The art of speculation

Speculation.. noun 1. the forming of a theory or conjecture without firm evidence. “There has been widespread speculation that he plans to quit: 2.investment in stocks, property, or other ventures in the hope of gain but with the risk of loss. “The company has moved into property speculation”

In the 1970s, the minimum wage in B.C was approximately $1 per hour. For most of the current decade the minimum wage has been approximately $10 per hour. Relying on my enormous financial background, I would thus speculate that goods and services, including housing and rentals should have increased by an approximate factor of ten. We will call this my factor of ten theory. Like most economics, it is only a theory and not a proven fact.

In that same 1970s decade, I bought a bare lot and built my first house for about $20,000, in an ordinary subdivision. Using the factor of ten theory that home should currently sale for about $200,000. OK, I can hear you laughing already.

Who can now buy a house in the Kelowna area for $200,000? In actual fact, the house I built would now sale in the $400, 000 plus range. So 20 times the original price!

Before I built the above house, my family rented a modest house on Hobson Road. Yes, that Hobson Road, and it did have modest houses in the 1960s. The monthly rent was $100 for the full home. I am not kidding. My parents did the same in Lake Country.

So using the Ten Factor theory, again, one should be able to rent a good house, currently, for about $1,000 per month. In actual fact, you would be hard pressed to find a one-bedroom basement suite for this price, anywhere in the Kelowna area.

Do you see how we have let accommodation costs get way out of hand? In many instances, it has forced both parents to work whether they want to or not. And at times, it has meant less food on the table.

There is no doubt, whatsoever, that housing prices and even rentals have been driven by speculation as the whole Okanagan has become a tremendously popular area to live.

Recently, I visited an area just a little west of Vernon and with magnificent views of Okanagan Lake from the hillside. I was startled to find, that even though it was spring, there was absolutely nobody home in the vast majority of the huge, well-built houses. Each of them is probably over $1 million in price, now. When I asked at a very few answered doors where the owners were, the response was, “Oh, this is only their summer home and not their principal address.” When I asked where they might be from, the quick response was most were owned by Albertans, mostly with oil money. Or, that some were foreigners to Canada. Some had simply bought the property hoping for a quick, increased resale value. I am sure this has happened in many areas of the Okanagan Valley.

This rapid buying up of very expensive homes simply keeps housing prices at an inflated level for all and has made it very difficult for an average family to even get started in purchasing their own house.

Also consider that even though these absentee owners do pay property taxes, they do not pay any provincial income tax for the many services that they do receive.

Albertans, as tourists certainly do contribute to the local economy and they are more than welcome here. The Okanagan is a great summer mecca to play. All foreign visitors are also greeted warmly.

But it is time to stop the tail from wagging the dog where outsiders to our communities get to decide what our local prices will be, hence the new NDP/Green government’s introduction of a speculation tax in areas with overinflated housing prices.

While this may need some fine tuning, it is now imperative that local governments in these area get on with affordable developments to help keep housing/rental costs down. This does not mean building small ‘boxes’ for young people to live in.

It seems that Kelowna Mayor Colin Basran has jumped on the bandwagon of anti-speculation tax without community consultation. Hint: the community is much bigger than real estate people and concerned absentee property owners. Coun. Maxine DeHart did not vote on the huge downtown Kelowna hotel because she is involved in the hotel industry. Now, as the mayor waits for some staff recommendations, perhaps he should consider not voting on these also?

So, how is the ten factor theory treating you? If your wage was $10,000 in the 1970s do you make $100,000 now? In most cases, I doubt it. A beginning teacher made about $9,000 in the early 1970s. They are not even close to $90,000 now.

A couple thousand dollars bought you a nice, new, little import station wagon in the 1970s. Today, that same little red wagon or SUV would be a least $40,000. Obviously, wages have not kept up and it’s well past time to tackle the issue of affordable housing. The speculative areas that are to be taxed have , generally, not done a good job and we need to stop pricing our young people and families right out of the market.

Real estate people should realize there is much more to the world than just buying and selling houses. Let’s not get hysterical until there is firm evidence of a problem. Albertans and other foreign buyers may not buy here for awhile. But, if the result is slightly lower or held prices, than they will not be missed.

The only other alternative is to press for increased wages.

Reg Volk is a Kelowna resident who writes on politics and local issues. This column appears on a monthly basis. To contact the writer: regvolk@shaw.ca