Canada's 'housing bubble' deemed close to bursting

[milomilo]

Originally Posted by Innsertnamehere

No one solution is going to work and we are so far deep into the hole it's not going to be fixed overnight.

A response, including increased supply, increased affordable housing, and potentially even trying to deflect demand side growth (perhaps trying to shift growth to lower cost markets for example) is needed to actually fix the issue.

My way of thinking about this is that it took decades to cause the current problem, it will probably take decades to fix. If we even try, which currently we are not.

[MonkeyRonin]

Originally Posted by milomilo

Government intervention (in the form of telling developers what to build and making it easy to block projects) got us into this mess, it cannot get us out. Any policy that further restricts what developers can build will decrease supply and increase prices, there's no way around that. Further "intervention" must be to relax regulation and allow more housing.

It's not about "more regulation" or "less regulation", it's about better regulation and interventions that are better suited to today's market conditions.

That could, on the one hand mean streamlining the approvals process, reducing development fees, and liberalizing zoning to allow more multi-family construction; while on the other hand providing tax breaks or density bonuses to purpose-built rental buildings, mandating that X% of new units must be >1 bedroom, and increasing taxes on speculators or restricting foreign buyers.

[goodgrowth]

Originally Posted by milomilo

We're not telling developers to go at it though, at all. Housing development is about the most restricted market there is. Imagine if the government only allowed grocery stores in specific locations, and you could only sell certain types of food at each one. And locals could block it for any reason. That sounds absurd, but it is how we force the housing market to function.

Well imagine if every development proposal for a fast food restaurant allowed input from nearby competitors on their thoughts?

NIMBY McDonalds at a council hearing: "Actually this Tim Horton's proposal is within the 2KM commercial radius bylaw, and would congest traffic".... or some —

Because that's sorta how it works for housing development....

[milomilo]

Originally Posted by goodgrowth

Well imagine if every development proposal for a fast food restaurant allowed input from nearby competitors on their thoughts?

NIMBY McDonalds at a council hearing: "Actually this Tim Horton's proposal is within the 2KM commercial radius bylaw, and would congest traffic".... or some —

Because that's sorta how it works for housing development....

And "we're concerned about traffic, so you can only serve 200 coffees per day, but also we think coffee should be affordable so you need to sell 10 of these for $1, allocated by lottery. Oh and you have to follow code, the cups you must use cost $1.10".

[WarrenC12]

Originally Posted by someone123

There's a lot of unavoidable bloat and compromise with condos. In BC the insurance rates for large residential condos went up by 2-4x recently so a lot of fees went up by 30-40% during 1-2 years. On the plus side even with the bloat the per unit cost of maintaining amenities like a gym or pool can be low. Of course during the covid era a lot of this stuff is indefinitely closed.

I'm not sure the way stratas work, at least here in BC, is appropriate for the function they serve, increasingly the only option for property ownership in a city with weak protections for tenants.

I think strata/maintenance fees are up front and scare a lot of people, but the hidden benefits and costs of non-strata aren't as open and well understood.

I'm not saying these fees aren't high, and you couldn't save money elsewhere, but the equivalent SFH will have higher costs for property taxes, heating/cooling, security, and those big "once every decade" items.

[someone123]

Originally Posted by WarrenC12

I think strata/maintenance fees are up front and scare a lot of people, but the hidden benefits and costs of non-strata aren't as open and well understood.

I'm not saying these fees aren't high, and you couldn't save money elsewhere, but the equivalent SFH will have higher costs for property taxes, heating/cooling, security, and those big "once every decade" items.

One difference is you often have options with your own property, but you're basically stuck with what your strata imposes on you. If your strata is mismanaged things can go off the rails quickly.

I own a condo and I think it's good overall (not that there are a lot of reasonable alternatives around here). I was mostly talking about it within the context of drawing up a family budget that involves paying ~50% in housing carrying costs right out of the gate. Those costs can easily shift upward by 10-20% and all sorts of other things can happen. To me, stability is a big part of the reason for owning in the first place and to have that IMO you need to live well within your means, not at the edge according to what the TD mortgage calculator says they will lend you based on their risk tolerance given CMHC support, etc.

[WarrenC12]

Originally Posted by someone123

One difference is you often have options with your own property, but you're basically stuck with what your strata imposes on you.

I own a condo and I think it's good overall (not that there are a lot of reasonable alternatives around here). I was mostly talking about it within the context of drawing up a family budget that involves paying ~50% in housing carrying costs right out of the gate. Those costs can easily shift upward by 10-20% and all sorts of other things can happen.

Yes they are absolutely permanent costs you will pay for the rest of your ownership period, no matter what, like property taxes.

Sometimes they are unavoidable in very dense or specific areas of town, if you really want to live there.

