Canada's 'housing bubble' deemed close to bursting

[Coldrsx]

Key highlights from the latest release

Variables impacting the housing market will gradually return to pre-COVID levels over the 2021 to 2023 period.

The level of existing home sales and price growth are forecast to moderate from unsustainable 2020 levels but will remain elevated.

The pace of sales is expected to moderate from recent highs. Slower sales growth will help moderate the pace of price growth.

Rental demand will recover as immigration recovers, but vacancy rates will likely remain elevated.

Housing starts will stabilize at levels consistent with household formation by the end of 2023.

The precise timing and speed of the economic recovery in major markets is highly uncertain and outlooks remain subject to significant risks.

https://www.cmhc-schl.gc.ca/en/professio...1302&mc_cid=4d43a9fdc7&mc_eid=b81cde227f

[Coldrsx]

https://twitter.com/CMHC_ca/status/1394268395605012483

[Coldrsx]

CMHC spring 2021 housing market outlook
https://assets.cmhc-schl.gc.ca/sites/cmh...rev=4c3c8563-6ed2-417a-98c0-82085815893f

[Tg11]

Montreal and Toronto wow

[Innsertnamehere]

Montreal housing starts being above toronto is crazy.

[someone123]

That housing starts infographic doesn't seem to make any sense and doesn't match the market outlook. For example the market outlook for Montreal says the high forecast for starts is 27,250 in 2021.

The "April 2021" label on the infographic suggests they're for the month but they're implausibly high. If they are for the year the 1,561 Halifax number makes no sense. Their "low" forecast for 2021 is 3,350 there. Maybe these are annualized from the April counts, and mislabeled?

The market outlook document seems to have more plausible numbers.

[Martin Mtl]

SOURCE: CANADA MORTGAGE AND HOUSING CORPORATION

[someone123]

Yeah, so it looks like they are probably annualized figures and maybe there's further adjustment happening (they should indicate that in the infographic). So the value for a month is more like X/12 actual construction, or maybe something a bit different.

The month to month values are highly variable at the city level but it tends to balance out year to year. For example 2020 and 2019 were almost the same in Edmonton but March more than doubled while August fell.

[goodgrowth]

No wonder Vancouver and Toronto are fucked in terms of prices. Calgary and Edmonton with ~15K starts and Vancouver only at 19K? Toronto only at 33K?

Proportionally Vancouver should be at 30K and Toronto like 75K...

[SignalHillHiker]

Is that just the City proper or the entire CMA? I’m surprised ours is so much lower than Moncton if it includes all the suburban municipalities here. HFX I assume would be huge anyway, they don’t have any border smaller than the HRM to be measuring so they? And that’s like half the province.

[someone123]

Originally Posted by goodgrowth

No wonder Vancouver and Toronto are fucked in terms of prices. Calgary and Edmonton with ~15K starts and Vancouver only at 19K? Toronto only at 33K?

Proportionally Vancouver should be at 30K and Toronto like 75K...

These numbers don't capture the size of the units and in Vancouver a lot of the new units are tiny. A 500 square foot condo does not add as much housing to the supply as a 2,500 square foot house.

[goodgrowth]

Originally Posted by someone123

These numbers don't capture the size of the units and in Vancouver a lot of the new units are tiny. A 500 square foot condo does not add as much housing to the supply as a 2,500 square foot house.

The federal governments entire economic and social agenda is record immigration along with incentives for middle class family life though tax and childcare incentives. In effect stimulating demand for large living spaces.

Cities response to handle growth is take small slivers of land and build towers with tiny living spaces.

This country is dysfunctional.

[goodgrowth]

Here's a Bloomberg article that basically mocks the Canadian housing situation and stating the reality that we are not building enough of the types of housing that people want:

The Second-Largest Country in the World is Running Out of Land

Canadian dream of a house with a yard is becoming unaffordable as real estate prices surge and space to build runs short.

https://www.bloomberg.com/news/articles/...ntry-in-the-world-is-running-out-of-land

Canada’s housing market is running hotter than just about anywhere else in the world.

But despite the anxiety about irrational bidding wars and fears of the bubble bursting, what's fundamentally driving it is a worsening imbalance between supply and demand: Buyers want large homes but increasingly can’t have them because there isn’t enough space in and around the major cities where people work.

The world's second biggest country by landmass is effectively running out of space, and that has Canada on course for a reckoning. The dream of a detached home and a piece of land, which generations of Canadians have taken for granted, and which continues to entice new immigrants, may soon be out of reach in the places where people want to live. That could force an expansion of the idea of home to include condos and rentals, potentially transforming how the middle class does everything from raising families to saving for retirement.

“Running out of land in Canada is a relatively recent phenomenon compared to Europe, or Japan, or other parts of the world,” said Robert Hogue, an economist at Royal Bank of Canada. “I think that for future generations, homeownership is going to look a lot more European, for example, than it does today.”

Nearly 60% of home sales last year in 18 communities in and around Toronto, Montreal, Vancouver and Ottawa were for single-family detached houses, according to data compiled from local real estate boards by Bloomberg News. Only about a quarter of the sales in these places were for apartments.

