Canada's 'housing bubble' deemed close to bursting

[someone123]

A huge part of the cost even of multi-unit construction in Vancouver is now land cost, so it is impossible to build affordable multi-unit housing under 5 storeys in much of the city. Add in demolition costs and the net loss of old housing and highrises start to make a lot more sense as infill in built-out parts of the city.

At this point the problem won't be fixed only by considering supply. There is too much money flooding into the market and housing in Vancouver has become an internationally-traded commodity. That side of things needs to be fixed too. Unfortunately it doesn't look like either the provincial or federal governments are likely to take any serious action.

[geotag277]

I think low rise is still doable is large swaths of Vancouver. Vancouver's equivalent areas to Calgary's Marda Loop, which are a bit removed from c-train (skytrain) stations have land values hovering around 1 million which could beget affordable housing options in a mid-rise vehicle.

It does make one scratch one's head what happened to David Eby however...

[lio45]

Originally Posted by geotag277

(As an aside, it's fun to make these statements and have other people do the research for you, or as I call it, the lio technique).

Just to follow up on this, I want to make sure we all agree it's perfectly reasonable for a highly-educated, intelligent, well-informed and intellectually honest SSP contributor to make a non-binding simple remark such as "wow, -19 C seems really unusually cold a record low for a city like Victoria BC!"

It's fine to have other people -- if they want to react -- doing their research and/or being way more personally familiar with the city, pointing out to you that this record low is from a mountaintop within city limits and that the record low in the city is more like -14 C, or that in the grand scheme of things it's actually totally comparable a record low to interior lowland Sunbelt cities and Mid-Atlantic coastal cities like Virginia Beach which all get much much warmer summers.

If we want to hold this forum to an even higher standard (i.e. that in terms of SSP etiquette, it wouldn't be acceptable practice for you to say things along the lines of "huh, at first sight Montreal seems awfully sprawly to me who lives thousands of km away and never visits; any locals care to elaborate/correct/explain?"), it won't be viable anymore as a discussion place IMO.

[someone123]

Originally Posted by geotag277

I think low rise is still doable is large swaths of Vancouver. Vancouver's equivalent areas to Calgary's Marda Loop, which are a bit removed from c-train (skytrain) stations have land values hovering around 1 million which could beget affordable housing options in a mid-rise vehicle.

1 million for what quantity of land? Many single house lots in the city are over a million dollars. You're not going to fit much more than 5 units per lot (net increase +3-4) if you are limited to 5 floors (which doesn't mean FAR of 5).

I live in a suburb and the land assessment for my 2 bedroom condo in a 5 storey building is up in the $300,000 range now. Affordable market-rate lowrise construction in my area is impossible.

[WhipperSnapper]

Originally Posted by geotag277

Again, this is totally ignoring the fact that Vancouver is already 2x the size of Calgary, which I think is important. Like CanSpice was alluding to, looking at these numbers in a vacuum causes incorrect conclusions.

Consider a city of 0 growing to 50,000 in the middle of the prairies. It would be a given that would be almost entirely single family detached housing, and that's ok. There are factors involved, such as getting people to settle into that place, and so on. Perhaps they built 5,000 multifamily, having a very poor "means ratio" in your calculation here, but 5,000 multifamily in that context is generally phenomenally good urban planning.

At the end of the data, the data is out there, it's not hard to put it together. I don't agree with WhipperSnapper that we would easily get lost in data here. The components of growth should all be easily accessible (interprovincial, natural increase, etc.) and we can just stack it up against multi family components.

One thing that I think Vancouver also fails on, is building too many towers and not enough low rise. I would argue towers and high rises are actually very poor options for city development in general, as they are limited options, usually very expensive, and so on. So while Vancouver's numbers might be padded disproportionately with towers, Calgary puts it to shame in low rise density as well.

(As an aside, it's fun to make these statements and have other people do the research for you, or as I call it, the lio technique).

You make some points but, there's no end to this. Calgary is a major metropolis with over a million people. It is much more like Vancouver than a hamlet of a few thousand people. The difference between 1 and 2 million is negligible at best considering multi-family isn't exclusive to massive tower complexes for massive cities but, anything with 6 (?) or more units.

I tried googling but, nothing came up. Still, on the surface a sizable chunk of Port Perry's growth is in multi-family as it booms from 10,000 to 12,000 over the next 5 years. It's not an outlier either. All the small towns outside the GTA are building multi-family. There's demand for it.

[WhipperSnapper]

Originally Posted by mistercorporate

Is everyone on this board going through menopause at the same time this week?? Did you synchronize your cycles? All I hear is cat fights in every thread...I want to hear about bubbles and supertalls gaddammit!

Yeah, it's January.

[WhipperSnapper]

Originally Posted by geotag277

Part of the problem with towers is that they are an unmitigated profit grab by developers, who without proper municipal guidance (read: bylaws) will simply maximise their profit. That typically means a litany of tiny 1 bedroom 400 sqft affairs with a subset of 600-1000 2 bedrooms. If there is a three bedroom, it is typically worked into a penthouse unit which is 2000+ sqft and multi-million dollars.

