There is a common misconception that it is the responsibility of someone – probably the municipal, provincial, or even federal government – to ensure that property values only ever move in one direction, and that direction is up.
People are very protective of their property values, and wary of any threat to them.
This is understandable, because a home is the largest investment most people will make in their lives, and for many homeowners, it’s a retirement fund, to be cashed in when they downsize.
In more recent years, it’s been a kind of ATM for older homeowners, who can extract cash to send kids or grandkids to university, or, in many cases, to help their kids buy homes now that it’s become extremely difficult without a little extra financial boost.
But it is impossible to guarantee that property values only go up. Housing is bought and sold, and like any market, prices may move up or down.
This week, folks will be discovering their property assessments. Since those assessments were made mid-summer, they’ll still be high.
But they’re also wrong.
Prices for homes have plummeted across the Lower Mainland, around most of B.C., and in most other regions of Canada. They may stabilize, but they may keep going down for a while. The folks who bought their homes around April and May, in particular, are already deeply underwater –there’s no way to sell their homes now for what they paid seven or eight months ago.
You all know the reasons why this has happened. The staggering price growth of the last decade, especially of the pandemic years, was unsustainable, and has been fatally wounded by rising interest rates.
Most folks will be fine. Their home is still worth a lot. For those who bought 10 or 20 or 40 years ago, it’s worth far more than they paid for it, an investment that has outpaced any stock market.
Those who speculated in property or borrowed heavily against the presumed value of their home, however, are about to learn a harsh lesson.
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It’s impossible to entirely stop people from treating their homes, or homes in general, as a speculative instrument, or as a piggy bank.
But in the long run, it’s always risky.
People will line up to tell you your home is an investment.
But it’s more important to think about it as a home first, as a part of a neighbourhood second, and as a financial instrument a distant third.
Building a better marketplace for housing might help, and the government should certainly encourage more co-ops, more affordable rentals and seniors homes. But convincing owners remains the key.