Canada's 'housing bubble' deemed close to bursting

[misher]

Originally Posted by goodgrowth

I'm not advocating for rent control. I am generally advocating for decreased regulations and a competitive construction industry so that supply can keep up with demand in a more timely fashion so prices don't increase so quickly.

Me either. I don’t see any effect on rents from last rent control policies on that graph. In fact it looks like rents rise faster after rent control. All rent control does is shift the burden from the majority to the minority.

I thought inflation+2% was a decent rent control policy that balances the rights of both sides.

But I’d also strongly support a triple net rent policy where tenants cover the costs while there rent rises at inflation. That seems like a more reasonable rent control policy. Plus it helps prepare renters for the burden of homeownership.

[ssiguy]

Here are the months of inventory for April 2020 according to ZOLO which is a very reliable resource and is updated almost everyday. For reference, an inventory of 1-4 months is considered a seller's market, 5 to 8 is considered balanced, and 9 to 12 is considered a buyer's market. The stats are organized................city...............single family home/townhome/confo. I only included cities of over 50,000 as small ones can have wild fluctuations

**** A note of cautiion, this is not proper viewing for realtors, buyers, and those with weak constitutions.

Vanccouver...........41/16/17
Burnaby................26/13/26
Richmond.............50/32/22
Delta....................30/14/34
North Van.............42/25/27
Coquitlam.............23/11/18
NuWest................76/33/15
Port Coq...............No SFH sales/10/22
Maple Ridge..........38/14/40
Surrey..................46/12/21
Langley................72/14/24

[lio45]

Originally Posted by misher

The problem with that is that house prices increase for other reasons as well. For instance the average size of a house in Vancouver has been increasing as people now use up their floorspace limit when building whereas before people built small affordable houses that were often just 1 level with a single washroom.

We also have new safety and environmental features. Insulation, condensing boilers, cooling towers, double pane windows, fire suppression systems, triple thickness concrete, etc. all add costs that previously didn’t exist. There is simply a lot more to a new home than an old one.

That's a great point.

To use a recent example, a few years ago (after a major fire that killed a bunch of people) the Quebec government decided to impose fire sprinklers in all senior residences.

So a smallish one that didn't have such a million-dollar system had to either shut down, or subject its tenants to a +100% year-over-year rent hike. >50x inflation! But then the product you're getting is different... can't compare directly!

If we keep increasing the safety and environmental regulations that our housing (new and existing) has to comply with, which we do, then it follows that rent hikes will always outpace inflation and that's perfectly normal, and unavoidable.

If you want your rent to follow inflation, then after 10 years you will likely find yourself forced into living in a smaller unit or in a lesser neighborhood, but to make up for that, that next apt of yours will have some newish high-tech expensive anti-earthquake feature or something like that, making it a wash from the point of view of value (at least in theory / in the eyes of the government).

[goodgrowth]

Safety regulations alone are not going to result in a 50-75% price increase over 5 years which many cities in BC and Ontario have. These are simply absurd rates.

Look at CityTech's post about Tokyo. You think those buildings aren't safety engineered to the extreme?

It's primarily local zoning and NIMBYism issue.

Again if there is such thing as class warfare in this country it's housing.

[Doady]

NIMBYism and zoning aren't the main barriers in Vancouver. The main barriers are physical and political, namely the ocean, the mountains, and the US border. Nothing much can be done about those.

[someone123]

Originally Posted by lio45

If we keep increasing the safety and environmental regulations that our housing (new and existing) has to comply with, which we do, then it follows that rent hikes will always outpace inflation and that's perfectly normal, and unavoidable.

Not necessarily. We have seen improvements to construction technology and manufacturing over time. It's way easier to build a unit of housing today than it was in 1900 or even 1950. What used to be brick or hardwood beams, or even just plywood is prefab stuff, particle board, etc. A lot of it is cheap manufactured stuff from China.

Sometimes standards evolve in other ways. For example ethernet and phone wiring used to be considered important and now it's less so. I think a lot of wiring stuff might change in the future as batteries improve. Your old house with no ethernet or limited phone jacks or limited outlets is less of a liability now than it was in 1998. You can have a battery-powered vaccum now when in the past you would have blown the circuit breaker (or fuse!).

Then on top of that we have insurance costs built in so a safety improvement doesn't necessarily result in a 100% monetary cost. In our condo building we have a big financial incentive to keep down the number of fires and floods.

I think it's probably true that all else being equal stricter codes and safety regulations will mean higher prices. But I think in a city in Vancouver this is a "deckchairs on the Titanic" scenario. Our safety standards didn't change that much from 2012-2017.

[goodgrowth]

Originally Posted by Doady

NIMBYism and zoning aren't the main barriers in Vancouver. The main barriers are physical and political, namely the ocean, the mountains, and the US border. Nothing much can be done about those.