This is the typical model for towers, and it ends up being a bit of an urban planning failure, as options for families are extremely limited. Towers also tend to be built on the most desirable highest cost land, which further negates potential affordability.

This is one area Vancouver does pretty well, as places like Burnaby actually mandate family friendly 3 bedroom units as part of developments. There needs to be more push like that to balance affordability and availability of types of units constantly. If a family can make it work in 10% of new units coming on the market in tower-style developments, that would put downward pressure on prices of townhomes where the typical family would feel is their only option.

You can't introduce affordability in a market with runaway real estate speculation. You can upzoning the hell out of a city allowing tower densities to be developed everywhere. It's not going to change a thing. Speculators will still pay top dollar for development's site under the impression they will always be able to sell for more and the owners of these houses now zoned for an apartment tower is not going give away their windfall for nothing.

You can get 30 storey high rises approved just about anywhere within Toronto's 630 square kilometres if you give it enough time. Rents and prices continue to skyrocket. Pre-sale has pretty much hit that $1000 a square foot mark now in the downtown and developers are paying upwards of a quarter of a billion dollars for a one residential tower site. Keep in mind, Oxford paid $60 million for possible the best remaining office tower site left in the CBD and at the height of the office crunch in Calgary.

[Pinion]

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[whatnext]

Originally Posted by WhipperSnapper

You can't introduce affordability in a market with runaway real estate speculation. You can upzoning the hell out of a city allowing tower densities to be developed everywhere. It's not going to change a thing. Speculators will still pay top dollar for development's site under the impression they will always be able to sell for more and the owners of these houses now zoned for an apartment tower is not going give away their windfall for nothing...

This.

Some posters just don't seem to get that.

[geotag277]

Originally Posted by WhipperSnapper

The difference between 1 and 2 million is negligible at best considering multi-family isn't exclusive to massive tower complexes for massive cities but, anything with 6 (?) or more units.

I tried googling but, nothing came up. Still, on the surface a sizable chunk of Port Perry's growth is in multi-family as it booms from 10,000 to 12,000 over the next 5 years. It's not an outlier either. All the small towns outside the GTA are building multi-family. There's demand for it.

I don't agree that there isn't a fundamental difference between 1 and 2 million people. For 1 million people the density picture is almost wholly different compared to the calculus at 2 million. Ottawa, Calgary, Edmonton are all cities which do OK for density and that is what a 1 million density picture looks like. Winnipeg and Quebec City are good examples of those almost 1 million cities where you can certainly tell they are playing in a different dimension regarding density compared to Vancouver.

Vancouver was doing quite well with density and urban planning when it was 1 million people (which wasn't even that long ago btw, we're talking 80s). During the 90s Vancouver reached an inflection point where they needed to get in front of density to maintain their urban planning advantages, and they didn't (roughly when Vancouver real estate passed Toronto, big red flag right there).

I do believe Calgary, Ottawa, & Edmonton, once they reach 2 million, will have a better balanced multi-family strategy which meets the needs of their citizens to a much better extent compared to Vancouver today. Comparing Canadian cities with 1 million people to Vancouver is part of the picture of Vancouver's extreme falling off with meeting the needs of their residents.

[geotag277]

Originally Posted by WhipperSnapper

You can't introduce affordability in a market with runaway real estate speculation. You can upzoning the hell out of a city allowing tower densities to be developed everywhere. It's not going to change a thing. Speculators will still pay top dollar for development's site under the impression they will always be able to sell for more and the owners of these houses now zoned for an apartment tower is not going give away their windfall for nothing.

You can get 30 storey high rises approved just about anywhere within Toronto's 630 square kilometres if you give it enough time. Rents and prices continue to skyrocket. Pre-sale has pretty much hit that $1000 a square foot mark now in the downtown and developers are paying upwards of a quarter of a billion dollars for a one residential tower site. Keep in mind, Oxford paid $60 million for possible the best remaining office tower site left in the CBD and at the height of the office crunch in Calgary.

I don't think we should be comparing $60 million office Calgary CBD boom-time deals with what I'm talking about. Just like Vancouver's Trump Tower and Shangri La, while tall, don't really solve any fundamental problems for Vancouver residents when it comes to housing. They might add a lot of units (not even given the sqft per unit), but they are marketed at the top end, so who cares? One recent development in Calgary was the Metropolitan, centrally located in the Beltline, a 500+ unit rental midrise with reasonable rents, a development among a cluster of other projects which did wonders for helping Calgary balance the market and provide affordability for residents. Where is the analogous development in Vancouver? It doesn't even exist.

I'm talking about the city stepping up to the plate to partner with developers on transforming Vancouver's housing picture by keeping up with demand across the spectrum. Rental units, across the price spectrum. Housing options, across the price and bedroom spectrum (with mandated three bedroom units). And so on.

