Canada's 'housing bubble' deemed close to bursting

[misher]

Many seem to be predicting large gains in Canadian housing prices this year unless something happens to our economy. Inventory is getting very low which is going to drive up prices.

Even anti housing price realtor Steve Saretsky admits this:

Yep similar to what I’m seeing. Barring a change in the data or a deterioration in the economy, prices look poised to rise further.

https://twitter.com/SteveSaretsky/status/1217556943314636800

[whatnext]

The Economist identifies the western world's obsession with home ownership as one of the greatest policy mistakes:

The West’s biggest economic policy mistake
Its obsession with home ownership undermines growth, fairness and public faith in capitalism

...You might think fear and envy about housing is part of the human condition. In fact, the property pathology has its roots in a shift in public policy in the 1950s towards promoting home ownership. Since then governments have used subsidies, tax breaks and sales of public housing to encourage owner-occupation over renting. Politicians on the right have seen home ownership as a way to win votes by encouraging responsible citizenship. Those on the left see housing as a conduit for redistribution and for nudging poorer households to build wealth.

These arguments are overstated. It is hard to show whether property ownership makes better citizens. If you ignore leverage, it is usually better to own shares than to own homes. And the cult of owner-occupation has huge costs. Those who own homes often become nimbys who resist development in an effort to protect their investments. Data-crunching by The Economist suggests that the number of new houses constructed per person in the rich world has fallen by half since the 1960s. Because supply is constrained and the system is skewed towards ownership, most people feel they risk being left behind if they rent. As a result politicians focus on subsidising marginal buyers, as Britain has done in recent years. That channels cash to the middle classes and further boosts prices. And it fuels the build-up of mortgage debt that makes crises more likely...

https://www.economist.com/leaders/2020/01/16/the-wests-biggest-economic-policy-mistake

[lio45]

Originally Posted by milomilo

If you can't do the former, then the latter will not be achieved either. Sure, you might be able to free up a handful of currently underused properties with policy, but that's not going to be a significant amount. You might not like the official numbers, but that's all we've got, and you've argued in posts like this that people's perception is less valuable than the actual data.




But just because cap rates are low, the rents paid in Vancouver are still high compared to other cities, right? And if they are not, then what's the problem?

This is the first source of data I found and I have done no fact checking, but I see little reason it would be way off:



So, regardless of the cap rates, Vancouverites still pay obscene rents, despite them also earning meager wages. You can tinker all you want, but the problem is clear, there are not enough units available to buy and/or rent.



And, as I said before, on this I totally agree. Despite all the hot air about affordability in our big cities, until (if ever) home owners have less political weight than renters, this problem will not be solved, because the population unknowingly do not want it to be solved. It's zero sum, for those without a house to be able to get cheaper accommodation, then those who currently own properties need to see the value of that property decrease.

Montreal's main newspaper quoted the Feds' data today (CHMC) on the average rent in Montreal for a 2 bedroom right now being $810. (Average for a 1 bedroom probably ~$650, I would guess.)

[rousseau]

When were the days when Montreal was dirt cheap compared to Toronto? Was that back in the early 2000s?

[lio45]

It may well still be significantly cheaper - what's the average rent look like in TO these days?

[rousseau]

Originally Posted by lio45

It may well still be significantly cheaper - what's the average rent look like in TO these days?

You just quoted a list of average rents in your post above. Montreal at $1,700 for a two-bedroom apartment is substantially cheaper than Toronto at $2,700, but I wouldn't exactly call that the sort of dirt cheap that would invite poor artists and layabouts to up sticks and camp out in Montreal with a part time job to support their creative endeavours.

I remember back in 1999 visiting friends in Montreal living in an apartment in a classic three-flat "staircase" building around St. Urbain and St. Joseph that I think was about $900 or less. It was a very comfortable three-bedroom place. They each paid about $300. This raised the eyebrows of my wife and I, and we often wistfully thought about moving to Montreal (but never did).

[lio45]

Originally Posted by rousseau

You just quoted a list of average rents in your post above. Montreal at $1,700 for a two-bedroom apartment is substantially cheaper than Toronto at $2,700, but I wouldn't exactly call that the sort of dirt cheap that would invite poor artists and layabouts to up sticks and camp out in Montreal with a part time job to support their creative endeavours.

Actually, if you pay attention, you'll note that the reason I quoted that list is to invalidate it, since the very freshest data from the CHMC says the average rent for a 2 bedroom in Montreal right now is $810.

Since we now know that list isn't worth the pixels it's printed on, I'm going to assume that $2,700 figure for TO is just a random number, but then I have no idea what Toronto's rents are, so the question is, how do they compare to $810 for a 2br?

