Canada's 'housing bubble' deemed close to bursting

[Innsertnamehere]

yup. Can they buy one in central Mississauga or Etobicoke? No. Can they buy one within an hours commute of downtown Toronto? yes.

Presuming a double income household with two people earning a pretty typical salary for a masters, or even one earning a typical masters salary and the other earning a little less, you can buy quite easily in places like Whitby or Brampton.

https://housesigma.com/web/en/house/5VXv3lXejoV3j2q8/4-Beisel-Crt-Brampton-L6Z2R8-W5170080

Places like this would have a $2,900/mnth mortgage cost presuming 10% down, which once you add utilities and property taxes, under traditional affordability metrics means a household income of about $130k to afford, or two earners earning, say, $80k and $50k, both not unreasonable salaries for someone with a masters and someone with a bachelors who are both out of school for a few years. $130k income is probably going to be dead median for that age bracket for two working adults in the GTA in the 2021 census too. Remember that the 2016 median income of households with children was $115k. In 2016, so inflation adjusted it will likely be closer to 130k. It's not high income at all, though many seem to think otherwise.

The problem is many look at houses a block from Trinity Bellwoods trading for $2 million and complain about how they can't afford housing. so instead they buy something like this which better fits many millenials lifestyles, and complain about how they can buy a house in Riverdale or somewhere.

https://housesigma.com/web/en/house/GMnK...illery-Lane-2403-Toronto-M5A0E3-C5057522

[Truenorth00]

Originally Posted by Innsertnamehere

people have been talking about the "boomer strain" for ages - reality is that it's already happening. Boomers are solidly in retirement age right now, even early Gen X are starting to approach retirement now too. The older boomers are almost 80 and are starting to die. we are at that "peak care level" right now, and it's generally fine.

Nope. Not even close. Boomers were born 1946 to 1965. The last of the Boomers won't even reach retirement age till 2030. The oldest Boomer is 75 right now. That's just pushing the age where homecare starts to be necessary for a growing segment. We won't be hitting peak care till the early 2030s.

[Coldrsx]

^exactly.

My buddy moved from the Annex (renting) to north Beaches (owned - small TH) and has just bought a duplex in Scar (owned) so that they could have 3 bdrms.

~900k

[Truenorth00]

Originally Posted by Innsertnamehere

Presuming a double income household with two people earning a pretty typical salary for a masters, or even one earning a typical masters salary and the other earning a little less, you can buy quite easily in places like Whitby or Brampton.

A market where you need double incomes, one of whom has a graduate degree to be able to afford a townhouse, an hour's commute from the core, is a recipe for a lot of financially precarious families.

You're also forgetting that attaining the skill level for that salary has probably come with significant debt itself.

To be fair, I don't get why anybody that is the least bit talented even stays in Toronto or Vancouver anymore. But still, for those who remain, this isn't exactly healthy. And increasingly, the same can be said for Canada.

[Innsertnamehere]

Originally Posted by Truenorth00

A market where you need double incomes, one of whom has a graduate degree to be able to afford a townhouse, an hour's commute from the core, is a recipe for a lot of financially precarious families.

You're also forgetting that attaining the skill level for that salary has probably come with significant debt itself.

To be fair, I don't get why anybody that is the least bit talented even stays in Toronto or Vancouver anymore. But still, for those who remain, this isn't exactly healthy.

About 35% of people between 25 and 34 hold a bachelors degree or higher across Canada. That is likely much higher in Toronto, with employment bases being much more focused on knowledge based industries.


Also, median household income in the GTA for households with children is $116k in 2016, regardless of educational attainment. If you isolate for those with post secondary education it is likely higher. I was just giving a rough example. Most people with masters will be earning well above median.


yes, educational attainment has debt. In Ontario, a typical masters student graduating would have had about $50k in tuition payments for the education, but much of that may be covered by government grants, and partially paid for with summer jobs. Typically people graduating spend the first 4-5 years in professional jobs paying down student debt and saving a downpayment. Nobody is buying that double garage house in Brampton a year after graduation.

I have explained how there has been real affordability declines in the GTA over the last 20 years on this board before, but that it has not been nearly as significant as many make it out to be. And most affordability declines have been in the low-rise housing market as the government has deemed it undesirable and has severely restricted supply. And everyone on this board seems to generally agree with that policy. Those policies have consequences.

Areas of the country without restricted supply of detached housing (i.e. not the GTA or GVA) continue to enjoy more or less equally affordable detached homes as a generation ago. You can pick up 2 car detached garage houses in the Ottawa area for $650k - which needs a household income of about $110k, for example. which is actually way below the 2016 median household income for families with children of $132k.

