Canada's 'housing bubble' deemed close to bursting

[geotag277]

Agreed. the downturn has been invaluable in spurring rental stock in Calgary - Vancouver doesn't have that "luxury" with rental vacancies at crisis levels and the economy showing no signs of slowing.

I don't think 2B over 10 years is going to cut it. Needs to be a highly incentivised solution to encourage private companies to direct capital towards rentals. With all the talk of the speculators tax, I didn't see much talk of what is actually being done to ensure developers actually are encouraged to build rentals over high end shoe box condos.

Pinion's link to a tiny bachelor pad costing 900 a month should be a wake up call. Vancouver is no longer a "low rent" city, it's unaffordable across the board now.

[someone123]

Originally Posted by geotag277

I don't think 2B over 10 years is going to cut it. Needs to be a highly incentivised solution to encourage private companies to direct capital towards rentals. With all the talk of the speculators tax, I didn't see much talk of what is actually being done to ensure developers actually are encouraged to build rentals over high end shoe box condos.

But the speculators are encouraging the construction of shoebox condos over rental stock by providing a market for these units and "outbidding" alternate plans for larger family-sized condos or rental buildings. There's a certain amount of capacity in the construction pipeline in Vancouver (number of firms able to build highrises, labour, available land) and that pipeline is getting filled with shoebox condos to the exclusion of all else. The pipeline doesn't seem to have grown a whole lot over the past few years.

The shoebox condo has become like a form of Bitcoin investment with strange intrinsic value dependent on assumed future gains in value. The focus on speculative gains rather than value as housing or rental returns is why the units are so strange and undesirable. This seems like a market failure.

Zoning more land for highrises and zoning land for rentals with requirements for family-sized units would be good (on a large scale - e.g. as-of-right buildings up to 40 storeys within a 1-2 km radius of every SkyTrain station), but I think the speculation tax and foreign buyer tax are important too.

[geotag277]

I'm really not sure how to read the condo situation in TO and Vancouver right now. It seems there was an unintended consequence of foreign buyer taxes to push housing demand into condos. I'm not sure how that unintended consequence follows or what the exact relationship is there.

My gut reaction is I suspect it is mostly a domestic demand effect. People cooled from the SFH redirected into condos - not because they couldn't afford houses, but because they intrinsically seem to think condos are better investments in the face of foreign buyer taxes.

I don't know why foreign investors would be suddenly and in concert interested in condos immediately in the aftermath of foreign buyer taxes.

Also interesting that foreign buyer taxes inspired more condo demand, which has now correlated with critically low rental vacancies. It seems at first blush these factors are not entirely unrelated.

Certainly speculation taxes and foreign buyer taxes are part of the equation to attempt to mitigate some of these inefficient land use and foreign speculation driving up prices across the board - but again my gut reaction is that what is desperately needed right now is more rental units to moderate prices.

Speculation taxes are important and a key piece of the puzzle, but I'm not sure Vancouver can wait around to see what happens with those taxes while implementing half hearted rental measures that only amount to 1.4k units a year. Vancouver needs to do everything, at once, right now.

[osmo]

I am not tax savvy but I hear in RE circles that the way rental buildings are structured tax wise make them unappealing to dive into for investors aside from big REITs. In the USA rental buildings are structured more favorably and builders prefer to dive into a rental with the cash flow potential versus a condo. Condos in the USA are structured alot more shady versus here and builders find them more risky in America.

Lots of buildings go up by spec in the USA also, Builders live and die in lease out windows. Seems very foreign to what happens here.

Americans are also over the homeowners looks is after the crash. Money savvy Americans are more prone to rent and use money for better performing investment products versus dumping all thier money into a house.

Originally Posted by geotag277

I agree. The most likely result of most of the speculative measures will be a slight cooling of the market of SFH, which will likely forever remain out of reach of working class Metro Vancouver residents from this point forward.

Who is likely to benefit from that? You're right - the people on the cusp of home ownership, who were going to buy that 600k place and instead get a deal at 550k. Or maybe the 1MM place for 850K.

It will do nothing to bring down rental prices, or moderate condo prices. The only thing that can do that is more units.