[lio45]

Originally Posted by rousseau

I remember back in 1999 visiting friends in Montreal living in an apartment in a classic three-flat "staircase" building around St. Urbain and St. Joseph that I think was about $900 or less. It was a very comfortable three-bedroom place. They each paid about $300. This raised the eyebrows of my wife and I, and we often wistfully thought about moving to Montreal (but never did).

My sis was renting a room for something like $300 not even that long ago, in the Villeray neighborhood (a.k.a. JT's riding)

A good friend of mine rents on Park Ave just off Mont-Royal, he used to be landlord to a significant portfolio in Sherbrooke (recently sold a chunk of it to me and the rest to others) yet he's hugging his rent-controlled apartment where his monthly rent is like $500 or $600 (I don't recall for sure, he told me once, it's just super low for the area), he could easily afford a condo in this exact neighborhood anytime but his costs (interest + property taxes) would be higher than his rent so it makes no financial sense (it'd be basically gambling - makes sense only if property values behave irrationally, and he's the kind of person who'd never bet on that.)

[2009]

Actually, if you pay attention, you'll note that the reason I quoted that list is to invalidate it, since the very freshest data from the CHMC says the average rent for a 2 bedroom in Montreal right now is $810.

Here's the link to the CMHC data:
http://www03.cmhc-schl.gc.ca/hmip-pimh/e...d=2&DisplayAs=Table&GeograghyName=Quebec

The cmhc data is the surveyed average rent paid (longterm renters will make this be the lower number). The rents posted by rentals.ca are the current prices of rental listings

They aren't exactly the same data

[lio45]

I'm aware it's not the same data. The article from today's paper had, in fact, both: ~$810 for the average Montreal 2 bedroom at the moment, and ~$1,080 for the average advertised vacant 2 bedroom rental listing in Montreal at the moment (keeping in mind it doesn't necessarily rent at that price; some listings end up renting for less, or offer one or two free months*; others stay vacant as no one bites at those prices.)

I'm noting from your link that some building sizes have rents even lower than that - the average Montreal rent for a 2 bedroom in a 6-19 unit multiplex is $765. (As one'd expect, it's slightly higher in triplexes/quadruplexes, and it's the highest in giant towers which one presume have lots of amenities and are newer.)

rentals.ca is still wildly off from the CHMC figure for what's currently advertised for rent in Mtl.



*whenever refinancing, you have a powerful interest to try to have the on-paper rent as high as possible, and make that up with various discounts, so it's not surprising it's a common practice.

[rousseau]

Originally Posted by lio45

Actually, if you pay attention, you'll note that the reason I quoted that list is to invalidate it, since the very freshest data from the CHMC says the average rent for a 2 bedroom in Montreal right now is $810.

Since we now know that list isn't worth the pixels it's printed on, I'm going to assume that $2,700 figure for TO is just a random number, but then I have no idea what Toronto's rents are, so the question is, how do they compare to $810 for a 2br?

I don't know how they come up with the numbers, but a casual look at apartments on Kijiji shows very few 2-bedroom apartments anywhere near downtown Toronto for less than $2,000. You have to go up to $2,500 before you really start seeing 2-bedroom apartments that are centrally located.

Renting somewhere in or around Mile End for under $1,000 (is it a 2-bedroom?) sounds positively utopian.

[lio45]

Originally Posted by rousseau

Renting somewhere in or around Mile End for under $1,000 (is it a 2-bedroom?) sounds positively utopian.

That's one of the perverse effects of rent control. He's been renting that place since his early 20s (15-20 years ago) so his rent has barely gone up since then. The more he stays, the more of an incentive he has to stay.

It's been annoying the hell out of him for at least 5 years, because he'd like to be able to remodel the place / have a place that he can fully bring to his taste... but he can't bring himself to swap it for a condo, since the rent is so cheap for the area (he's a couple minutes on foot from the Mt Royal skiing and hiking trails).

He's a great example of the weirder effects of rent control - a guy who owns a sizable portfolio of real estate is a renter, hugging a ~$500/month unit in one of the most desirable sections of the Mile End, while his tenants pay higher rents than him (for lesser properties).

[urbandreamer]

Twenty years ago I paid $325 a month for a bachelor apartment in the Annex. 15 years ago I paid $750 for a 2 bedroom apartment in Waterloo. Today I'm paying $1100 for a 1 bedroom in Toronto which currently rents for $1800. I suspect many of my newish 20something neighbours are getting rental support from their parents.

[misher]

It’s funny how we blamed Vancouvers rental crisis on foreigners when Halifax is now even worse than Vancouver. Are there many foreigners in Halifax? I do love that the government has stated the the solution is supply and is rapidly building more rentals. Honestly the Halifax government seems to be very impressive the more I read up on it, their legislation seems to balance renter and owner rights.

