Canada's 'housing bubble' deemed close to bursting

[NetMapel]

I feel it would be better if you guys tone down the name callings and labelings on another post here whom you disagree with. Discuss the content and not be throwing random labels and conspiracy stuff like somebody here works for PRC. Tone down the racial rhetoric as well unless you got some solid data to back up what you're saying. I too remember the days before "Chinese" money, it was Persian money and Japanese money and so on and so forth. So there is no doubt that yes, foreign money plays a role in our housing markets. However, you can also see from Statistic Canada's chart that the majority of high income neighbourhoods are white. I also recalled that Americans do represent a bigger chunk of our real estate sales than Chinese. So I hardly also think it's fair to attribute so much of our current real estate situation to just Chinese foreign buyers. So much of it is contributed also by locals who bought multiple units because the market is hot. Ultimately, Vancouver is a high demand place with geographic constraints.

[Pinus]

Originally Posted by NetMapel

I feel it would be better if you guys tone down the name callings and labelings on another post here whom you disagree with. Discuss the content and not be throwing random labels and conspiracy stuff like somebody here works for PRC. Tone down the racial rhetoric as well unless you got some solid data to back up what you're saying. I too remember the days before "Chinese" money, it was Persian money and Japanese money and so on and so forth. So there is no doubt that yes, foreign money plays a role in our housing markets. However, you can also see from Statistic Canada's chart that the majority of high income neighbourhoods are white. I also recalled that Americans do represent a bigger chunk of our real estate sales than Chinese. So I hardly also think it's fair to attribute so much of our current real estate situation to just Chinese foreign buyers. So much of it is contributed also by locals who bought multiple units because the market is hot. Ultimately, Vancouver is a high demand place with geographic constraints.

Well okey dokey Mr. Moral Majority.

I see another SJW schill has arrived.

[whatnext]

Originally Posted by NetMapel

I feel it would be better if you guys tone down the name callings and labelings on another post here whom you disagree with. Discuss the content and not be throwing random labels and conspiracy stuff like somebody here works for PRC. Tone down the racial rhetoric as well unless you got some solid data to back up what you're saying. I too remember the days before "Chinese" money, it was Persian money and Japanese money and so on and so forth. So there is no doubt that yes, foreign money plays a role in our housing markets. However, you can also see from Statistic Canada's chart that the majority of high income neighbourhoods are white. I also recalled that Americans do represent a bigger chunk of our real estate sales than Chinese. So I hardly also think it's fair to attribute so much of our current real estate situation to just Chinese foreign buyers. So much of it is contributed also by locals who bought multiple units because the market is hot. Ultimately, Vancouver is a high demand place with geographic constraints.

Oh really?

That’s funny because I was born in Vancouver and lived here for decades and don’t ever recall widespread discussion or media coverage of Persian or Japanese buyers.

[CityTech]

Originally Posted by ssiguy

Thanks for the housing bubble chart but I would say that for Canada, our situation is rather unique compared to the other top 5 countries. For NZ, Norway, Sweden, and Australia, all areas of those countries are over valued certainly some more than others. That is most definately not the case in Canada.

In Canada we have truly grotesque regional differences in prices. BC is obviously the most glaring example but the GTA is also relatively expensive. Conversely most Canadians live in fairly reasonably real estate priced markets. Even the booming prices in Windsor, London, and Montreal still leave those cities with reasonably affordable real estate. Remember Montreal prices are rising quickly but would have to nearly quadruple to reach Vancouver's dizzying heights.

For people in Quebec, Atlantic Canada, the Prairies, and Ontarians outside the GTA, home ownership is well within grasp for even the working class. The GTA will definately see a significant drop but of course it will be BC that is ground zero for a housing collapse.

Canada is too large and economically diverse to really say there is "A Canadian Housing Market". When there is downturn due to something like high interest rates then yes the overall market will decline but due to the huge variations in prices in the country, some markets may see no declines and other go into freefall.

Ottawa is starting to become crazy.

[kwoldtimer]

Originally Posted by CityTech

Ottawa is starting to become crazy.

It started to become crazy over a year ago and has remained so.