Again, my initial reaction to the budget is here - basically "not even close".

2 billion over 10 years for rental housing? 4 billion for other housing?

1 decade, 10 years, for 14,000 rental units?

For reference, even during a downturn, Calgary added 1,637 rental units in a single year. That has incredibly helped moderate prices.

http://calgarysun.com/life/homes/new-homes-and-condos/apartment-vacancy-rate-drops-year-over-year



Here is a slide from CMHC regarding rental stock in Vancouver:

http://www.cbc.ca/news/canada/british-columbia/purpose-built-rentals-primer-vancouver-1.4303824



2200 units in City of Vancouver... over 6 years.

Burnaby actually LOST 500 units in that time.

All told Metro Van added 3410 rental units over 6 years - a paltry 500 units a year.

2 billion on new rental housing over 10 years, at a rate of 1.4K units a year?

Not even close to enough.

Vancouver adds 2000 units over 6 years.... Record breaking.

Seattle added 12,000 last year alone.

This what is actually important. In a huge building surge the only people taking on risk is the builders. If there is an over abundance of supply that crashes prices or explodes vacancy consumers always win. Builders eat thier shirts.

The way the market is now and with Canadian neglect to grow it's housing stock we now see that Vancouver and Toronto but need record years on a continual basis to have prices and vacancy rates stabilize.

For folks saying a $2m is cause for concern, it isn't. Most folks still are not approaching that for a first home. You need $200k income to qualify for that. No Canadian aside from wealthy professionals or folks already in the housing game with a high value home are looking at those prices.

The greatest issue is that there is not enough middle-market housing product being created. In Ontario, Government ran off the folly of suburban expansion as a way to satisfy that segment demand for housing. Now with Greenfield polices that restrict this cheap housing there is literally no alternative aside from condos for that price range.

The builders could give you 100,000 units very quickly if you let them. You look at what is happening in the States it is a building rush right now with majority rentals going up, even California is on the verge of revolutionary state level land use reform only seen in places like Japan with upzoning to take place all over the state. Some estimates say it will crack open the ability of 150,000 new units quickly.

Meanwhile, here in Canada we clap for 100 units here and there. Evrey city in Canada is getting expensive. I was floored to find out that rent in Waterloo isn't all that much cheaper than Toronto. Places where I grew up in Regina and Saskatoon rents are at $1000 now. All over Canada they are getting pinched with high housing costs if your urban area has upward growth numbers. Everyone is feeling it.

[GreaterMontréal]

Montréal adds more rentals than condos.

the median price for a rental unit on the Island of Montréal is $778, heating and electricity included.

[someone123]

Originally Posted by osmo

The builders could give you 100,000 units very quickly if you let them. You look at what is happening in the States it is a building rush right now with majority rentals going up, even California is on the verge of revolutionary state level land use reform only seen in places like Japan with upzoning to take place all over the state. Some estimates say it will crack open the ability of 150,000 new units quickly.

I think we can agree that if 150,000 rental units appeared in Vancouver prices would fall. This would be great. Unfortunately this hasn't happened and isn't all that likely to happen anytime soon. Politically, it would be hard for the provincial government to force upzoning on the cities, and that solution is something the cities could have already started to implement if there were political support. We can either stubbornly insist that increased supply is the only good solution and watch the political logjam or try a multi-pronged approach that includes responses to problematic sources of demand for housing.

We'll see what happens in California. For now rents are insane in the Bay Area and it is NIMBY central.

Seattle saw a small drop in rental rates early this year it's true, something like 3% quarterly. But their average rent is up around the $1,700 a month range. It's still not a very affordable city, and it has a lot of planning problems to tackle.

[1overcosc]

Ottawa is going through a major boom of purpose-built rental as a response to an oversupply of condo units. For whatever reasons, Ottawa's condo market got really, really hot in the late 2000s and into the early 2010s, and it crashed around 2013. When that crash happened there were dozens of approved-but-not-yet-built condo towers that could no longer move forward. Most developers have responded by converting those plans to rental and moving forward with that. In fact, almost every new high rise proposal in Ottawa now is purpose-built rental. Most are along the Confederation Line route as the city upzoned all the areas around it a few years ago.

