There is only so much land in the lower mainland, and a huge influx of new residents every year. Whatever is going on in the Vancouver metro area is not laissez-faire capitalism. For examples of that, look to the major metros in Texas where zoning is lightly regulated and prices are comparatively lower than elsewhere.

FWIW, I find the zoning argument to be the most persuasive if your goal is to make housing more affordable. If you have other goals, including a transit-friendly city, bike-friendly city, "green" city, etc then it will definitely not be optimal.