Housing Bubble II: The Quest To Build Enough Homes Where People Actually Need Them

[P'tit Renard]

Originally Posted by Innsertnamehere

The 30 year insured and 1.5 million purchase price changes were overdue, IMO.

30-year mortgages are standard globally and forcing buyers to finance for 25 years was only hurting affordability.

The $1 million insured price has been static for years and has not been adjusted for inflation. $1.5 million is a reasonable increase that puts the real value closer to what it was originally intended to be. They should be indexing it to inflation though, not just ad-hoc increases like this.

But why should the government be guaranteeing this mortgage insurance in the first place? Why should the federal government shoulder the risk? At least keeping the insured price at $1 million means that eventually the government could roll itself out of this business.

What most mortgage holders also don't realize is that mortgage insurance is to protect the banks (it's a form of bailing out the banks so they don't have to take on any balance sheet risk, so that banks are incentivized to prioritise real estate lending, and encourage them to pursue moral hazard like ignoring money laundering and mortgage fraud), and not the homeowners. In the case of default, it's CHMC that will bounty-hunt the homeowner to cover their losses from default payouts.

Increasing the cap to $1.5M is the most explicit form of socializing risks and privatising reward, and an explicit endorsement of the advanced financialization of the residential real estate market. And this is being sold under the false premise of "improving affordability".

Originally Posted by theman23

It's a bit of a circular argument. If housing prices run up to $3 million because of the increased liquidity and (perhaps more importantly) the implicit signal of housing being too big to fail by the federal government, will we need to double the cap again?

Exactly. Is there any end to this merry-go-round if the government keeps ratcheting up the risk that it has to bear on MBS bonds?

[P'tit Renard]

Originally Posted by 1overcosc

$1.5 million is not a reasonable price for a home, though. Steps like this - 30 year mortgages, 1.5 million caps - are basically just accepting that $1.5 million is a "normal price" for a home, when it is not.

What's hilarious is that this government has ample time to dream up these new initiatives to support and inflate the housing bubble, but refuses to even entertain basic ideas to protect against mortgage fraud, like allowing underwriters to verify income with CRA.

It's quite obvious where this government's priorities lie, their hidden agenda is basically protect housing prices at all costs, which is a lot more sinister than any hidden agenda Harper was accused of having.

[whatnext]

BC NDP, clueless as usual:

....“We have a very giant loophole that you can walk through. There’s an arrow pointing to it — rent out your vacant home, don’t pay the tax, make extra money from rent.”

Eby explains he’s heard from constituents that since introducing the speculation tax, former vacant houses are now homes to “a bunch of students … or a family moved in and they’re renting that place.”...

https://vancouver.citynews.ca/2024/1...n-vacancy-tax/

[GenWhy?]

Originally Posted by whatnext

BC NDP, clueless as usual:

....“We have a very giant loophole that you can walk through. There’s an arrow pointing to it — rent out your vacant home, don’t pay the tax, make extra money from rent.”

Eby explains he’s heard from constituents that since introducing the speculation tax, former vacant houses are now homes to “a bunch of students … or a family moved in and they’re renting that place.”...

https://vancouver.citynews.ca/2024/1...n-vacancy-tax/

Back in 2009 I lived in a house with 5 other people. It's kind of what you do while in university.

[whatnext]

Interesting take from a realtor on Toronto's condo market which seems to be in the shitter. Inventory is as high as the early Nineties, dark days for Toronto real estate. Apparently the only area with some life is cheap townhouses because they can be rented out to groups of students!

• Video Link

[harls]

Originally Posted by whatnext

dark days for Toronto real estate.

Hopefully great bargains will be found in Vancouver!

[MonkeyRonin]

Originally Posted by whatnext

Interesting take from a realtor on Toronto's condo market which seems to be in the shitter. Inventory is as high as the early Nineties, dark days for Toronto real estate. Apparently the only area with some life is cheap townhouses because they can be rented out to groups of students!

