KANNON: Bubble or not, affordability is at crisis level

from immigration to development. In fact, the housing sector has become an inordinately large portion of GDP, pushing 10 per cent, whereas the number is about half that in the U.S. Policies are adopted to encourage growth, however harmful, to maintain the fiction of economic well-being, just as borrowing is encouraged to maintain the illusion of middleclass prosperity. It’s not sustainable, but that’s a problem for another day ... and another government.

Housing prices have been over-inflated largely by easy credit, a situation the federal government temporarily moved on, but prices continued to rise. There has been some movement on creating more affordable house – rent-geared-to-income projects, for instance – but demand far outstrips supply.

There’s a gap between increasing housing prices and stagnating wages at the heart of the affordability crisis. Nothing will be resolved until population easing dramatically reduces demands and wages grow to close the gap. Or we see a 30, 40 or 50 per cent correction in the vein of what we saw in the U.S. in 2008, when many people learned bubbles can burst, and the fallout comes at a heavy price.