The Vancouver Housing Bubble Has Popped, Look Out Below - Nathan McDonald

Snap, crackle, pop! No, what you just heard wasn't a string of iconic characters representing a bowl of cereal from your childhood. It was in fact the first pillar in the highly inflated Vancouver real estate market beginning its much overdue descent to reality.

This housing market has been one of the hottest housing bubbles in the world and one of the few that has largely sidestepped the economic crisis that began in 2008. That is, until now.

One of the hottest areas of the Vancouver housing market has been the West Van area, which has seen gains of roughly 450% since 2001! This is a truly mind blowing number, especially given the fact that the increase in incomes since that time come nowhere close to keeping up with these numbers. In fact, they have either barely treaded water, or sank like a rock when adjusted for REAL inflation.

This correction has been one that I have forecast for years and stated is long overdue. It has been fueled not by a proliferation of wealth among the local citizens but by foreign investors, most notably from China.

As I have highlighted before, the Vancouver housing market has been a hot spot for laundering money legally out of China. This is why you have seen story after story showcasing a dump of a house selling for hundreds of thousands of dollars more than its assessed price. The fact is the people buying the property didn't care as the property itself was simply a vehicle to get their money out of their home country.

This story has been highlighted by many other financial pundits so I am far from alone in this realization. It is just another example of the truth eventually finding its way out of the bag

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The government of British Colombia has also finally come to this realization and it is the reason they have recently imposed the much talked about 15% foreign investor's tax.

This tax has led to a plummeting average sale price in Vancouver properties, as "investors" are unwilling to hand 15% of their wealth over to the BC government, choosing to move on to greener pastures, namely the Toronto housing market.

It is uncertain whether or not the government of BC was attempting to simply "get in on the action" or get a slice of pie, or whether they were truly trying to protect local residents from increasingly un-affordable housing. Either way, they will be able to spin this into a win.

With this, you can expect much more pain to come, as the collapsing housing market in Vancouver becomes a self-fulfilling prophecy that has ramifications across the financial industry. Perhaps this will set off a spell of contagion that will spread across the rest of Canada. But perhaps not.

Regardless of the outcome, you can mark this bubble as popped. Good riddance.