
Real estate was surging in 2021 right through early 2022, when general inflation was 2% or so. Now inflation is 7% or so, and housing prices are dropping. As of December 19th, on the website myrealtycheck.ca, among active listings in Metro Vancouver (West Vancouver to Abbotsford), there have been 68 listings where the price has increased this month and 894 price drops. The average change has been -6.6%. The party might be over because of consumer belt-tightening, given inflation and higher interest rates, but the demand side of the equation is still strong.
Canada’s immigration target is 500,000 per year, which is what the US targets, and they are 9 times more populous. Canada is attempting a massive population surge and we can only hope to assimilate and house new immigrants quickly enough. Can we even get them a GP? Do you have one? Immigration will help support parts of the real estate market, especially in those areas they move to and in price segments that will be attractive and feasible.
Regulation is bothersome when it slows us down, but it’s often for our own good. FTX has been in the news recently and may turn out to be the biggest fraud in history. FTX functioned as a marketplace to buy and sell cryptocurrency like Bitcoin and Ethereum. Because there’s no substantial regulation around this and demand for crypto was high, there was a gold rush of cash into it, and investors got stung. The CEO is now under arrest. There is no free lunch.
Get used to hearing terms like “re-shoring”, “friend-shoring”, and “near-shoring”. The pandemic and the way it was dealt with, along with changing geopolitics and conflicts, have put the global supply chain in jeopardy. For decades, China has been the world’s factory. Outsourcing production to China for cheap labour and industrial capability was the norm. Because China never adopted a widespread effective vaccine policy, instead electing to have rolling lockdowns, we sometimes see tens or hundreds of millions in lockdown there, which affects production capacity. Also, China is looking closely at how the West defends Ukraine, in light of their designs on Taiwan.
In the context of these risks to Western supply chains, we are seeing a global realignment where both price and security/certainty of delivery are taken into account. What good is an inexpensive widget if you can’t get it to your factory? We’ll see more economic activity sourced to home countries, friendly countries, or at least those nearby.
Best wishes to you for love and peace during this holiday season.
Alain Quennec
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