Sure but in that case....the sky's the limit...

I just look at a place like Victoria where the average home price is approaching $800,000 and I don't think it even has a 30 story building...

[WarrenC12]

Originally Posted by Doady

NIMBYism and zoning aren't the main barriers in Vancouver. The main barriers are physical and political, namely the ocean, the mountains, and the US border. Nothing much can be done about those.

That's a tired old trope that doesn't hold up to any scrutiny. You can throw in the agricultural land reserve too. It still doesn't change the fact that the overwhelming majority of land is zoned for single family housing at brutal FSR rates.

[misher]

Originally Posted by goodgrowth

Safety regulations alone are not going to result in a 50-75% price increase over 5 years which many cities in BC and Ontario have. These are simply absurd rates.

Look at CityTech's post about Tokyo. You think those buildings aren't safety engineered to the extreme?

It's primarily local zoning and NIMBYism issue.

Again if there is such thing as class warfare in this country it's housing.

3x thicker structural concrete in Vancouver as we're an earthquake zone is a massive increase in costs. Rebar is very pricey. Not an expert so I can't say how much this increases costs but I'm sure its lot. Fire sprinkler systems are also not cheap. Nor are fob systems. Or elevator safety brakes. The simple fact is that we're comparing apples to oranges by comparing a wooden condo from 1980 to a concrete one of today.

And Japan isn't "cheap". Here's a 280sqft apartment for $470,000 built in 2018. The Japanese build a lot smaller condos (something I would definitely approve of here). I have no idea if this condo is in an expensive area but its near a skytrain station so I assume so. Its estimated rent is $1360 a year. That doesn't sound much different than Vancouver.


https://realestate.co.jp/en/forsale/view/726687

[goodgrowth]

Originally Posted by misher

3x thicker structural concrete in Vancouver as we're an earthquake zone is a massive increase in costs. Rebar is very pricey. Not an expert so I can't say how much this increases costs but I'm sure its lot. Fire sprinkler systems are also not cheap. Nor are fob systems. Or elevator safety brakes. The simple fact is that we're comparing apples to oranges by comparing a wooden condo from 1980 to a concrete one of today.

And Japan isn't "cheap". Here's a 280sqft apartment for $470,000 built in 2018. The Japanese build a lot smaller condos (something I would definitely approve of here). I have no idea if this condo is in an expensive area but its near a skytrain station so I assume so. Its estimated rent is $1360 a year. That doesn't sound much different than Vancouver.


https://realestate.co.jp/en/forsale/view/726687

A large factor in determining real-estate prices is cost of land. Because if it was all construction cost related shitbox houses in Vancouver would not go for $1M.

Also not saying Toyko is cheap but remember the Greater Toyko Area has the population of Canada. So the fact that it's even remotely in the same ballpark isn't a good look on Vancouver.

[misher]

Originally Posted by goodgrowth

A large factor in determining real-estate prices is cost of land. Because if it was all construction cost related shitbox houses in Vancouver would not go for $1M.

Also not saying Toyko is cheap but remember the Greater Toyko Area has the population of Canada. So the fact that it's even remotely in the same ballpark isn't a good look on Vancouver.

Tokyo is massive. The City of Vancouver not so much. Plus the CoV keeps a lot of land for parks, golf courses, Indian Reservations, and detached housing.

Yes for a detached house land is a huge factor. But for a 400 unit condo building its insignificant.

Also construction costs are still very high. You can get 20,000+ sqft of land in Richmond for a mil, land is cheap over the bridge. But housing is still expensive due to construction costs.

[goodgrowth]

Originally Posted by misher

Tokyo is massive. The City of Vancouver not so much. Plus the CoV keeps a lot of land for parks, golf courses, Indian Reservations, and detached housing.

Yes for a detached house land is a huge factor. But for a 400 unit condo building its insignificant.

Also construction costs are still very high. You can get 20,000+ sqft of land in Richmond for a mil, land is cheap over the bridge. But housing is still expensive due to construction costs.

If supply was keeping up with demand prices would not be rising at such a rate.

[CityTech]

With Tokyo, it's not so much that housing is cheap, it's that it's stable; prices have been unchanged for decades. The Japanese are also used to living in tiny spaces, so high costs per square metre can still make for decently affordable units.

[misher]

Originally Posted by CityTech

With Tokyo, it's not so much that housing is cheap, it's that it's stable; prices have been unchanged for decades. The Japanese are also used to living in tiny spaces, so high costs per square metre can still make for decently affordable units.

Exactly. I don't know why we're so opposed to a 500sqft 2 bedroom unit and a 300sqft 1 bedroom unit.

Back when I was a bit younger I was renting at $600 a month for a 230ish sqft studio.