[whatnext]

More rentals being built across Canada than any time:

..Canada Has Never Had More Rentals Being Built At The Same Time
Canadian rental units under construction reached a new high last month. There were 62,604 rental units under construction in June, up 3.60% from the month before. This represents an increase of 18.53% from the year before – which was also a new high. The country hasn’t seen this much rental construction at once, since at least 1990. The data set stops in 1990, so this may actually be the most built at once – ever...


https://betterdwelling.com/canada-is-building-the-most-rental-housing-in-at-least-30-years/

[ssiguy]

True prices are rising in Ottawa but again, prices would have increase 2.5 X to reach Vancouver heights despite Ottawa being a FAR higher income city. Real estate is starting to be out of the grasp for some but overall the market is probably only 10% oveer valued as opposed to Vancouver's 70%.

[le calmar]

We decided to buy a house earlier this year. Our original plan was to buy next year but the market has definitely been changing in Ottawa for over a year and I started to feel the urgency. Prices went up quite a bit in the area where we bought our house (30% increase in 5 years). That said, there is a high demand in that specific area due to the relative proximity of the DND campus, Kanata North Technology Park and the future Moodie LRT station. 10,000 units are supposed to break ground in the future in that area so things should remain under control.

[whatnext]

Originally Posted by le calmar

We decided to buy a house earlier this year. Our original plan was to buy next year but the market has definitely been changing in Ottawa for over a year and I started to feel the urgency. Prices went up quite a bit in the area where we bought our house (30% increase in 5 years). That said, there is a high demand in that specific area due to the relative proximity of the DND campus, Kanata North Technology Park and the future Moodie LRT station. 10,000 units are supposed to break ground in the future in that area so things should remain under control.

I wonder how the Ottawa market would change if the Conervatives come to power and put a stop the free spending on the public service that's taken place under the Liberals?

[misher]

Breaking down charges on new homes in Vancouver. Sample case, a 1000sqft condo in a 20 storey concrete tower on West Broadway in 2020. Of course there are other fees and taxes that I am unsure how to calculate or unaware of and have thus not mentioned. One big one is the sales taxes on building materials, the taxes on companies developing/building, etc. which I couldn't figure out how to estimate:

Regional District-Transit DCC $1545 a Condo
https://www.translink.ca/About-Us/Taxes/Development-Cost-Charges.aspx
Regional District-Sewage DCC $1072 a Condo
http://www.metrovancouver.org/boards/Bylaws1/GVSDD_Bylaw_254-Unofficial_Consolidation.pdf
City-Utility DCL $10.09/sqft =$10,090
https://bylaws.vancouver.ca/consolidated/12183.PDF
City-Broadway DCE $425/sqft = $425,000
https://vancouver.ca/files/cov/development-contribution-expectations-policy-appendix-c.pdf

For a total of $437,707 in fees to the city and regional district.

Now on to taxes. Although it would definitely need to be priced higher, for tax purposes lets assume that its priced at $1,000,000 and that the land value is 20% of the price and that there are 100 units in the building.

Federal-5% GST on new units $50,000
Provincial-Property Transfer tax when developer buys is $9,187.60
Provincial-Property Transfer tax when Owner buys is $18,000
Provincial/City-Property tax (estimated 4 years) is $2049
Provincial-Additional School tax during development time (estimated 4 years) Approx $3200
Municipal-Vacancy tax while waiting on permit (estimated 1 year) $2,000
Muncipal-Property tax during development time (estimated 4 years) Approx $2000

For a total of $88,436.60 in taxes.

$437,707+$88,436.60=$526,143.6‬0 to various levels of government.
That means for a $1 million dollar condo located outside Downtown Vancouver on Broadway, you will pay more than half the price to the government.


I hope other Canadians can see why Vancouver has problems building affordable housing. Note that its not "greedy" developers or "foreign money laundering speculators" that are the biggest problem here. How can a developer make an affordable condo in this socialist economy. The reason Vancouver housing prices went up is that we have high demand and its impossible to build new housing for less, so we build at super expensive prices which drives demand towards used housing which of course drives up their prices until new housing seems reasonably priced. And then government increases charges which repeats the process. My example for Broadway seems expensive, but honestly I understated things. This assumes that the condo will be selling for $1,000,000 which is impossible, its likely going to be $2,000,000+. Also this example is for a development outside downtown, imagine how many fees the city layers on development in the downtown core?

Also lets take a look at new taxes on businesses in BC:

https://biv.com/article/2019/08/bc-businesses-paying-5b-extra-taxes-2013

Where is all this tax money going? Why does BC charge so damn much compared to the other provinces? People complain that wages aren't rising, well obviously the taxes are rising instead. How can developers build cheaper housing when taxes on them and their employees are going up?