Interestingly enough, after the speculation tax in BC and the Vancouver empty home tax, rental vacancies in the "rich areas" like the West side and Coal Harbour still went down while its the poorer area aka mount pleasant where they went up. It appears that the speculation tax was a complete failure unless Vancouver's South East and Mount Pleasant are where people expected foreign owned empty homes to be.

Unfortunately, options are still limited for tenants—areas still facing declining vacancy rates:
Westside/Kerrisdale (from 1.5% in 2018 to 1.1% in 2019).
English Bay (from 1.1% in 2018 to 0.7% in 2019).
Kitsilano/Point Grey (from 0.8% in 2018 to 0.6% in 2019).

https://goodmanreport.com/market-insight...report-for-metro-vancouver-was-released/

[someone123]

Originally Posted by misher

It’s funny how we blamed Vancouvers rental crisis on foreigners when Halifax is now even worse than Vancouver. Are there many foreigners in Halifax? I do love that the government has stated the the solution is supply and is rapidly building more rentals. Honestly the Halifax government seems to be very impressive the more I read up on it, their legislation seems to balance renter and owner rights.

The two cities are similar in some ways and completely different in other ways. Halifax has a lot of rental construction; there are around 4,000 rental units under construction there right now. But population growth used to be 0.5-1% per year and now it's 1.5-2% per year and construction hasn't kept up.

There's a lot more available land around metro Halifax to be built on (for the most part farmland doesn't start until you drive about 30 minutes north; these areas have the equivalent of ALR rules) and there are a lot of good inner city sites that are ready for infill projects. These are geographical and historical differences that don't come down to better or worse planning.

One thing that Halifax did well is that a lot of developments are essentially as of right (Centre Plan or HRM by Design planning areas). Large parts of the city are zoned for highrises, the rules are written out fairly plainly, and approval times are measured in months. The city used to rely more on a quasi-legal process of appeals and that would have turned into a total disaster with rising population growth rates.

[misher]

Originally Posted by someone123

The two cities are similar in some ways and completely different in other ways. Halifax has a lot of rental construction; there are around 4,000 rental units under construction there right now. But population growth used to be 0.5-1% per year and now it's 1.5-2% per year and construction hasn't kept up.

There's a lot more available land around metro Halifax to be built on (for the most part farmland doesn't start until you drive about 30 minutes north; these areas have the equivalent of ALR rules) and there are a lot of good inner city sites that are ready for infill projects. These are geographical and historical differences that don't come down to better or worse planning.

One thing that Halifax did well is that a lot of developments are essentially as of right (Centre Plan or HRM by Design planning areas). Large parts of the city are zoned for highrises, the rules are written out fairly plainly, and approval times are measured in months. The city used to rely more on a quasi-legal process of appeals and that would have turned into a total disaster with rising population growth rates.

I wish Vancouver could learn from success instead of wallowing in failure. As you've correctly pointed out, in both cities supply isn't keeping up with population growth. Unfortunately Vancouver is in denial and continues to blame easy targets instead of taking corrective action.



The recent BCREA report forecasts price growth of 4.8% this year with this largely coming from BC North where they predict a 9.5% increase.They only predict a 2.4% increase for Greater Van.

However, they are predicting a 18.8% increase in sales for Greater Van.
https://www.bcrea.bc.ca/wp-content/uploads/2020-01-23-forecast.pdf

[le calmar]

Originally Posted by lio45

Actually, if you pay attention, you'll note that the reason I quoted that list is to invalidate it, since the very freshest data from the CHMC says the average rent for a 2 bedroom in Montreal right now is $810.

CHMC's average rent numbers are way lower than reality though. You should add something like 30% to their numbers to get more realistic numbers.

[misher]

Originally Posted by le calmar

CHMC's average rent numbers are way lower than reality though. You should add something like 30% to their numbers to get more realistic numbers.

Welcome to how rent control brings the average down but drives advertised numbers up.

[kwoldtimer]

Originally Posted by le calmar

CHMC's average rent numbers are way lower than reality though. You should add something like 30% to their numbers to get more realistic numbers.

That has always been my impression, at least wrt their numbers for Ottawa-Gatineau, which are used to determine the "rent share" paid by civil servants working abroad. I always felt we were getting a bit of a price break.

[le calmar]

Originally Posted by kwoldtimer

That has always been my impression, at least wrt their numbers for Ottawa-Gatineau, which are used to determine the "rent share" paid by civil servants working abroad. I always felt we were getting a bit of a price break.

They also use these numbers to fund housing projects. It is to their advantage to keep the numbers low.