Canada's 'housing bubble' deemed close to bursting

[Truenorth00]

Originally Posted by misher

If you rent out the first floor for $3000/month that goes down to $32000 a year in mortgage payments

Ah yes. Truly a sign of a healthy market when homeowners can't afford to pay the mortgage without renting out part of their home.

[p_xavier]

Originally Posted by esquire

^ Quebec seems to have a penchant for smaller, more compact living generally. I've heard it said that car manufacturers tend to bring certain subcompact/city sized cars to Canada that wouldn't otherwise be here because they tend to be hot sellers in Quebec. A possible European influence?

I would say it's more of a generalized lack of wealth.

[Truenorth00]

Originally Posted by wave46

I don't understand how - absent an outside force - housing prices can be completely detached from average income. If a $1.5 million home costs $68k in mortgage costs per year, that basically limits it to a narrow niche of people. I do not believe that the average income in Vancouver can sustain $68,000 worth of annual mortgage payments.

It doesn't compute. Unless there's something else happening.

If the locals don't have money, then money has to come from elsewhere. I always wonder why the CRA doesn't take a deeper look at property owners in these areas....

[wave46]

Originally Posted by misher

If you rent out the first floor for $3000/month that goes down to $32000 a year in mortgage payments

Sure, one can make all sorts of neat caveats to make the numbers work. It could be that people are falling 🞵🞵🞵-backwards into massive fortunes and incomes are just inconsequential, writ large. It is possible.

I remain skeptical. Ultimately, my opinion is that housing prices in some of our largest cities are not representative of the underlying fundamentals of that region's economy. Thus, there is likely an outside force acting upon some of our housing markets that is distorting them.

We shall see what happens, I suppose. Maybe Vancouver's housing prices will spiral unto infinity, using straight-line extrapolation. Maybe they'll crash. I'll somehow probably indirectly end up paying for it.

I think we've drawn our own respective conclusions and no amount of debate will change the other's opinion.

[Acajack]

Originally Posted by p_xavier

I would say it's more of a generalized lack of wealth.

Not sure.

My sense is that people in Ontario are more willing to make financial and lifestyle sacrifices for a bigger house.

Tons of people I know have a household income of over 200k and live in 1700 sf house with 2-3 kids. Single car garage. But the finishing tends to be quite nice.

In Ontario they'd be living in a 2500 sf house with a two car garage.

Bedrooms and living room are likely to be carpeting, whereas in Quebec that's always hardwood flooring.

[Acajack]

Originally Posted by Truenorth00

Size aside, when I compare Ottawa and Gatineau, I find those smaller homes in Gatineau are better finished. And there's more mixed development.

On size, I've always wondered how much of it is just used to the tax differential. Higher income and property taxes means less money for homes. Developers have adjusted accordingly.

Income taxes are definitely higher but there is not a big difference in property taxes.

In Ottawa-Gatineau it is true that Quebec side developers adjust their prices (or at least the market does it for them) in order to more or less take the income tax difference into account.

But you don't have that comparative going on in places like Quebec City and Montreal.

[misher]

Originally Posted by Truenorth00

Ah yes. Truly a sign of a healthy market when homeowners can't afford to pay the mortgage without renting out part of their home.

But this is exactly what’s happening and it’s been happening since the 1960’s. Back then there was huge racism against Asians as they were seen as competing for homes and jobs, driving up prices and down wages. The KKK even setup a chapter. That’s a big reason why we build bigger homes now and why the “mortgage helper” design became so popular in Vancouver.

And it’s not that they can’t afford to pay their mortgage, it’s that they choose to buy a bigger home as having an extra suite(s) more that made up for the difference. At a 2% interest rate each income suite is worth $600,000 (before costs) even if they each rent for $1,000 a month. So likely the average buyer is willing to pay $400,000 more for a home that has an income suite over one that does not. And if that home has 2? 3? 5? you can see where I’m going with this.

When I went to sfu almost a decade ago a lot of my friends who were international students were living in basements or ground floor units renting for $700ish with 3-4 rooms all being rented to students.

Interest rates are a MASSIVE factor. If bank interest falls then people enter the rental market and seek bigger homes they can rent out or rental condos.

You can’t argue with math. The Vancouver Special got its name for a reason. This housing design started in the 1960’s and is the most prevalent design in the city. Of course prices need to be high because owners of these are seeing large incomes out of them so no one is going to sell unless you offer more than their making.

The Vancouver Special’s rise in popularity can be attributed to the socio-economic conditions that predominated in the late 1960’s to early 1980’s. Economic conditions such as expensive housing, and disproportionate average incomes, thus creating the need for attainable housing. In the millennium, similar socio-economic conditions began to occur and the Vancouver Special regained popularity because of the option of having a rental unit to augment an expensive mortgage while still having a large home that is easy to maintain and call one’s own.