But when you look at what has been built in these same cities and their nearby bedroom communities over the last decade, the percentages are exactly reversed: 60% of new housing stock is apartments, and just 25% detached houses, according to government data compiled by Bloomberg. That mismatch has forced desperate bidders to vie for an increasingly constrained supply of single-family homes. In 2020, Canada’s benchmark home prices gained almost 15%, with only Luxemburg posting a bigger increase, according to a data from the Dallas Fed.

[Harrison]

Originally Posted by goodgrowth

Here's a Bloomberg article that basically mocks the Canadian housing situation and stating the reality that we are not building enough of the types of housing that people want:

The Second-Largest Country in the World is Running Out of Land

Canadian dream of a house with a yard is becoming unaffordable as real estate prices surge and space to build runs short.

https://www.bloomberg.com/news/articles/...ntry-in-the-world-is-running-out-of-land

'The Second-Largest Country in the World is Running Out of Land' (except in the Prairies).

I'm happy to live in a city where I can easily afford a house/duplex/townhouse with a yard near the core. I would never be able to say the same if I stayed in Kitchener-Waterloo.

[someone123]

Originally Posted by goodgrowth

Here's a Bloomberg article that basically mocks the Canadian housing situation and stating the reality that we are not building enough of the types of housing that people want

I think this is basically political and the most politically dominant group is the one that wants high asset prices relative to wages. They can live with a tight supply of new housing because they already own housing. They can live with weak labour markets and laws because they are wealthy and in a lot of cases retired and net buyers instead of sellers of labour. They don't really need a lot of new transportation infrastructure, but they do want health care spending.

We might or might not like it or think it's fair but that's basically how government spending and policy orientation looks in Canada. Some people promote natural boundaries as an explanation for what is happening but lots of cities without any particular land constraints are rapidly becoming less affordable.

I wonder how this is going to evolve in the next decade or two. We're probably roughly around peak Baby Boomer political power. And in the US the 80's/90's political class has held on but they are getting very old.

[rofina]

Originally Posted by goodgrowth

The federal governments entire economic and social agenda is record immigration along with incentives for middle class family life though tax and childcare incentives. In effect stimulating demand for large living spaces.

Cities response to handle growth is take small slivers of land and build towers with tiny living spaces.

This country is dysfunctional.

Canada is coasting on its stellar reputation.

We just spent 300 billion in a year - I get it COVID.

But how about we have one year where we spend 50 billion, end homelessness, build high speed rail throughout the country. End boil water advisories.

Its so frustrating post COVID to see the inaction.

If governments wanted to, they could finance the money easily enough and transform the countries future. The limits are only our imagination.

Its actually tragic. Think about most of the major infrastructure in this country - built decades ago with a vision to the future.

We are not doing enough future proofing and its all starting to stack up at once and cause issues, one of those being housing.

Where is our high speed rail? Where are our new towns and cities popping up?

Were expecting to admit over 2 million people in 3 years, that's enough to build another Vancouver from scratch and populate it.

Why don't we?

[rofina]

Originally Posted by someone123

I think this is basically political and the most politically dominant group is the one that wants high asset prices relative to wages. They can live with a tight supply of new housing because they already own housing. They can live with weak labour markets and laws because they are wealthy and in a lot of cases retired and net buyers instead of sellers of labour. They don't really need a lot of new transportation infrastructure, but they do want health care spending.

We might or might not like it or think it's fair but that's basically how government spending and policy orientation looks in Canada. Some people promote natural boundaries as an explanation for what is happening but lots of cities without any particular land constraints are rapidly becoming less affordable.

I wonder how this is going to evolve in the next decade or two. We're probably roughly around peak Baby Boomer political power. And in the US the 80's/90's political class has held on but they are getting very old.

I agree with this perspective.

The shame of it is, another decade or two is a long time to continue in very much the wrong direction as a country only to find out, that hey, we been travelling in the wrong direction for a decade or two.

[GreaterMontréal]

We are not running out of land, we are anti-sprawl compared to the US. In southern Quebec, the anti-sprawl movement is getting pretty ridiculous. The CAQ government is not anti-sprawl though, it's more like a mainstream media convergence against everything that does not encourage high population density and public transit.

[someone123]

Originally Posted by rofina

The shame of it is, another decade or two is a long time to continue in very much the wrong direction as a country only to find out, that hey, we been travelling in the wrong direction for a decade or two.

I think a lot of Millennials, the lower-middle 2 quintiles or so, are just screwed at this point and I wonder if they will ever be middle class in a way that Baby Boomers understood it. Not very good career prospects, student debt and income given up for schooling, no assets, and governments are even more indebted. Often can't afford a car or kids, which are now a kind of luxury good. Things were not going well for this group before covid, and there's no guarantee that there will be clear sailing after covid. This is the group that in the Baby Boomer era completed high school and then moved into medium pay low skill union jobs.

[Innsertnamehere]

Originally Posted by GreaterMontréal

We are not running out of land, we are anti-sprawl compared to the US. In southern Quebec, the anti-sprawl movement is getting pretty ridiculous. The CAQ government is not anti-sprawl though, it's more like a mainstream media convergence against everything that does not encourage high population density and public transit.

Even as a planner it’s almost odd to me. The media reactions to things like the 413 or new subdivisions is dazzling compared to what anecdotally most people want to live in. There seems to be a huge disconnect that if you don’t build more houses in a growing market that they will get more expensive.