I've been hearing a lot about all the unsold condo inventory in Toronto, but so far at least, asking prices at least haven't dropped much to match that reality. Still a lot of sellers that seem to be optimistic they'll be able to sell their studio units for nearly half a million.

Based on my regular real estate browsings (and sales histories), my general observations on the state of the market in BC & Ontario at the moment are that:

• Prices for all property types in rural areas, small towns, and especially vacation hotspots like Muskoka or the Gulf Islands have dropped quite a bit from the Covid peak when everyone was counting on being able to work from home forever; but are still well above pre-pandemic prices. Without the local incomes to support those prices though, inventory is sitting on the market for a long time.
• In the cities: houses, townhouses, and larger condo prices are continuing to rise - or at least, the cheaper ones are disappearing. Despite benchmark prices dropping, I get the sense that it's the mid-tier properties that are most affected. With higher interest rates, buyers are looking for cheaper alternatives, and thus raising the entry-level price points. I'm seeing fewer listings under a million, and those that are are scooped up pretty quickly.
• The condo market is more nuanced, and very much dependant on location and unit size/type. Priced on larger, higher-quality units in desirable neighbourhoods are holding steady or rising; while investor shoeboxes are falling - but not by enough to match the demand for them, and so they're mostly just sitting on the market for months or even years on end.

[whatnext]

I posted this in the Vancouver forum under the building concerned but I'll post it here as well. It indicates why prices will have a hard time correcting when there is still so much offshore money controlling real estate in Canada's big cities. Note that despite people seeming to think vacancy taxes stifled offshore buying that two of the houses mentioned were recently purchased.

Ex-Wife of Evergrande Chair Amasses $285 Million in Property
-Ding owns housing assets ranging from Vancouver to London
-Evergrande liquidators are seeking to recover $6 billion

By Venus Feng
October 16, 2024 at 4:00 PM PDT
Updated on October 17, 2024 at 6:13 AM PDT

In the heart of downtown Vancouver, just minutes from the financial district and art galleries, sits the One Wall Centre - an elliptical, blue glass complex featuring a Sheraton Hotel and luxury apartments.

A condominium on the 47th floor, offering stunning views of the Pacific coast mountains and Vancouver Harbour through floor to ceiling windows, is owned by the ex-wife and son of Hui Ka Yan, the billionaire founder and chairman of the failed developer China Evergrande Group.

The Vancouver condominium is one of many global properties worth as much as $285 million held by Ding Yu Mei, according to court documents and property searches done by Bloomberg News. The homes, from Canada to the UK, include one of the most expensive mansions in London....

....Ding, who holds a Canadian passport, and her son Steven Xu Zhijian bought the Vancouver condominium in 2004, just as Evergrande was starting to ride the wave of a real estate boom that would eventually make Hui Asia’s second-richest person. Ding benefited too, as Evergrande’s rise boosted the value of her almost 6% stake in the company, based on filings last year.

Ding and Xu are still listed as registered owners of the One Wall Centre property, for which they paid C$1 million ($725,000), according to documents from the Land Title and Survey Authority of British Columbia. The two-bedroom unit is currently worth about C$2 million, according to BC Assessment, after prices soared in Canada’s most expensive housing market....

....Ding, 67, was listed as a “homemaker” and Xu a student at the time of the purchase, the documents show. Xu holds a Bachelor of Arts (Economics) degree from the University of British Columbia, according to an Evergrande filing.

Ding has likely added to her Vancouver holdings since then. A house worth C$2.15 million purchased in November 2022 and another bought in February 2023 for C$12 million list Yu Mei Ding as the registered owner, according to land title documents. The transactions were made after Evergrande defaulted on its dollar bonds, and after Hui was urged by Chinese authorities to tap his personal wealth to help repay debts.