Within the past ten years, Vancouver Specials have become very popular and many new families are choosing to buy one because of the benefits that they provide. I was able to interview a family who purchased their Vancouver Special within the last 15 years, during the time of their resurgence in popularity.

https://blogs.ubc.ca/vancouverspecialsimmigration/the-modern-special/

[niwell]

Quebec seems smaller for sure, but when I moved to Ontario I did find that most housing was quite a bit smaller than what I was used to in suburban Alberta. There are exceptions in certain areas, but the 70s to 90s upper-middle class housing I was most familiar with was in the 1700sq ft (not including basement) range in Ottawa/Toronto compared to well over 2000 in Calgary.

For instance, my wife's parents in Ottawa are in a similar financial position as mine (if not better off), their was house built right around the same time and likely purchased for a similar amount, yet is quite a bit smaller. There are a similar number of rooms but they just aren't as expansive - lot size is about the same, and they are both located in well off inner-suburbs. Technically they both have two car garages but in the Ottawa example you'd be hard pressed to actually fit two cars in there. My parents have ample room for storage in addition to their vehicles, though as both own compact economy cars they may not be the norm in Calgary! Interestingly enough many of the houses in their area are now being torn down and replaced by much larger examples.

I can't speak to newer areas as nobody in my friend/family group really lives in one, but have been to a number of places similar to the above example. Based on the number of teardowns in inner-suburban Toronto this is probably changing (unfortunately, IMO).

[milomilo]

Originally Posted by wave46

Sure, one can make all sorts of neat caveats to make the numbers work. It could be that people are falling 🞵🞵🞵-backwards into massive fortunes and incomes are just inconsequential, writ large. It is possible.

I remain skeptical. Ultimately, my opinion is that housing prices in some of our largest cities are not representative of the underlying fundamentals of that region's economy. Thus, there is likely an outside force acting upon some of our housing markets that is distorting them.

We shall see what happens, I suppose. Maybe Vancouver's housing prices will spiral unto infinity, using straight-line extrapolation. Maybe they'll crash. I'll somehow probably indirectly end up paying for it.

I think we've drawn our own respective conclusions and no amount of debate will change the other's opinion.

It doesn't matter too much to the price though if the average local can't afford to buy them - if there simply aren't enough homes being supplied to the market to meet the increase of population, then prices will go up. People are buying houses at those prices, so the money is there, assuming that it's not entirely debt that was given out to people that can't afford it. And while I'm sure there is some of that going on, I don't think we can say things are at all as bad in that regard as compared to what happened in America with sub prime mortgages.

So even if we have a recession and prices in Vancouver and Toronto ease a bit as people can't afford their mortgages, as soon as the economy picks up again I would predict house prices go back to where they were.

[goodgrowth]

The systemic problem really comes back to planning/zoning and NIMBYISM.

It's almost like a "patent system" but for real estate. It creates a degree of protectionism.

I am not against private property as it incentivizes investment and upkeep. But prices should not be appreciating at 10% per year and if it is your development policies are too restrictive to appropriately keep up with demand.

If inflation is the greatest tax on the poor then Vancouver basically has state-sanctioned class warfare. And for every 100 acres of low-density idyllic suburb it attempts to preserve/create it's probably going to get a new acre of tent cities.

[MolsonExport]

Originally Posted by Acajack

Not sure.

My sense is that people in Ontario are more willing to make financial and lifestyle sacrifices for a bigger house.

Tons of people I know have a household income of over 200k and live in 1700 sf house with 2-3 kids. Single car garage. But the finishing tends to be quite nice.

In Ontario they'd be living in a 2500 sf house with a two car garage.

Bedrooms and living room are likely to be carpeting, whereas in Quebec that's always hardwood flooring.

Anecdotally, I also find that in Ontario, there is more investment (or importance placed upon) housing assets and financial investments, whereas in Quebec (where I lived for 2/3 of my life), money is spent more on restaurants, fashion (and for some, cars).

In other words, a kernel of truth to the over simplistic notion that "Montrealers work to live, and Torontonians live to work". I find Quebecois live for the moment, whereas Ontarians save for a rainy day.

or maybe I just miss Montreal's Joie de vivre.

[lio45]

Originally Posted by p_xavier

I would say it's more of a generalized lack of wealth.

I think the equalization amounts sent towards Quebec should get increased continuously (from their current "base" starting level) until we hit the point where house sizes and car sizes are exactly the same as in "have" provinces. Who's with me?

[misher]

More NIMBY news. Honestly how can you blame foreigners/speculators/empty homes then support politicians that push this 🞵🞵🞵🞵? Obviously Vancouver's housing issue is partially government created. I supported the NPA since they are pro capitalism but unfortunately some members are pro NIMBYISM. The rental housing voting record of the Council is below too. As you can see only 2 members truly support solving this housing supply issue.

Vancouver’s 72,000 housing target excessive, less than half needed: councillor Colleen Hardwick

A Vancouver councillor is proposing a review of the city’s housing targets.

