Canada's 'housing bubble' deemed close to bursting

[WarrenC12]

Originally Posted by rofina

Same page.

Where we go from here though, is a tough one. Especially if we are to stick to realistic solutions, or at least ones with some likelihood of implementation in any of our life times.

We're going to get ourselves a "slash and burn the red tape" Mayor & council next time around, maybe(!). If we do, they'll probably throw out plenty of baby with the bathwater.

[cabotp]

Originally Posted by milomilo

Incredibly well, do you actually think this is a good example? Do you think you'd be vaccinated now if it wasn't for the global economy?

I feel the global economy on initially setting up slowed us down with initial distribution of the vaccines and ppe. It was only after other countries stole what they wanted that we started to get what we needed.

But hey if you are willing to trust some other country man to support you in a time of crises.

[cabotp]

Originally Posted by rofina

Perfect example of what I speak about when I say our problems are nearly entirely self imposed.

The amount of time wasted taking down the old, the fact we only have a 50ish% gain in units. The fact there is houses all around.

The whole thing is silly. No other way to put it. Were not serious about solving this problem, that's the only reasonable conclusion.

It is always about the NIMBY. People want to solve the problem. They just don't want to do it in a way that will affect their life. So they will talk the talk but never walk the walk.

[CanSpice]

Originally Posted by cabotp

It is always about the NIMBY. People want to solve the problem. They just don't want to do it in a way that will affect their life. So they will talk the talk but never walk the walk.

Just go to any public hearing and you'll always hear the phrase "I support affordable housing, just not in this location" from people who live within a couple of blocks of the proposal.

[Truenorth00]

Right now in Ottawa, the Official Plan is being reviewed. 100 000 citizens have complained. A majority are concerned about losing single family homes in their neighbourhoods.

I don't think anything is every going to change. In Ottawa or elsewhere. The majority of the public can't imagine anything but single family detached. And they want it at any cost. High traffic. High debt. High emissions. It's disheartening to see.

[Truenorth00]

The financialization of housing is here. Developer buying a billion dollars worth of single family homes to rent out.

https://www.theglobeandmail.com/business...illion-worth-of-single-family-houses-in/

[Nite]

City staff adjust official plan after intensification worries


"One of the biggest issues for residents was a single table found among hundreds of pages that stated how many units per hectare would be required in the future.

Residents in Alta Vista, for instance, were alarmed to see their neighbourhood might be expected to have four times more homes, and that they wouldn't be permitted to rebuild a single detached home on their properties. Those requirements have now been dropped."

Now, staff will replace contentious neighbourhood density requirements in the official plan with a target range. To offset that move, the maximum height of highrises will rise to 40 storeys and taller buildings will be permitted at transit hubs."

[Truenorth00]

Basically moving away from "missing middle" to more concrete skyboxes to please the NIMBYs. The end result will be more sprawl and more unaffordable housing.

[Innsertnamehere]

But hey, their single detached home in a central location will get to stay!

[hipster duck]

Originally Posted by Truenorth00

The financialization of housing is here. Developer buying a billion dollars worth of single family homes to rent out.

https://www.theglobeandmail.com/business...illion-worth-of-single-family-houses-in/

That's great news! We should be cheering this!

For most people who want to buy a home, the main argument is space. Equity is a plus, but other forms of investment have less of an upfront commitment, steer you away from putting all your eggs in one basket and, frankly, outpace the gains on Canadian real estate anyway.

Right now, very few rentals offer the space required to start a family.

Paying your existing rent, building your career and saving the $200k necessary for a downpayment is next to impossible for most people in their 30s.

Paying $3,200/month for a 3 BR rental house and putting the rest of your money in ETFs, or whatever, is certainly not easy for a large chunk of people, but it is much more feasible than the previous scenario. If I were starting out today, my wife and I could do this, but we couldn't do the former.

The other plus of having institutional investors buy up SFH is that, the more they buy, the less NIMBYism we have, since there are fewer owner occupiers and more large landlords. The companies that are buying these SFH are developers. I think their long range plan is to assemble enough properties that they can horse trade with other developers and do easy lot assembly and upzoning. I don't think they'll make much money just renting these out long term. The cap rates on renting a SFH out in a city like Toronto are just terrible.

I think this move is inevitable. We have reached the point where the only new entrants to the owner occupier market for single family homes are investors or HNWI (or the spawn of HNWI). We might have a tenure (rent:own) situation that's less like our peer countries like England and Australia and something closer to continental Europe. That's a good thing.

[Innsertnamehere]

real estate is one of the best investments to make not because of the returns it makes, but because it's a leveraged return.

Nobody borrows money to buy index funds (well, you could), but lots borrow money to buy real estate. In fact, it's expected.

A 5% annual return on real estate in which you have 20% equity in is equal to a 25% return on an investment that is unleveraged. That's hard to beat. And you can do it mostly with money that you have to otherwise spend on rent.

People love to say that renting can be better (and it can be if you don't plan on living in one place for more than a few years), but it's really, really hard to beat the leveraged returns of real estate and the benefits of being able to get a return from your housing budget.

It's definitely an odd move by the developer, as the cap rates are hilariously poor on detached in the GTA. I wouldn't be surprised if they are literally negative.

[hipster duck]

Originally Posted by Innsertnamehere

real estate is one of the best investments to make not because of the returns it makes, but because it's a leveraged return.

Nobody borrows money to buy index funds (well, you could), but lots borrow money to buy real estate. In fact, it's expected.