[osmo]

Originally Posted by GreaterMontréal

Montréal adds more rentals than condos.

the median price for a rental unit on the Island of Montréal is $778, heating and electricity included.

People treat Montreal like a unicorn. Its housing story should be told more nationally but it isn't desirable because it shows what happens in a natural housing market.

Montreal = lots of older generation rental units that are entry market and workforce housing. It is not like nothing new gets build, lots of new housing gets built in Montreal with a good abundance of rental to suit local tastes. People don't mind renting there. You still see condos hitting the market to target certain market segments such as the higher end stuff going up which is normal as new housing naturally will drift up the ladder of the market.

You build lots of housing, you let it age, it then becomes cheap over time. Montreal at one point in time had the most housing in the country, and much of it is still in operation today and is very affordable largely because it is old.

Originally Posted by someone123

I think we can agree that if 150,000 rental units appeared in Vancouver prices would fall. This would be great. Unfortunately this hasn't happened and isn't all that likely to happen anytime soon. Politically, it would be hard for the provincial government to force upzoning on the cities, and that solution is something the cities could have already started to implement if there were political support. We can either stubbornly insist that increased supply is the only good solution and watch the political logjam or try a multi-pronged approach that includes responses to problematic sources of demand for housing.

We'll see what happens in California. For now rents are insane in the Bay Area and it is NIMBY central.

Seattle saw a small drop in rental rates early this year it's true, something like 3% quarterly. But their average rent is up around the $1,700 a month range. It's still not a very affordable city, and it has a lot of planning problems to tackle.

We can agree it would be much worse if Seattle was not proactive on this. Promoting unit construction and toying with minimum unit sizes have ALL helped Seattle from turning into the mess San Fransisco is where wages bloom, population blooms but housing levels stay the same.

Seattle isn't "cheap", but Seattle is also a high wage city with median household incomes at $80,000 USD /year (Versus Vancouver at $54,000 USD per year). Imagine if most Vancouver households took home $100k per year with rents around $1700, nobody would be complaining about affordability in Vancouver if that were the case.

You don't need to anything radical. Upzoning along transit and arterials isn't radical policy. The Canadian political mindset is calcified to try to think beyond the 'towney' mindset that every Canadian city is going to be bungalows and museum-like housing districts that will never change.

[someone123]

Originally Posted by osmo

You don't need to anything radical. Upzoning along transit and arterials isn't radical policy. The Canadian political mindset is calcified to try to think beyond the 'towney' mindset that every Canadian city is going to be bungalows and museum-like housing districts that will never change.

You're sort of arguing against yourself here though. You say that we don't need anything radical, but that this rezoning goes against the calcified political mindset of Canadians.

From a political perspective this rezoning is "radical" in the sense that a lot of people would be opposed and it would be challenging to implement. That doesn't make it a bad thing, and I hope we do get more useful rezoning in the future, but zoning policy in established residential areas may not be the easiest policy to change.

[Architype]

Originally Posted by osmo

...

Vancouver adds 2000 units over 6 years.... Record breaking.

Seattle added 12,000 last year alone.

...

Seattle has almost no condos being built, but plenty of rentals because incentives are not the same as Vancouver, in terms of tax structure, etc. Government and regulations have much more effect over these things than we realize.

... there are many reasons for the disparity. “The short answer is economics. In Vancouver, apartments are saddled with an unfavorable tax code, making condos the more lucrative multi-family housing investment even despite high rental demand. In Seattle’s skyrocketing rental market, one that’s climbed even faster than the condo market in recent years, apartment buildings are much more financially attractive, while condos come with bigger risks and, typically, lower returns.”

http://www.rew.ca/news/why-vancouver-builds-condos-while-seattle-builds-apartments-1.21926671

[geotag277]

Originally Posted by 1overcosc

Ottawa is going through a major boom of purpose-built rental as a response to an oversupply of condo units. For whatever reasons, Ottawa's condo market got really, really hot in the late 2000s and into the early 2010s, and it crashed around 2013. When that crash happened there were dozens of approved-but-not-yet-built condo towers that could no longer move forward. Most developers have responded by converting those plans to rental and moving forward with that. In fact, almost every new high rise proposal in Ottawa now is purpose-built rental. Most are along the Confederation Line route as the city upzoned all the areas around it a few years ago.