The C$12 million home is in Shaughnessy, home to some of Vancouver’s most expensive real estate. Huawei Technologies Co. Chief Financial Officer Meng Wanzhou lived in the area during her time in Canada. Built in 2019, the house has eight bedrooms and 10 bathrooms, with about 6,700 square feet (622 square meters) of floor area, featuring a floor-to-ceiling wine cellar and home theater. The other house in the Southlands area has six bedrooms and four bathrooms, according to marketing materials. A visit to the Vancouver properties in August didn’t find anyone at home....(bold mine)

https://www.bloomberg.com/news/artic...&sref=x4rjnz06

[Arrdeeharharharbour]

Originally Posted by MonkeyRonin

I've been hearing a lot about all the unsold condo inventory in Toronto, but so far at least, asking prices at least haven't dropped much to match that reality. Still a lot of sellers that seem to be optimistic they'll be able to sell their studio units for nearly half a million.

Based on my regular real estate browsings (and sales histories), my general observations on the state of the market in BC & Ontario at the moment are that:

• Prices for all property types in rural areas, small towns, and especially vacation hotspots like Muskoka or the Gulf Islands have dropped quite a bit from the Covid peak when everyone was counting on being able to work from home forever; but are still well above pre-pandemic prices. Without the local incomes to support those prices though, inventory is sitting on the market for a long time.
• In the cities: houses, townhouses, and larger condo prices are continuing to rise - or at least, the cheaper ones are disappearing. Despite benchmark prices dropping, I get the sense that it's the mid-tier properties that are most affected. With higher interest rates, buyers are looking for cheaper alternatives, and thus raising the entry-level price points. I'm seeing fewer listings under a million, and those that are are scooped up pretty quickly.
  [*]The condo market is more nuanced, and very much dependant on location and unit size/type. Priced on larger, higher-quality units in desirable neighbourhoods are holding steady or rising; while investor shoeboxes are falling - but not by enough to match the demand for them, and so they're mostly just sitting on the market for months or even years on end.

This last point is so very true in my sphere. I have a number of single or couples friends who currently live in large multi-bedroom houses that are far too large for what they need or want but they can't find a suitable alternative in a condo. They all want pretty much the same things... minimum two bedrooms, a den, a good sized unit, and generous private outdoor space. The media reports of the number of unsold 'condos' on the market is so far from the whole story that it's laughable.

[someone123]

Originally Posted by YOWetal

With 2% mortgage rates it absolutely is a normal price for a home. Most couples can afford that with a downpayment from profits on their condos they bought in their 20s rather than travelling the world and ordering every night on uber eats.

This concept of a "normal price" seems to have a built-in assumption that housing won't be a competitive market and so housing will be priced to eat up some portion of everybody's earnings. But the government is supposed to try to keep this market competitive. There is no way it fundamentally costs $1.5M to build new houses in terms of labour and materials.

The Canadian real estate market is absurd. We barely have any natural increase in population growth and this is a country overflowing with natural resources where most of the geography is not urbanized. Even if we're talking about Vancouver, there's tons of developable land for multi-unit within a short walk of downtown. Make it easy for small developers to build as-of-right 10-30 storey towers on single or double lots around East Van and condos will get cheaper there.

[SignalHillHiker]

One of the little ones I was hoping would come on the market back when I was looking finally did. Glad I didn't hold out lol. Twice my budget, and much larger than I thought.

[Build.It]

Whatsnext made onto TV! (well, youtube lol)

https://youtu.be/XnFVvyu2zGY?si=VNLD6j8xTdi7OapT

[YOWetal]

Originally Posted by Arrdeeharharharbour

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This last point is so very true in my sphere. I have a number of single or couples friends who currently live in large multi-bedroom houses that are far too large for what they need or want but they can't find a suitable alternative in a condo. They all want pretty much the same things... minimum two bedrooms, a den, a good sized unit, and generous private outdoor space. The media reports of the number of unsold 'condos' on the market is so far from the whole story that it's laughable.