A 5% annual return on real estate in which you have 20% equity in is equal to a 25% return on an investment that is unleveraged. That's hard to beat. And you can do it mostly with money that you have to otherwise spend on rent.

People love to say that renting can be better (and it can be if you don't plan on living in one place for more than a few years), but it's really, really hard to beat the leveraged returns of real estate and the benefits of being able to get a return from your housing budget.

That's all good, but few people have the cash upfront to make the necessary 20% downpayment in expensive markets (not including closing costs which are now quite substantial) or the finances to pass the stress test. And all the gains that are realized upon sale have to be spent on another property to put a roof over your head - unless you want to downsize, move far away or go back to renting.

I'd say one of the reasons why renting is considered to only be for people who plan on staying in a place for a couple of years is because our rental market is provided by private landlords. In places where most rentals are owned by large property management companies, it's not uncommon for people to stick around for decades.

[Innsertnamehere]

It makes sense to rent if you are only going to live in a place for a few years as closing costs of moving eliminate most gains earned in that time.

And regarding the downpayment, it's a good thing you don't need 20% to buy a place. You can put down as low as 5%, and that just increases your leveraged returns.

Sure you can't pull that money out unless you downsize or return to renting, but eventually you pay off the mortgage which allows you to have extremely small housing costs, or you can access extremely cheap credit through HELOCs which isn't possible for renters. A lot of times that equity can act as a financial backstop in retirement, or at the very least give your children a nice inheritance tax-free.

Just the tax efficiency of the primary residence capital gains exemption means a house is an excellent vehicle over the long term to hold a significant amount of your net worth.

Owning isn't a be-all end-all thing, but it's certainly a better thing in the long term financially.

[Truenorth00]

I don't get the trust that large companies will behave any better than small time landlords. There's nothing stopping them from making renoviction a new annual Canadian tradition.

I do agree that they won't be NIMBYs about development. But I wonder if this will push a lot of existing opposition into overdrive.

[milomilo]

Originally Posted by Truenorth00

I don't get the trust that large companies will behave any better than small time landlords. There's nothing stopping them from making renoviction a new annual Canadian tradition.

I do agree that they won't be NIMBYs about development. But I wonder if this will push a lot of existing opposition into overdrive.

Renovictions are a good thing. We need to stop focusing on individual grievances and look at the big picture.

All these stories about perceived bad things happening are just a symptom of the single issue - there are not enough houses. Allow the market to be free, and the bad things will happen less.

[thewave46]

Originally Posted by Truenorth00

I don't get the trust that large companies will behave any better than small time landlords. There's nothing stopping them from making renoviction a new annual Canadian tradition.

I do agree that they won't be NIMBYs about development. But I wonder if this will push a lot of existing opposition into overdrive.

I don't think large companies will necessarily care about renovicting, because that would imply they're actually investing in a detached home - a bet with limited upside.

They'll own the place for a bit, offset their capital cost with rent and then - after acquiring several adjacent properties - probably flatten a chunk of the street and build a bigger building after doing the legal wrangling.

The real money's in the long-term value of the land. The house is worth peanuts.

I'm curious about how much worse the NIMBY thing will get in this scenario. I doubt it will get much worse, because if you do this at the right scale, you only annoy a few people.

[milomilo]

Originally Posted by milomilo

Here we go - whatnext, can you please show how these numbers show Vancouver building more supply than population growth?

Sources:

https://www03.cmhc-schl.gc.ca/hmip-pimh/...&DisplayAs=Table&GeograghyName=Vancouver
https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=1710013501

No response, whatnext?

[goodgrowth]

Originally Posted by Innsertnamehere

real estate is one of the best investments to make not because of the returns it makes, but because it's a leveraged return.

Nobody borrows money to buy index funds (well, you could), but lots borrow money to buy real estate. In fact, it's expected.

A 5% annual return on real estate in which you have 20% equity in is equal to a 25% return on an investment that is unleveraged. That's hard to beat. And you can do it mostly with money that you have to otherwise spend on rent.

People love to say that renting can be better (and it can be if you don't plan on living in one place for more than a few years), but it's really, really hard to beat the leveraged returns of real estate and the benefits of being able to get a return from your housing budget.

And it's one of the reasons why non-property owners should arguably be income tax exempt.

Renters paying ~30%(average) tax on productivity while property owners accrue significant passive gains.

Renting is fine so long as the financial play field is equalized.

[thewave46]

Originally Posted by goodgrowth

And it's one of the reasons why non-property owners should arguably be income tax exempt.

Renters paying ~30%(average) tax on productivity while property owners accrue significant passive gains.

Renting is fine so long as the financial play field is equalized.

I disagree.

Property owners are taxed on capital gains upon sale, so that's where the playing field is balanced. Someone unloading a rental property may be liable for large capital gains taxes.

They're also taxes on rental profit. Not that profit is usually large in the rental industry - it's mostly a capital gains game.

[milomilo]

Originally Posted by thewave46

I disagree.

Property owners are taxed on capital gains upon sale, so that's where the playing field is balanced. Someone unloading a rental property may be liable for large capital gains taxes.

They're also taxes on rental profit. Not that profit is usually large in the rental industry - it's mostly a capital gains game.

Yes. I disagree with exemptions for non property owners, but the justification does have merit. The correct policy response is to amend some of the taxes that currently unjustly reward capital gains vs income, rather than add more swiss cheese to the tax code.