I find it hard to read the Ottawa housing market. Why did it seem to crash around 2013? It occasionally starts booming out of nowhere, and seems to also enter declines out of nowhere. I remember it was tracking roughly with Calgary for a while after the oil bust, and I had no idea why, as that was around when the Liberals swept into power and I thought Federal spending would be going up.

[ssiguy]

More great news from Vancouver.

The Chinese government just took over control of Anpang Insurance due to mass money laundering and they own Vancouver's Retirement Concepts. Retirement Concept is the largest chain of retirement homes in BC. Great, now thousands of BC seniors are living in housing that is owned by the Communist Party of China. Anpang bought RC about 9 months ago and several comments in the story in FP and elsewhere that the standards in the last 9 months have gone from good to horrible with large reductions in staff and the good staff leaving.

Gotta love BC. It certainly isn't "The Best Place on Earth" but it certainly is "The Best Place in China."

[1overcosc]

Originally Posted by geotag277

I find it hard to read the Ottawa housing market. Why did it seem to crash around 2013? It occasionally starts booming out of nowhere, and seems to also enter declines out of nowhere. I remember it was tracking roughly with Calgary for a while after the oil bust, and I had no idea why, as that was around when the Liberals swept into power and I thought Federal spending would be going up.

Ottawa is weird. You could do a whole case study on that city.

[kwoldtimer]

Originally Posted by geotag277

I find it hard to read the Ottawa housing market. Why did it seem to crash around 2013? It occasionally starts booming out of nowhere, and seems to also enter declines out of nowhere. I remember it was tracking roughly with Calgary for a while after the oil bust, and I had no idea why, as that was around when the Liberals swept into power and I thought Federal spending would be going up.

Government cuts with nothing, at that time, to pick up the slack.

[whatnext]

The City of Vancouver has released a heat map of all the dwellings that haven't declared they are owner occupied (and hence they will be subject to the Empty Homes Tax).
http://theprovince.com/news/local-news/e...wcm/9c570642-3eb5-4bd2-82bd-74d022a48232

[someone123]

Originally Posted by whatnext

The City of Vancouver has released a heat map of all the dwellings that haven't declared they are owner occupied (and hence they will be subject to the Empty Homes Tax).
http://theprovince.com/news/local-news/e...wcm/9c570642-3eb5-4bd2-82bd-74d022a48232

This must be trivial to circumvent. Even for immigration purposes, which is much more serious, there have been many cases of people saying they were in Canada during the required period while they were actually in some other country. Does Canada have any exit controls right now? If it does, is there any way for this information to get back to immigration officials or (even less likely) the City of Vancouver?

It would be really funny if our government were mailing GST rebate cheques and assessments with primary residence rebates to Guangdong or whatever. This only seems moderately implausible to me.

I am not sure how the city could fix the problem with these primary residence taxes. I think it's much better to have taxes that correlate property ownership with income tax, and shift the tax burden onto people who aren't paying any taxes in Canada but own expensive property here. Aside from being easier to implement it is also pretty fair; property taxes alone are not enough to cover the cost of running the city and province, so people who only pay those while monopolizing some of the best land in the province are not paying their fair share.

I think it is somewhat unfair that Canadians who pay taxes in another province might get treated the same way as someone who is living in another country and paying nothing at all. Then again a lot of the more domestic vacation property areas are outside of the areas mentioned in the recent budget.

[SpongeG]

Canadians with B.C. vacation homes to be hit with new tax

DAVID EBNER AND JUSTINE HUNTER
VANCOUVER AND VICTORIA
PUBLISHED 3 DAYS AGO
UPDATED FEBRUARY 21, 2018

British Columbia's new property tax targeting out-of-province owners will hit Albertans and other Canadians who have vacation homes there with a big additional bill of thousands of dollars.

On Tuesday, one of the primary measures in the B.C. budget was the introduction of what the government is calling a speculation tax. It is aimed at foreign and domestic property owners who are parking capital in real estate and driving up prices in the province. It would apply to owners who do not pay income tax in British Columbia. Principal residences are exempt, as are properties with long-term renters.