And before you outright reject my idea, a reminder that you pay for every sqft. Would you accept a 500 sqft 2 bedroom over an 800 sqft 2 bedroom if your rent was 30% less?
Would you live in a 300sqft 1 bedroom over a 600sqft 1 bedroom if it cost 40% less?

The idea about affordability is to fix the problem with a solution. These are solutions. We can complain that things are too small later.

[milomilo]

Originally Posted by misher

Exactly. I don't know why we're so opposed to a 500sqft 2 bedroom unit and a 300sqft 1 bedroom unit.

Back when I was a bit younger I was renting at $600 a month for a 230ish sqft studio.

I live in a country 26 times bigger than Japan with a third the population. So no, I have no interest in living in a prison cell when we are perfectly capable of building decently sized accommodation for the entire population.

[misher]

Originally Posted by milomilo

I live in a country 26 times bigger than Japan with a third the population. So no, I have no interest in living in a prison cell when we are perfectly capable of building decently sized accommodation for the entire population.

This is the argument Vancouverites have been making for 5-10 years without much success.

I refuse to compromise! Build me a brand new place thats large and cheap! I spit on your affordable housing, I want something new and big!

I believe we need to build "enough" housing. Once we do that we can talk about building stuff thats bigger. More supply will lower average rents. I'd much rather have a homes are too small problem than an affordability problem.

[milomilo]

Originally Posted by misher

This is the argument Vancouverites have been making for 5-10 years without much success.

I refuse to compromise! Build me a brand new place thats large and cheap! I spit on your affordable housing, I want something new and big!

I believe we need to build "enough" housing. Once we do that we can talk about building stuff thats bigger. More supply will lower average rents. I'd much rather have a homes are too small problem than an affordability problem.

If Vancouver chose to build enough supply, then there would be no need to live in prison cells. But they don't want to - and that is 100% a choice by the population as a whole.

[wave46]

I just don't get the 'Why?' part.

It's not like Vancouver is New York City. Or Tokyo. Or London.

It's an OK city, but not a million-dollar plus nice city. It's not some global mecca that pays top dollar for talent, either, like San Francisco. Why stay to be poor, unless you have a sweet deal or no care to own a home?

Regardless of what's driving housing prices, I still don't get how - absent an outside source of money - how can people afford to purchase a home in which the average income is nowhere near the cost of purchasing? I've noodled some numbers into an amortization schedule and the monthly costs of a mortgage are several times my income (and I'd like to think I do OK), even with assumptions of a 20% downpayment.

Canada's a big country. It's not like the rest of it is a destitute wasteland, so why not take a chance somewhere else, unless something absolutely makes one tied to Vancouver.

[milomilo]

Originally Posted by wave46

I just don't get the 'Why?' part.

It's not like Vancouver is New York City. Or Tokyo. Or London.

It's an OK city, but not a million-dollar plus nice city. It's not some global mecca that pays top dollar for talent, either, like San Francisco. Why stay to be poor, unless you have a sweet deal or no care to own a home?

Regardless of what's driving housing prices, I still don't get how - absent an outside source of money - how can people afford to purchase a home in which the average income is nowhere near the cost of purchasing? I've noodled some numbers into an amortization schedule and the monthly costs of a mortgage are several times my income (and I'd like to think I do OK), even with assumptions of a 20% downpayment.

Canada's a big country. It's not like the rest of it is a destitute wasteland, so why not take a chance somewhere else, unless something absolutely makes one tied to Vancouver.

A symbiosis of cause and effect. Vancouver is a beautiful place with restricted supply of land, so it's natural it will have somewhat higher prices. At some point, this got noticed by speculators including foreign buyers, who pushed up housing prices further. And all along the way, those that have benefited selfishly want to maintain that benefit, so they oppose any policy that would allow the market to correct the problem and build more supply, hence why all of Vancouver is zoned for SFH despite having some of the highest house prices on the planet while the economy offers pitiful wages.

If the market was functioning correctly, then this would be fixed quickly. It's obvious there is a lot of profit to be made by buying a few SFHs and replacing them with hundreds of condos. But the extant NIMBY boomers prevent this by opposing upzoning, because they selfishly oppose their children having access to affordable housing. Thus supply cannot be increased, and the problem continues. Until the blame is pointed at the correct target (selfish NIMBYs), nothing will change.

[misher]

Originally Posted by wave46

Regardless of what's driving housing prices, I still don't get how - absent an outside source of money - how can people afford to purchase a home in which the average income is nowhere near the cost of purchasing?.

One word, debt. Debt is by far outpacing wages. But Vancouver has also been the city of choice for rich Canadians seeking a place to retire/vacation within Canada as its the most temperate. Its also a hub for the LGBT community, one of NA's biggest film centers, and a trade/business hub.