And again, where is all this money going!?

[kwoldtimer]

Originally Posted by whatnext

I wonder how the Ottawa market would change if the Conervatives come to power and put a stop the free spending on the public service that's taken place under the Liberals?

One would anticipate a slowdown. We've been there before. Although it has been suggested that high tech, rather than public sector growth, is behind the accelerated increases of the past couple of years, at least in some parts of town.

[CityTech]

High tech and federal sector are both growing fast. Normally in Ottawa, one grows while the other stagnates.

[craneSpotter]

Originally Posted by misher

$437,707+$88,436.60=$526,143.6‬0 to various levels of government.
That means for a $1 million dollar condo located outside Downtown Vancouver on Broadway, you will pay more than half the price to the government.


Where is all this tax money going? Why does BC charge so damn much compared to the other provinces? People complain that wages aren't rising, well obviously the taxes are rising instead. How can developers build cheaper housing when taxes on them and their employees are going up?

And again, where is all this money going!?

1. Your math seems off. This tax expert calculated all the Gov (Fed/Prov/Mun) taxes and development fees @ ~ 26% for a newly built housing unit in the city of Vancouver (Using a recent project with speculation tax involved he found fees/DCCs of $220,256 of the total $840,000 cost of a typical new apartment.). I think this part of your calculation may be off : City-Broadway DCE $425/sqft = $425,000, this DCE makes up >80% of all the fees in your calculation.
https://dailyhive.com/vancouver/vancouver-housing-government-fees-taxes-costs-may-2018

2. Lots of money is going to fund runaway municipal government spending - which now include some of the highest wages in the county. Munis have little to no oversight on their spending and wage increases. There is also increasing funding for municipal infrastructure as the Feds and Prov have made cuts to transfers to munis over the past 30 years. There are the police and fire departments, with their myriad of senior staff - which make up 30% of the city of Vancouver's budget. 30% also goes to Utilities/Public works/Engineering. That's nearly 1 Billion $/year right there. Then there are schools, art, transportation etc etc..
https://vancouver.ca/your-government/annual-budget.aspx

3. You are talking about the fees/DCCs specifically in the CITY of Vancouver - then ask why BC (the Province) charges so much more than other Provinces. That makes no sense...I'm sure many other BC cities have far lower DCCs&fees compared to the city of Vancouver. I am interested is your data/comparison of fees/costs in the other Provinces (or maybe you mean other Canadian cities?) which made you come to your conclusion that BC's are high in comparison. I don't doubt BC's (cities) are on the high side, but what the actual numbers that you found?

Agreed, government fees - specifically municipal - can certainly constitute a sizeable portion of the purchase price of new housing, apparently as high as ~26% in the city of Vancouver.


Edit: I quickly found this story from the Toronto Star that summarized a study done in May 2018 on the 'average' total Gov fees/taxes on new houses within six municipal governments in the GTA. So this is not just the city of Toronto, but I think usable as a comparison. These fees are set to rise each year over the next two ...

From the $41,251 fee set this past May 1, development charges for a single family home increased to $60,739 this past Nov. 1. That charge will increase to $71,432 on Nov. 1, 2019 and then to $80,227 on Nov. 1, 2020, adding $38,976 to the cost of a new home in just three years...

..This past May, BILD commissioned a study by Altus Group that calculated all government fees and charges on a new single family home in six municipalities across the GTA. The study found that, on average, all government fees, taxes and charges amounted for 22 per cent of the cost of a new home. The biggest contributor was development charges, which accounted for 30 per cent of all charges.

https://www.thestar.com/life/homes/opini...lopment-costing-consumers-thousands.html

[misher]

Originally Posted by craneSpotter

1. Your math seems off. This tax expert calculated all the Gov (Fed/Prov/Mun) taxes and development fees @ ~ 26% for a newly built housing unit in the city of Vancouver (Using a recent project with speculation tax involved he found fees/DCCs of $220,256 of the total $840,000 cost of a typical new apartment.). I think this part of your calculation may be off : City-Broadway DCE $425/sqft = $425,000, this DCE makes up >80% of all the fees in your calculation.
https://dailyhive.com/vancouver/vancouver-housing-government-fees-taxes-costs-may-2018