A typical vacation home that is used several times a year but is otherwise empty would not be exempt. "If you are from outside the province and you leave your home vacant, you will be taxed," B.C. Finance Minister Carole James told reporters on Wednesday.

...

https://www.theglobeandmail.com/news/bri...-to-be-hit-with-new-tax/article38061593/

[osmo]

Originally Posted by whatnext

The City of Vancouver has released a heat map of all the dwellings that haven't declared they are owner occupied (and hence they will be subject to the Empty Homes Tax).
http://theprovince.com/news/local-news/e...wcm/9c570642-3eb5-4bd2-82bd-74d022a48232

2%....Of properties have not declared...

I can't wait for all this hysteria stuff to die.

[bless-u]

Originally Posted by ssiguy

More great news from Vancouver.

The Chinese government just took over control of Anpang Insurance due to mass money laundering and they own Vancouver's Retirement Concepts. Retirement Concept is the largest chain of retirement homes in BC. Great, now thousands of BC seniors are living in housing that is owned by the Communist Party of China. Anpang bought RC about 9 months ago and several comments in the story in FP and elsewhere that the standards in the last 9 months have gone from good to horrible with large reductions in staff and the good staff leaving.

Gotta love BC. It certainly isn't "The Best Place on Earth" but it certainly is "The Best Place in China."

I've just learned about the news today. It sounds absolutely dreadful and very alarming. People should realize that any company in Communist China, regardless of being privately owned or publicly traded, could become state-owned property on any given day should the Communist Chinese government deem it appropriate to take over. This piece of news should serve as a reminder to those Canadian companies which are eager to sell out to Chinese companies for personal gains. Let's hope the Communist Chinese government would do the right thing and sell the Canadian assets back to Canadian companies soon.

The Chinese government now controls the biggest retirement home chain in B.C.

If the takeover did lead to asset sales, analysts in Canada believe there would be significant interest in the Retirement Concepts properties

http://ottawacitizen.com/real-estate/pro...wcm/4c726ada-7955-47b6-a3c7-ea2be798b666

Anbang seizure whets buyers' appetites for buildings across Canada and the U.S.
Anbang owns the HSBC Tower in Toronto's financial district as well as Bentall Centre, Vancouver's largest office complex

http://business.financialpost.com/real-e...uyers-appetites-for-buildings-across-u-s

Even if that Chinese company endeavours to stay "independent" and free from the grip of the Communist Chinese government it could just be a "mirage" of the owner's bloated ego. Doing business with companies in Communist China is always a high risk proposition.

Fall of Chinese tycoon threatens electric car factory in California town
Jia Yueting vowed to surpass Elon Musk but then his Faraday & Future Inc. empire crashed.

https://www.thestar.com/business/tech_ne...tric-car-factory-in-california-town.html

[lio45]

Originally Posted by SpongeG

Canadians with B.C. vacation homes to be hit with new tax

DAVID EBNER AND JUSTINE HUNTER
VANCOUVER AND VICTORIA
PUBLISHED 3 DAYS AGO
UPDATED FEBRUARY 21, 2018

British Columbia's new property tax targeting out-of-province owners will hit Albertans and other Canadians who have vacation homes there with a big additional bill of thousands of dollars.

On Tuesday, one of the primary measures in the B.C. budget was the introduction of what the government is calling a speculation tax. It is aimed at foreign and domestic property owners who are parking capital in real estate and driving up prices in the province. It would apply to owners who do not pay income tax in British Columbia. Principal residences are exempt, as are properties with long-term renters.

A typical vacation home that is used several times a year but is otherwise empty would not be exempt. "If you are from outside the province and you leave your home vacant, you will be taxed," B.C. Finance Minister Carole James told reporters on Wednesday.

...

https://www.theglobeandmail.com/news/bri...-to-be-hit-with-new-tax/article38061593/

This should at the very least be a two tier approach. A level of property tax for people who pay income tax in both BC and Canada federally, then another level of property tax for people who only pay income tax in Canada federally, then another for those who pay no income tax in Canada at all.