[thewave46]

Originally Posted by Innsertnamehere

I have explained how there has been real affordability declines in the GTA over the last 20 years on this board before, but that it has not been nearly as significant as many make it out to be. And most affordability declines have been in the low-rise housing market as the government has deemed it undesirable and has severely restricted supply. And everyone on this board seems to generally agree with that policy. Those policies have consequences.

I'm curious how long the contradictions last for the GTA and Vancouver.

It's an interesting situation: High population growth, high demand for limited detached homes and limited supply by force of government.

What cracks first?

[WarrenC12]

Originally Posted by rousseau

Thanks for that, I wasn't aware. We're not realistically going to be able to retire soon, if ever, so we'll still have some income coming in. And we'd be investing most of the nest egg, not just letting it sit in a bank collecting interest.

Something to think about, anyway.

Yep always good to see where you're at. I plan to retire early but not cut off work 100%, just be flexible.

I don't plan to leave much to my kids either.

[Truenorth00]

Already cracking no? The Ford Government is okaying filling up large chunks of the greenbelt.

Vancouver is more interesting. Hard geographic restrictions. Strong NIMBYs. Maybe young people just leave?

[WarrenC12]

We need an estate tax.

[someone123]

Originally Posted by esquire

The "struggle with basic shelter" thing I can see being a problem in Toronto and Vancouver which is admittedly a significant part of the Canadian population, but it's by no means the majority. There's a big country out there.

The "struggle" part was actually not in the original tweet. It said:

"Millennials: Basic shelter with a masters degree."

I think this is fairly accurate for Toronto and Vancouver and many other cities lurched in that direction during the past year. The younger professional class (maybe upper quartile or so) tends to manage to acquire basic housing, like a 1-2 BR condo or a standard suburban home, often with the help of parents. Many don't seem to feel like they can or want to juggle kids due to the mix of low resources and high career demands.

In the Baby Boomer generation there was no special pleading about needing to move far away or be in the upper 10% of your age cohort education-wise to be able to afford a house and basic detached houses were not considered a luxury good. They experienced a big run-up in prices (effective returns on leveraged investment) that would be ruinous if it were repeated in Canada (though who knows, maybe the $1-2M home buyers will see 5-10% real returns for decades and the 2040 SSP equivalent will include comments about how it's no big deal that houses are $8M; you just need to have a modest IPO to buy a Vancouver bungalow!).

[WarrenC12]

Originally Posted by Truenorth00

Already cracking no? The Ford Government is okaying filling up large chunks of the greenbelt.

Vancouver is more interesting. Hard geographic restrictions. Strong NIMBYs. Maybe young people just leave?

Vancouver's demographics are changing though. The vote could shift to elect a more YIMBY municipal government and re-zone big parts of NIMBY-land. Nobody is getting a SFH for any reasonable price though, that ship sailed long ago.

[someone123]

Originally Posted by WarrenC12

Vancouver's demographics are changing though. The vote could shift to elect a more YIMBY municipal government and re-zone big parts of NIMBY-land. Nobody is getting a SFH for any reasonable price though, that ship sailed long ago.

Yep. I don't think Vancouver will have cheap land again but over time fewer and fewer people will care about NIMBY style regulations that were originally brought in to please a homeowner class that has largely moved on.

In principle, multi-unit development could be affordable, although lowrise affordable housing is not going to work when land is many millions per acre.

[milomilo]

Originally Posted by WarrenC12

Vancouver's demographics are changing though. The vote could shift to elect a more YIMBY municipal government and re-zone big parts of NIMBY-land. Nobody is getting a SFH for any reasonable price though, that ship sailed long ago.

I hope I'm wrong, but I find it hard to believe there will be fewer NIMBYs going forward. Millennials are the same species of human as boomers, they are just as selfish and as soon as it's them with the stuff, they will protect it equally.

What could perhaps change is that the housing haves become increasingly the minority. In the past this would have been eventually solved by the plebs burning the whole lot down and chopping off the elites' heads, but hopefully we can use democracy instead. I remain pessimistic though, as it is quite clear that the plebs are totally ignorant of the simple reason for high house prices, and are content to incorrectly allocate blame.

[someone123]

Originally Posted by milomilo

I hope I'm wrong, but I find it hard to believe there will be fewer NIMBYs going forward. Millennials are the same species of human as boomers, they are just as selfish and as soon as it's them with the stuff, they will protect it equally.

A lot of areas are changing though. It is not a simple passing down of housing units to the next generation, where middle class Baby Boomer families sell or leave the houses to a new generation that looks similar. A lot of the houses are being bought up by developers or speculators and many are already "slum" properties inhabited by renters (the rent collection being secondary and maintenance or renos being a waste since the goal is eventual sale for development). Many of the condos are rented out by amateur landlords. Most of the new homeowners seem to be immigrants who may or may not have the same sensibilities as Vancouverites born in the 1940's and 50's. And of course most younger people own little to no property and multi-unit is becoming a bigger and bigger share of the city's housing stock, although the land allocation is still heavily slanted.