This is extremely expensive and most people make the decision they'd rather have a house or townhouse at least at the same price. They $2000 a month condo fees are also seen as a waste of money and as much as rent by these people.

[Innsertnamehere]

yea, people don't realize how expensive condos are on a per square foot basis. Everyone talks about how they would be fine living in an apartment provided it was 1,000sf with a 500sf terrace and two underground parking spaces and laments that doesn't seem to exist.. but the reason it doesn't exist is that type of unit is actually *more expensive* to build than a townhouse. They don't exist because they don't make economic sense.

Which is why our policy driven aversion to anything other than apartments is so problematic. It's artificially forcing people to live in 600-700sf units as that's all people can afford in that building form.

We *need* ground related housing for housing affordability. That doesn't mean we need to give up dense, walkable communities to achieve it - you can build very, very dense townhouse neighbourhoods if you want.. but that's the reality. A back-to-back townhouse can provide 80-90% of the utility of a detached home in living space and function while taking up 1/20th of the land footprint and at densities similar to low-rise apartment building forms.. but we deem anything like that undesirable and effectively illegal.

[MonkeyRonin]

Originally Posted by Innsertnamehere

yea, people don't realize how expensive condos are on a per square foot basis. Everyone talks about how they would be fine living in an apartment provided it was 1,000sf with a 500sf terrace and two underground parking spaces and laments that doesn't seem to exist.. but the reason it doesn't exist is that type of unit is actually *more expensive* to build than a townhouse. They don't exist because they don't make economic sense.

Which is why our policy driven aversion to anything other than apartments is so problematic. It's artificially forcing people to live in 600-700sf units as that's all people can afford in that building form.

We *need* ground related housing for housing affordability. That doesn't mean we need to give up dense, walkable communities to achieve it - you can build very, very dense townhouse neighbourhoods if you want.. but that's the reality. A back-to-back townhouse can provide 80-90% of the utility of a detached home in living space and function while taking up 1/20th of the land footprint and at densities similar to low-rise apartment building forms.. but we deem anything like that undesirable and effectively illegal.

Indeed. Land values aside (which are themselves largely a function of restrictive zoning), low/mid-rise wood frame housing is the most economical form of construction (aside from modular), which is why I always find it kind of funny when you get the Urban Toronto YIMBY-types who think everything needs to be a 90-storey tower to solve the housing crisis.

That said, high-rise condo units were a lot larger in the 1970s-2000s. The average condo size in Ontario for example has fallen by 35% from 25 years ago, from 1,100-sqft to 700 sqft today. I suppose they were somewhat of a more niche, luxury product in the past (but obviously, still a lot cheaper than anything available today!), but that's probably where people are getting the notion of a reasonably-priced, decently-sized condo unit from.

[Innsertnamehere]

It's because construction standards and cost structures have changed immensely since then.

Ultimately other countries manage to build cheap, large apartments - but code standards are wildly different.

A 1970's apartment building is a giant slab building with square, repeatable floorplates from ground floor to top. No expensive setbacks, stair transfers, changing floorplans. Floor to floor heights are shorter, construction methods simpler, environmental standards substantially worse, common shared heating and cooling systems, little amenity space.. the list goes on.

We built cheap big apartments back then because they were no-frills. Units today have to be near net-zero, have massive amenity areas, feature extensive, complicated structural systems to accomodate complex building forms, have individual heating and cooling systems, have in unit laundry which require individual ventilation, underground parking needs to be waterproof.. the list goes on. It's full of "frills", so the per-sf cost is far higher.

Apartments can be cheaper if we simply permit them to be cheaper. But no matter how cheap we build them, lowrise stick construction always wins out on a per-sf basis.

The problem is politicians seem to have this concept that taxes, construction standards, land use regulations, etc. have 0 impact on real estate prices and instead it's all the fault of "foreign investors" and "developers".

