I just had a listen to this CBC interview with some writer about the housing situation in Vancouver: Young Adults Leaving Vancouver.
He was asked about whether the housing bubble is due to speculation. Of course there is speculation. It's rampant. Even the average Joe that is buying a home and maxing out how much the bank will lend him is speculating. Someone who is selling their current place (that they bought in the 1990s) and buying a larger house now is speculating. They are all speculating that the market value of housing will increase even further (or stay where it is and not go down). It is this speculation that is lifting prices. There are not enough people sitting on the fence waiting for the market to crash, in order for a crash to happen. This is the way bubbles work (see: every bubble that has ever occurred). Speculation is the nature of bubbles. Some of the speculation is explicit, the rest is implicit. There are lots of people who also speculate that interest will never go up. That's a costly gamble to take when maxing out your credit on a new home.
This Tyee guy has bought into everything the talking heads are saying: 1) money is coming from offshore, 2) if there is a crash it's won't be much, maybe 20%, 3) Vancouver is different, 4) It's gone on for so long, therefore the market will never go down. It's all bollocks!
1) First, locals are just as responsible here for paying exhorbitant prices. Secondly, in the 1990s there was lots of money coming from Hong Kong and elsewhere and prices did not increase very much, they stayed where they were in spite of a massive influx of money. Lastly, any "local" who takes that "offshore money" and puts it back into the housing market is also playing a part in fuelling the housing bubble. I can't tell you the number of times I've talked to a "local" who owned more than one property as an "investment". Again, it's the locals (as the majority) who are the major cause of the housing bubble in Vancouver.
2) If there is a crash, it will most likely be huge. When bubbles pop, that's the way it goes. To think otherwise is to believe there isn't a bubble.
3) Vancouver is not different! Other cities in Canada and around the world had or have real estate bubbles as well. Some have crashed already and some have yet to crash. It's not just here (where there is supposedly all this "offshore money" flowing in), not is this a recent phenomena. This kind of thing has been happening for centuries and they always say "it's different here" or "it's different this time". It's not.
4) Just because we haven't had a crash yet doesn't somehow mean that we have reached a new normal and that it will never crash.
You can find other commentary here.