British Columbia a lesson in economic incompetence
Flipping property has become the only profitable business in town
In Vancouver, first time buyers are being replaced by people who are investing rather than living there.
With detached homes now costing an average of C$2 million (HK$11.5 million), Vancouver increasingly looks like central London, where property prices are simply determined by who is willing to pay the next higher price. The number of first-time buyers has also hit an all time low like London, too. Vancouver could share the experience of Irvine, California, where last year, 80 per cent of new homes sold were bought by mainland Chinese.
Instead of wallowing in self-defeating, white-hot Canadian sanctimony, Canadians ought to understand how outsiders see their inability to respond to changes in the global economy, not money laundering or yellow peril, are behind their problems.
Canada was one of the most economically equal countries in the OECD. But successive waves of offshore manufacturing in Japan and now China have destroyed that balance. Much like the rest of North America, during the ’70s and ’80s the real income of a unionised, semi-skilled worker in British Columbia’s forestry or pulp and paper industry entitled her or him to the Canadian dream – a home in Vancouver, two cars, and a snowmobile or wave runner.
That dream is now folklore. Little do they realise that 10 Chinese workers can be hired for the wages of one unionised Canadian – and the Chinese worker will work harder because they are desperate to get ahead. A history of militant unionism, originally imported from Britain, stubbornly clings to all aspects of the British Columbia work ethic.
The province has failed to significantly rebuild or diversify its economy outside of natural resources. That results in chronic complaints about low-paying jobs in Vancouver and the immense difficulty for graduates to find jobs. Vancouver has rarely been the ideal location for corporate headquarters so unlike Hong Kong or New York, there are no highly paid, expatriate investment bankers or tech executives who can afford expensive rents.
Worst of all, Canadians have made catastrophic decisions eroding their competitiveness in the natural resource industry. First Nations and environmental activists have achieved an onerous and unassailable level of influence over the economy, making it increasingly difficult to attract the foreign investment needed to create large-scale oil and gas development.
Encouraged by Canadian courts, which have become arbiters of political correctness, every major pipeline project trying to reach the east and west coasts has been stifled. Few countries would allow strategic paralysis of the national interest. Asian investors have been frustrated by the costly and endless energy review process.
Caught between his lavish promises made at the recent Paris climate conference and growing unemployment in the resource sector, Canadian Prime Minister Trudeau is now being accused of mediating rather than leading the domestic oil and gas approval process.
Misplaced and costly objectives of being “the world’s greenest city” only worsen affordability problems for Vancouver’s citizenry as the city is not a significant contributor to global warming or pollution.
After decades of mismanagement, Vancouver has cornered itself into a position, leaving it far worse than London and New York. And flipping property, an activity joyfully practised in Hong Kong and China, has become the only profitable business in that town.
Peter Guy is a financial writer and former international banker