[JHikka]

Originally Posted by milomilo

I hope I'm wrong, but I find it hard to believe there will be fewer NIMBYs going forward. Millennials are the same species of human as boomers, they are just as selfish and as soon as it's them with the stuff, they will protect it equally.

I'd take this bet. Far more Millennials by and large have had to live in rental or tighter spaces compared to their parents and better understand the realities of the housing crisis, being squeezed out of areas financially, and just generally understanding the needs of housing as it relates to others.

[milomilo]

Originally Posted by someone123

A lot of areas are changing though. It is not a simple passing down of housing units to the next generation, where middle class Baby Boomer families pass the houses to their kids or the wealthiest professional Millennials. A lot of the houses are being bought up by developers or speculators and many are already slum properties inhabited by renters. Most of the new homeowners seem to be immigrants who may or may not have the same sensibilities as Vancouverites born in the 1940's and 50's.

Yep I agree that changing of ownership structure would change the game.

I would guess a lot of the SFH passed across generations will be immediately sold as the old family house isn't that useful to the children, probably needs some immediate capital outlay (taxes, repairs, modernisation), whereas the cash could be put to use.

The amount of people that could genuinely afford to buy a Vancouver SFH and keep it as a SFH must be quite low now so the pressure to replace them with greater density has to increase. But so far that pressure hasn't resulted in the theoretical result, so it remains to be seen how long the current situation will last.

[someone123]

Originally Posted by JHikka

I'd take this bet. Far more Millennials by and large have had to live in rental or tighter spaces compared to their parents and better understand the realities of the housing crisis, being squeezed out of areas financially, and just generally understanding the needs of housing as it relates to others.

I know a few families that have owned detached Vancouver houses that eventually came to be worth millions of dollars. Some of the people had what might be called NIMBY sentiment, others not.

The ones who wanted to maintain a neighbourhood or small town feel were generally older and were familiar with the city in the 60's-80's. Every one of these I know has now cashed out and downsized or moved away. Their kids moved away too.

Another group is immigrant households that are generally larger. They don't seem as plugged in to municipal politics and I'd be surprised if they have strong feelings of nostalgia for a city they never lived in.

Most of the younger people are renters while the well-off ones or careful planners who got help from parents are condo owners. By and large they already live in high density areas, and most don't own cars. Some live in poorly maintained houses, and there are a lot of stories that make it sound like the owners pretend to live in them.

[milomilo]

Originally Posted by JHikka

I'd take this bet. Far more Millennials by and large have had to live in rental or tighter spaces compared to their parents and better understand the realities of the housing crisis, being squeezed out of areas financially, and just generally understanding the needs of housing as it relates to others.

To counter though, when the millennials eventually do get the house of their dreams, they really had to work for it and invest a lot of money, more than the boomers did. I'd bet they'll be even more selfish in their efforts to "protect their investment".

[someone123]

Originally Posted by milomilo

To counter though, when the millennials eventually do get the house of their dreams, they really had to work for it and invest a lot of money, more than the boomers did. I'd bet they'll be even more selfish in their efforts to "protect their investment".

5% of them will get the house of their dreams. The other 95% will have interests at odds with them. In the Boomer era the homeowner middle class might have been the plurality, or at least the strongest political voice, and the poorer people probably had a clearer path to homeownership.

The young Toronto professionals who are often spoken of as a niche group on here are or will be the most influential cohort in Canada. There will be more and more influential professionals, politicians, etc. who have a completely different perspective on housing and development compared to the norm of say 2005, when by and large entitled professional types would have felt there was a path for them to own anything but a large mansion if they wanted it.

[Innsertnamehere]

Way more than 5% will get their house of their dreams, again, unless the dream is a 2,000sf double garage home on a half acre lot a 10 minute walk from Trinity Bellwoods or something ridiculous.

39% of housing in the Toronto CMA is still detached homes, and 56% is low-rise. That number will decline over time, but it's far more than 5%. And people will live in those units.

That said, will people make comprimises to achieve other goals, like, say, a shorter commute, or a more walkable neighborhood? yes. But that would be a discretionary choice.

One of the biggest differences is boomers were happy to drive till they qualified. Now, they had to drive less than many Millennials do, but that attitude has largely disappeared in Millennials. They place a higher priority on things like commute distance and walkability than previous generations did, I think.

We also have to be careful to not play up the level of wealth achieved in the apparently dreamy days of housing affordability of the 1970's through 1990's when boomers were buying real estate. Overall home ownership rates were lower than then today and the percentage of people owning 2,000sf+ 2 garage homes is likely smaller than most people realize, just by nature of there being far less of that housing type, which didn't really become the standard for detached construction until the late 1970's or early 1980's.