[1overcosc]

Originally Posted by Innsertnamehere

yea, people don't realize how expensive condos are on a per square foot basis. Everyone talks about how they would be fine living in an apartment provided it was 1,000sf with a 500sf terrace and two underground parking spaces and laments that doesn't seem to exist.. but the reason it doesn't exist is that type of unit is actually *more expensive* to build than a townhouse. They don't exist because they don't make economic sense.

Which is why our policy driven aversion to anything other than apartments is so problematic. It's artificially forcing people to live in 600-700sf units as that's all people can afford in that building form.

We *need* ground related housing for housing affordability. That doesn't mean we need to give up dense, walkable communities to achieve it - you can build very, very dense townhouse neighbourhoods if you want.. but that's the reality. A back-to-back townhouse can provide 80-90% of the utility of a detached home in living space and function while taking up 1/20th of the land footprint and at densities similar to low-rise apartment building forms.. but we deem anything like that undesirable and effectively illegal.

If you look at much of the European cities we all love it's quite striking how it's mostly ground oriented housing but still several times denser than North America. Even Scandinavian suburbs that are mostly SFH still manage to fit a lot more people per square kilometre than our SFH suburbs do. There's a lot that can be done to significantly increase densities without having to build towers.

By ditching garages and front yards, you can make entire SFH subdivisions 3-4x denser than your typical bungalow belt suburb in Ontario.

[1overcosc]

Originally Posted by Innsertnamehere

It's because construction standards and cost structures have changed immensely since then.

Ultimately other countries manage to build cheap, large apartments - but code standards are wildly different.

A 1970's apartment building is a giant slab building with square, repeatable floorplates from ground floor to top. No expensive setbacks, stair transfers, changing floorplans. Floor to floor heights are shorter, construction methods simpler, environmental standards substantially worse, common shared heating and cooling systems, little amenity space.. the list goes on.

We built cheap big apartments back then because they were no-frills. Units today have to be near net-zero, have massive amenity areas, feature extensive, complicated structural systems to accomodate complex building forms, have individual heating and cooling systems, have in unit laundry which require individual ventilation, underground parking needs to be waterproof.. the list goes on. It's full of "frills", so the per-sf cost is far higher.

Apartments can be cheaper if we simply permit them to be cheaper. But no matter how cheap we build them, lowrise stick construction always wins out on a per-sf basis.

The problem is politicians seem to have this concept that taxes, construction standards, land use regulations, etc. have 0 impact on real estate prices and instead it's all the fault of "foreign investors" and "developers".

Plus a lot of voters have the mindset that simplifying these standards to reduce costs amounts to "turning our homes into deathtraps for developer profits".

1960s era highrise apartments are arguably nicer to live in than 2020s condos, despite the supposedly "higher standards" of the latter.

[1overcosc]

If we get the housing crisis under control, a lot of those shiny 2010s-2020s condo towers that are chock full of 500 square foot studio units are going to become the new slums. Nobody is going to want to live in those if there's other options available.

I'm not sure how we go about preventing them from becoming "stranded assets".

Arguably, a lot of the housing crisis can be stemmed from what could be called bad left-wing policy (stricter building codes, more energy efficiency rules, higher taxes, sprawl controls, overplanning zoning, etc.), but this is one aspect of it that could definitely be called bad right-wing policy: by not having much in the way of capital controls, it meant that investors were driving the market during the 2010s condo boom. So developers built units to appeal to potential investors rather than units to appeal to potential residents. In some alternate scenario where we had stricter rules to ensure most of the buyers of condo units were prospective owner-occupants, developers would have likely paid more attention to things like floorplans and square footage to optimize for quality of life in the units.

[Build.It]

I've wondered the same thing 1overcosc. My guess is there will be pressure on local governments to get those buildings rezoned so that the units can be repurposed as private offices. Usually the walls within the unit are drywall so can be torn down. The walls between units are concrete though so there's that limitation. But the buildings are in class A locations for commercial space, so I'm sure there will be demand for this. For a lot of businesses this would be a more affordable option to get office space.