The picture being painted in Vancouver today is not runaway speculation (for multi-family: CoV %80+ domestic buyers, Richmond %80+ domestic buyers, Burnaby %90+ domestic buyers, etc.), but rather a dearth of housing options at the lower end of the price scale. Why did a foreign buyer tax re-direct so much investment into condos? It doesn't make sense if foreign speculation was the primary driver. I recently looked at available places in Vancouver, and there is white hot demand at the lower end of the price spectrum. There is such intense demand for it, that developers and the city could literally print money if only they stepped up to the plate and came up with a plan to actually provide these options for residents. Why don't they? Where are the "Metropolitan" developments in Vancouver? This is in a place with crisis level <1% rental vacancies.

A market is driven by supply and demand, and while foreign buyer bans will marginally help the demand side, there is a big gaping hole in Vancouver's urban development strategy around the supply side.

The city is failing it's residents, over and over and over again. Vancouver used to be at the forefront of urban development when it was the size of Ottawa and Calgary today. Now it is falling on it's behind. I don't know how you can conclude otherwise considering what is happening there.

[Pinion]

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[OTSkyline]

I think part of the problem is that, for developers, they know they can build a high-end luxury tower and sell out units almost right away and max out profits. So why would they build lower-end or mid-tier developments and limit their profits since surely margins (or profits) per unit at the lower levels are much less than the profit they can make selling $1M+ units.

Whether those units are sold to residents or Chinese investors, developers don't care. A sale is a sale.

[Pinion]

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[geotag277]

It's up to the city to reign in developers and ensure they are developing in a sustainable way for the city. If it was up to developers they would sell 300 sqft 1 bedrooms (or whatever the optimal sqft to plumbing cost is) by the boat load unrestrained. Urban planning and development isn't about developers doing whatever they want, it's also about the city ensuring land is being used effectively to meet the needs of residents.

It's not just about pre-sale condos, ALL resales in Vancouver at the lower end of the market went crazy once the foreign buyer tax was added. SFH had a few months where averages and sales went down - if anything that would allow more domestic buyers to reach into that market, but that didn't happen.

Incidentally, why hasn't the pre-sale condo loophole been closed by now? They could have been done on day 1 with the NDP/Green coalition. Isn't Andrew Weaver huge on this tax, and isn't the NDP the party of David Eby? What is going on?

[Pinion]

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[CanSpice]

Originally Posted by geotag277

It does make one scratch one's head what happened to David Eby however...

David Eby is the Attorney General and he's got his hands full with the money laundering going through BC's casinos. Who we should be hearing from is Selina Robinson, the Minister of Municipal Affairs and Housing. The only legislative changes that ministry has made is closing some loopholes surrounding fixed-term rental leases.

[geotag277]

Originally Posted by CanSpice

David Eby is the Attorney General and he's got his hands full with the money laundering going through BC's casinos. Who we should be hearing from is Selina Robinson, the Minister of Municipal Affairs and Housing. The only legislative changes that ministry has made is closing some loopholes surrounding fixed-term rental leases.

Don't forget increasing the homeowner grant to offset property taxes for million dollar homes (now up to almost 2 million).

Selina Robinson was a strange choice for this role, considering she seemed to be most concerned about dogs left in cars more than housing before the election.

[lio45]

Originally Posted by geotag277

One recent development in Calgary was the Metropolitan, centrally located in the Beltline, a 500+ unit rental midrise with reasonable rents, a development among a cluster of other projects which did wonders for helping Calgary balance the market and provide affordability for residents. Where is the analogous development in Vancouver? It doesn't even exist.

It can't be done in Vancouver because Vancouver rents are exceptionally low compared to property prices. It's impossible to build rental properties in such circumstances (unless the government's paying for it).

After building "The Metropolitan" in Vancouver, the owner of the building would have to decide between getting a pittance yearly in incoming rent, or selling 500+ units as condos (a.k.a. glass-and-steel bitcoins) for skyhigh prices to rich Chinese investors and maybe some locals too. I have no doubt the former route would be, if not outright money-losing (possible given the land values and construction costs), incredibly uninteresting financially compared to the latter.

[lio45]

I've thought a bit about it and I think the only way to bring the Vancouver market down to Earth would be to scare off Chinese investors into preferring some other place. Make them realize that it's much safer to park their money in a market that isn't bubbly, while all the advantages remain. It shouldn't be that hard to convince them that it would be in their interest to invest their $3 million into Winnipeg real estate with good cap rates than into one single cheapass 1970s Vancouver bungalow that will bring pocket change in income, can't realistically continue to climb much in value, and could very well lose significant value because there's no fundamentals justifying anywhere near what they're paying for it.

If Vancouver and/or the BC government want to do something to cool off the market, it would be this ^^^ in addition to paying the Winnipeg and Edmonton airports to set up and maintain frequent direct flights to China. Also, things like paying the City of Winnipeg so they'll accept to have their website in Mandarin, etc.