2. Lots of money is going to fund runaway municipal government spending - which now include some of the highest wages in the county. Munis have little to no oversight on their spending and wage increases. There is also increasing funding for municipal infrastructure as the Feds and Prov have made cuts to transfers to munis over the past 30 years. There are the police and fire departments, with their myriad of senior staff - which make up 30% of the city of Vancouver's budget. 30% also goes to Utilities/Public works/Engineering. That's nearly 1 Billion $/year right there. Then there are schools, art, transportation etc etc..
https://vancouver.ca/your-government/annual-budget.aspx

3. You are talking about the fees/DCCs specifically in the CITY of Vancouver - then ask why BC (the Province) charges so much more than other Provinces. That makes no sense...I'm sure many other BC cities have far lower DCCs&fees compared to the city of Vancouver. I am interested is your data/comparison of fees/costs in the other Provinces (or maybe you mean other Canadian cities?) which made you come to your conclusion that BC's are high in comparison. I don't doubt BC's (cities) are on the high side, but what the actual numbers that you found?

Agreed, government fees - specifically municipal - can certainly constitute a sizeable portion of the purchase price of new housing, apparently as high as ~26% in the city of Vancouver.


Edit: I quickly found this story from the Toronto Star that summarized a study done in May 2018 on the 'average' total Gov fees/taxes on new houses within six municipal governments in the GTA. So this is not just the city of Toronto, but I think usable as a comparison. These fees are set to rise each year over the next two ...



https://www.thestar.com/life/homes/opini...lopment-costing-consumers-thousands.html

People did reply and say the proposed Broadway DCE of $425/sqft isn't final yet. But this is the proposed DCE so you have to assume it'll be somewhere close. I provided a source link if you'd like to look.

Downtown Vancouver the CAC's go up more than the proposed Broadway DCE's while for the Cambie corridor the highest it went was $112, however this was a little older in a cheaper area for towers up to 10 storeys unlike the 20+ storeys we will see on Broadway.

https://vancouver.ca/files/cov/community-amenity-contributions-through-rezonings.pdf

While most of the fees are going towards the city, the province of BC also has several charges that other province's with "affordable" housing do not. For instance, land transfer tax in Alberta is 0.02% I believe which contrasts with BC's 3%+. That's approximately $25,000 added on by the province of BC compared to Alberta, despite BC being the one that keeps saying we have a "housing crisis". When there is a crisis and you raise prices, that's usually seen as predatory pricing/gouging. And this is being done by our governments not by foreigners or speculators or developers.

And the knife in the ribs is that we will be looking at 10-20% in property tax increases on lower tier residential property despite all the other fees and taxes rising.
https://globalnews.ca/news/5482006/vancouver-property-tax-increase-council-expenses/

A lot of people argue we should stop our economic dependence on real estate. But I'd say we must first stop our government's dependence on real estate. The max you can raise rent is by inflation yet taxes, fees, utilities, etc. are all going up a lot more annually than inflation.

I'd say the current "affordability" crisis has either been created or exponentially worsened by the actions of our governments. Look how dependent the City of Vancouver is becoming on development fees.

[CanSpice]

Originally Posted by misher

While most of the fees are going towards the city, the province of BC also has several charges that other province's with "affordable" housing do not. For instance, land transfer tax in Alberta is 0.02% I believe which contrasts with BC's 3%+.

BC's property transfer tax rate scales depending on the fair market value of the property. 1% on the first $200,000, 2% on the portion that's between $200,000 and $2,000,000, 3% on the portion between $2m and $3m, and 5% on the portion above $3m.

The overwhelming majority of the properties in BC fall in the $200k - $2m range, so the overwhelming majority of sales have a property transfer tax of less than 2%.

For some products, governments raise taxes to try to curb purchasing of those products. Look at sin taxes; taxes on cigarettes are high to discourage people from purchasing cigarettes. One could use the same argument for property in BC -- adding additional tax could slow sales, which could slow the rate of property value increase. I mean people wanted foreign buyers to be slowed, and the BC government introduced a foreign buyer tax.

[misher]

Originally Posted by CanSpice

BC's property transfer tax rate scales depending on the fair market value of the property. 1% on the first $200,000, 2% on the portion that's between $200,000 and $2,000,000, 3% on the portion between $2m and $3m, and 5% on the portion above $3m.

The overwhelming majority of the properties in BC fall in the $200k - $2m range, so the overwhelming majority of sales have a property transfer tax of less than 2%.