Councillor Colleen Hardwick suggests that the goal of enabling the development of 72,000 housing units over a decade is too much.


Hardwick believes that a target of 30,000 is more appropriate.

According to Hardwick, the 30,000 figure is more in line with the historical growth of the city’s population.

https://www.straight.com/news/vancouvers...-half-needed-councillor-colleen-hardwick


https://dailyhive.com/vancouver/vancouve...t-rental-housing-voting-record-june-2019

[lio45]

So when I stepped over junkies lying on the sidewalk while passing in front of this ("well-maintained"!) ugly POS,

(oh and BTW, that sidewalk powerfully reeked of urine; I don't recall a smell that bad anywhere in Montreal, or NYC, or anywhere really, in recent years),

https://www.realtor.ca/real-estate/21352419/245-e-hastings-street-vancouver

I could've stopped there, asked to see the owner/landlord, and fully emptied my pockets... to give him a <1/200th (!) cash deposit on the purchase price.

Honestly, you could slash one zero and I'd still find that little piece of crap building to be overpriced. People live right there (in front of it) for free, why would anyone pay anything for housing there?

[misher]

Originally Posted by lio45

So when I stepped over junkies lying on the sidewalk while passing in front of this ("well-maintained"!) ugly POS,

(oh and BTW, that sidewalk powerfully reeked of urine; I don't recall a smell that bad anywhere in Montreal, or NYC, or anywhere really, in recent years),

https://www.realtor.ca/real-estate/21352419/245-e-hastings-street-vancouver

I could've stopped there, asked to see the owner/landlord, and emptied my pockets to give him a <1/200th cash deposit on the purchase price.

Honestly, you could slash one zero and I'd still find that piece of crap totally overpriced. People live right there (in front of it) for free, why would anyone pay anything for housing there?

Exactly. How would you feel paying property and income taxes to a government that allows people to piss, sleep, and shit on your property daily. Canadian governments need to start enforcing the law. No one that isn't a farmer should be forced to deal with shit.

[lio45]

Originally Posted by misher

Exactly. How would you feel paying property and income taxes to a government that allows people to piss, sleep, and 🞵🞵🞵🞵 on your property daily. Canadian governments need to start enforcing the law. No one that isn't a farmer should be forced to deal with 🞵🞵🞵🞵.

Distribute marketing flyers praising Maple Creek's tropical climate, and give them all free one-way bus tickets to Paradise-in-Canada.

Then, after the problem's fixed, I might actually considering offering more than 1/10th of the asking price for that building there. It has some potential and the location could be interesting someday, if it weren't for the fact there's currently nearly as many ppsm residing on the sidewalks as in the buildings. That's really THE major flaw of that neighborhood, and it's fixable.

[misher]

Originally Posted by lio45

Distribute marketing flyers praising Maple Creek's tropical climate, and give them all free one-way bus tickets to Paradise-in-Canada.

Then, after the problem's fixed, I might actually considering offering more than 1/10th of the asking price for that building there. It has some potential and the location could be interesting someday, if it weren't for the fact there's currently nearly as many ppsm residing on the sidewalks as in the buildings. That's really THE major flaw of that neighborhood, and it's fixable.

Definitely. I think we should be shifting the provinces social services and social housing to a dying town (or towns) in BC that could use the jobs and has cheap real estate. Making drug dealers drive out a few hours to reach their customers would make police officers jobs much easier. Being so close to the border and ports makes it much easier for illegal drugs to reach our addicted. We should be working to increase the commute.

We could pay for it by charging development fees to the real estate in that area as they all redevelop into high density towers and by selling off the current social housing sites for $100's of millions.

[misher]

RE activity is picking up in Toronto and Vancouver. I’m as shocked as you must be. I guess when people aren’t going to work they have time to look at homes. Going to make all those morons who claim foreigners buy everything look pretty stupid. Obviously locals can afford our housing.

[kwoldtimer]

Originally Posted by MolsonExport

Anecdotally, I also find that in Ontario, there is more investment (or importance placed upon) housing assets and financial investments, whereas in Quebec (where I lived for 2/3 of my life), money is spent more on restaurants, fashion (and for some, cars).

In other words, a kernel of truth to the over simplistic notion that "Montrealers work to live, and Torontonians live to work". I find Quebecois live for the moment, whereas Ontarians save for a rainy day.

or maybe I just miss Montreal's Joie de vivre.

As a proportion of disposible income, perhaps, but likely not in terms of per capita spending.

[WarrenC12]

Originally Posted by misher

RE activity is picking up in Toronto and Vancouver. I’m as shocked as you must be. I guess when people aren’t going to work they have time to look at homes. Going to make all those morons who claim foreigners buy everything look pretty stupid. Obviously locals can afford our housing.

Got a real source for this? RE is pretty much the longest lagging indicator you can find.