Canada's urban gold rush
by Robert Fulford

(The National Post, 1 October 2005)

The subject of houses was never out of her mind for more than a few minutes. She was a beautiful wife and mother, this neighbour I once knew, but what I remember most is her loving and always hopeful study of the market in residential real estate. Long before it was fashionable, she embodied the ethos of the housing market.

Her family income was modest, but she wasn't going to let that limit their accommodation. She made it her business to know where the good houses were, which of them might be bargains and which Toronto neighbourhoods were graduating from "pleasant" to "desirable."

When she moved, she carefully traded up, figuring out precisely how much investment in renovation would be needed to produce how much profit.

She was the home-ownership queen, the mortgage maven, and she always knew, within about 50 cents, the amount of equity her family held in their current house. Eventually they moved to Vancouver, and one afternoon I visited her there. She was living high on a hill overlooking the harbour. She had about as good a view as anyone in Canada. It was perfect. But as she sat sipping wine on a wide, handsome deck, I imagined she was slowly, quietly putting together the pieces of yet another move on the real estate board.

Decades ago, when we lived on the same street, all this activity was a profitable and mildly eccentric avocation. In retrospect, it's clear she was far ahead of the curve. Her hobby has turned into a national obsession. In the age of cheap mortgages, millions of citizens find themselves drawn into thinking about the mysteries and delights of real estate. The rise in house prices has invaded the national imagination and changed our shared perceptions. Even Montreal, the latest research suggests, is turning from a city of renters into a city of owners.

Housing has become an increasingly dominant element in our culture, demonstrated by the status of Home Depot as a major institution, prominent in the way big department stores were once prominent. Gardening, which is, among other things, an expression of house-pride, has become the only art form practised daily by millions of people. Real estate can even push sex, politics and the weather out of a conversation. It provides us with forms of bragging that pretend to be ruefully modest ("My house is making more money than I am").

Most of us always understood that our house was our biggest investment and probably our most valuable possession. Today it's much more than that. For many people, it's the physical symbol of their cultural ambitions and their greatest chance of getting rich, or at least relatively affluent. Canadians of the 21st century don't save much money, and many of us can be persuaded to invest in the stock market only when we get a decades-long tax-free ride in the form of a registered retirement savings plan.

But a house? That's our kind of investment. We can touch a house, compare it with the one next door and improve it at our own pace, in our own way.

Real estate has a way of surprising and changing us. In recent years, many private citizens with middle-class incomes have awakened to the fact that the real estate market has unexpectedly turned them into mini-capitalists. In my observation, they are never quite the same again.

The housing boom in Canada draws much of its strength from our tax system, which makes any profit on the sale of your principal residence tax-free -- in other words, a bonanza. Some shrewd people turn this provision into a business. In the 1980s, my wife and I bought a house from a couple who earned a good part of their income each year by renovating an old house while living in it. In January, they would buy a house for, say, $200,000. They would make obvious improvements (a swimming pool, air conditioning, etc.), redecorate, fix everything that was obviously wrong and, after six months or so, put it on the market. If they spent $50,000 on improvements and sold for $325,000, they would collect $75,000 -- tax-free -- and move on to their next house. (They needed, of course, a special talent: the ability to tolerate workers under foot for much of every year.)

This system, otherwise foolproof, depended on a rising market. But the husband did other work as well, and if the market fell too far they could just remain in the renovated house, for years if necessary. They were working the system in a way that was more calculated but not really different from the way many other homeowners work it now.

The other day, The New York Times headlined a story, "Is it better to buy or rent?" (The answer: It depends.) The article pointed out that ownership can tie up hundreds of thousands of dollars "that might be invested more safely and more lucratively." But surely that's beside the point.

Few people have the patience to invest with intelligence. More importantly, buying a house rather than renting puts you "in the market." It provides the giddy pleasure of being part of what sometimes feels like an urban gold rush.

People develop complicated feelings about their houses, even if they've been planning for years to sell them. Speculators understand this and when buying desirable properties will often give an inventive performance of real estate theatre. A buyer may claim she has always wanted to live in this district, that she likes the church just down the street and that her sons are already enrolled in the university nearby. Then, about 24 hours after the former owners leave, she will move a dumpster onto the lawn and start tearing the place down, preparing the site for construction of the much bigger house that will soon go on the market.

Why would she concoct this lie? She's guessing that the sellers, while they want the best price, also want (consciously or not) to believe that their house will be treated with respect. The buyer thinks that if the sellers receive several close bids, her charming narrative may tip the deal in her favour.

Recent history offers many examples of breathtaking gains. If someone's parents paid $17,500 in 1960 for a cute little house on a cute little street in the centre of the right city, that house may well bring in $500,000 today. Everyone hopes to buy low and sell high, but an increase that immense can be life-changing, or at least mood-altering. You hear schoolteachers and copywriters and office managers speak of "one point three" with a kind of awe. Both horrified and delighted, they are in the process of understanding that their relatively ordinary house, which they once thought of as nothing but a nice place to bring up the kids, will bring them, on a good day, $1.3-million.

No one believes this can go on forever, everyone knows that what goes up must come down, and most people have heard about speculators thrown into bankruptcy the last time the music stopped, some 15 years ago. But in many parts of the country, this market has gone up and up, far past anyone's expectations. Last year there were signs of weakening in the economy as a whole, and these should have hit the real estate market. I heard it said that the end couldn't be far away.

Indeed, aspects of the market did slow down. But in Calgary this spring, the increase in turnover of high-end housing was spectacular. Sales of houses priced above $900,000 tripled in the first six months -- 110 units in 2005 compared to 37 in 2004. In Toronto this year, a similar market has moved far ahead of last year. In the first six months of 2005, sales of houses priced above $1.5-million increased 48%; a record number in that category, 288, changed hands.

As a broad phenomenon sweeping society, the housing boom has refocused our attention on our surroundings and intensified the search for aesthetic pleasure in domestic spaces. Far more people show an interest in the principles of interior design, for instance. Ten years ago, it was a rare TV network that had a program about decorating -- and it was usually about touring the vast estates of the rich. Now it's a rare TV network that doesn't have one or two shows about practical decorating. Those programs appeal to an impulse that's deeper than a financial interest in housing.

Where did that come from? My guess is that it's one result of the emphasis on creativity in primary and secondary schools over the past two decades. All that talk and teaching developed, among other things, a commitment to the art of shaping a private environment. It goes far beyond profit. "All assets are not the same," wrote Lionel Tiger, the Canadian anthropologist and author of The Apes of New York, in a recent Wall Street Journal piece. Money will always be a part of it, but, as Tiger wrote, the care and ownership of a house involves levels of satisfaction far beyond the imagination of stockbrokers. Emotions involved in a personal dwelling are far stronger than those evoked by ownership of a bond or a stash in a Bermuda hedge fund. The right kind of housing environment offers large numbers of people the self-expression they've been taught all their lives to seek.

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