For some products, governments raise taxes to try to curb purchasing of those products. Look at sin taxes; taxes on cigarettes are high to discourage people from purchasing cigarettes. One could use the same argument for property in BC -- adding additional tax could slow sales, which could slow the rate of property value increase. I mean people wanted foreign buyers to be slowed, and the BC government introduced a foreign buyer tax.

Your right I should have put 2% not 3%.

But "sin" taxes are for when the government doesn't want people to purchase it. Does the BC government not want people to be homeowners? If the point was to stop purchase of second homes than they should have offered a waiver on transfer tax for the first home.

[osmo]

Originally Posted by misher

Breaking down charges on new homes in Vancouver. Sample case, a 1000sqft condo in a 20 storey concrete tower on West Broadway in 2020. Of course there are other fees and taxes that I am unsure how to calculate or unaware of and have thus not mentioned. One big one is the sales taxes on building materials, the taxes on companies developing/building, etc. which I couldn't figure out how to estimate:

Regional District-Transit DCC $1545 a Condo
https://www.translink.ca/About-Us/Taxes/Development-Cost-Charges.aspx
Regional District-Sewage DCC $1072 a Condo
http://www.metrovancouver.org/boards/Bylaws1/GVSDD_Bylaw_254-Unofficial_Consolidation.pdf
City-Utility DCL $10.09/sqft =$10,090
https://bylaws.vancouver.ca/consolidated/12183.PDF
City-Broadway DCE $425/sqft = $425,000
https://vancouver.ca/files/cov/development-contribution-expectations-policy-appendix-c.pdf

For a total of $437,707 in fees to the city and regional district.

Now on to taxes. Although it would definitely need to be priced higher, for tax purposes lets assume that its priced at $1,000,000 and that the land value is 20% of the price and that there are 100 units in the building.

Federal-5% GST on new units $50,000
Provincial-Property Transfer tax when developer buys is $9,187.60
Provincial-Property Transfer tax when Owner buys is $18,000
Provincial/City-Property tax (estimated 4 years) is $2049
Provincial-Additional School tax during development time (estimated 4 years) Approx $3200
Municipal-Vacancy tax while waiting on permit (estimated 1 year) $2,000
Muncipal-Property tax during development time (estimated 4 years) Approx $2000

For a total of $88,436.60 in taxes.

$437,707+$88,436.60=$526,143.6‬0 to various levels of government.
That means for a $1 million dollar condo located outside Downtown Vancouver on Broadway, you will pay more than half the price to the government.


I hope other Canadians can see why Vancouver has problems building affordable housing. Note that its not "greedy" developers or "foreign money laundering speculators" that are the biggest problem here. How can a developer make an affordable condo in this socialist economy. The reason Vancouver housing prices went up is that we have high demand and its impossible to build new housing for less, so we build at super expensive prices which drives demand towards used housing which of course drives up their prices until new housing seems reasonably priced. And then government increases charges which repeats the process. My example for Broadway seems expensive, but honestly I understated things. This assumes that the condo will be selling for $1,000,000 which is impossible, its likely going to be $2,000,000+. Also this example is for a development outside downtown, imagine how many fees the city layers on development in the downtown core?

Also lets take a look at new taxes on businesses in BC:

https://biv.com/article/2019/08/bc-businesses-paying-5b-extra-taxes-2013

Where is all this tax money going? Why does BC charge so damn much compared to the other provinces? People complain that wages aren't rising, well obviously the taxes are rising instead. How can developers build cheaper housing when taxes on them and their employees are going up?

And again, where is all this money going!?

Same story here in Toronto as both municipal and provincial governments have we exploited new housing as a means to avoid raising general taxes.

[misher]

Originally Posted by osmo

Same story here in Toronto as both municipal and provincial governments have we exploited new housing as a means to avoid raising general taxes.

Yep but the development fees charged are about 4x higher in Vancouver compared to Toronto.

[whatnext]

If the real estate market is supposedly strong in the GTA, why is construction related employment falling to rapidly?

Home-building jobs fall in Ontario as construction for low-rise houses declines

[urbandreamer]

Quite a number of projects cancelled in the GTA. New home sales are falling, many design build flippers have gotten burned/slowed their flipping of bungalows into mcmansions.

Ottawa could easily crash if the PC's are elected--they'll surely cut jobs.