[zoomer]

For those of you interested in a typical 'we must limit growth and not be like Vancouver' perspective, here's a commentary in today's Victoria Times-Colonist newspaper.

https://www.timescolonist.com/opinion/op...shing-toward-a-crowded-future-1.24331103

As is often the case it's people who moved to Victoria towards the end of their career or to retire away in a peaceful little city who are upset it's not remaining frozen in time. The link to this article was sent to me by a retired friend who moved here ten years ago from Alberta. She texted "our charming city is turning into a monster!”

The commentary is by Edward Relph 'who lives in Victoria and is an emeritus professor of geography and planning at the University of Toronto.'

There are so many inaccuracies and misleading statements is not worth rebutting, but what we're faced with primarily by the older generations. I spoke at a council meeting years ago in favour of
super controversial 18 storey building, lol - and said "If you don't like what Victoria is becoming - move to Parksville!". Actually got some cheers, laughter and high fives for that, although now any outward expression or public reaction at city Council meetings is banned, you must remain silent.

[whatnext]

Originally Posted by someone123

One difference is you often have options with your own property, but you're basically stuck with what your strata imposes on you. If your strata is mismanaged things can go off the rails quickly.

I own a condo and I think it's good overall (not that there are a lot of reasonable alternatives around here). I was mostly talking about it within the context of drawing up a family budget that involves paying ~50% in housing carrying costs right out of the gate. Those costs can easily shift upward by 10-20% and all sorts of other things can happen. To me, stability is a big part of the reason for owning in the first place and to have that IMO you need to live well within your means, not at the edge according to what the TD mortgage calculator says they will lend you based on their risk tolerance given CMHC support, etc.

Yep. If the roof on your house springs a leak you can spend the money to replace it. Or you can just patch it, or even just throw a tarp over it. In a condo you're going to be stuck paying for what council decides.

[ssiguy]

The construction companies, real estate agents, developers, and all the politicians they bribe also hold back one of the cheapest forms of housing.............modular.

Now before you say that no one wants to live near a mobile home, I am NOT talking about mobile homes but rather manufactured ones. They are built in factories and shipped to where you need them. They meet all housing standards, can be built in any design including multi-level homes, have basements, and yes, qualify for CMHC or a regular bank mortgage. These are houses 101 and you may be driving past several every single day and it would even occur to you that these are modular.

There are also alternatives like refurbished cargo containers that can be made at a fraction of the price of standard apt or small homes are can look damn cool and funky as well as being infinitely better constructed with nearly no repairs ever needed.

Alas, our "friends" in the industry who say we simply need more housing are really saying we need more of THEIR houses.

[rofina]

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/

It cannot be overstated what a horrendous precedent this sets.

From this point, forever onward, those houses will be considered a tradable securitized asset first, housing second.

They will never be returned to market, and will forever trade as part of this fund. If Core goes bankrupt, it will sell of these as packages.

Extrapolate this 10, 20, 30 years, you end up with a dozen housing owners that supply housing how they see fit.

Horrible from every angle.

[milomilo]

A big deal is being made over nothing IRT that rental company.

[rofina]

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?

In my experience, yes.

Most of my age cohort has left the city.

I have friends who bought SFH in Vancouver 5-6 years ago, who are also contemplating leaving even though they have secure housing.

The capital gains are so massive, one can sell, but elsewhere in BC with minimal or in some cases no mortgage.

Life becomes more free - yes, career opportunity is lesser outside the big cores, but if you have rent/mortgage payment to make lower salary becomes a lot more palatable, and in my personal case, will actually not affect me financially at all.

Further, many are getting passionate about helping people leave. I'm taking active steps to promote folks to leave Vancouver, I rather not post about it here, but I want to do whatever possible to erode the tax base in Vancouver to make it aware of the horrendous decisions being made.

[rofina]

Originally Posted by milomilo

A big deal is being made over nothing IRT that rental company.

Completely disagree.

Good luck competing with a fund that can, and always will, outbid you.

Good luck when the 3 buyer competing with you are funds.

Good luck ever returning these houses as individual housing units to the housing stock.

There is not one upside here for the average person.

[Truenorth00]

Does the fund not have investors? Are they going to bid without any regard to rate of return? Let's not forget, they aren't just buying the houses. Their goal is to get them and convert the homes into 2-3 units by dividing up the home and/or building basement apartments. So, for all the vitriol (and I'll admit my initial kneejerk here), they are adding to the housing stock. And that's a good thing.

The question is whether this puts houses as investments out of reach. But that is a different discussion. Put it this way, they wouldn't be buying homes if the scarcity didn't exist. We aren't building enough. Which is exactly why those homes are so valuable.

To give you an idea of how absurd the current state of planning is read this analysis by Mike Moffat, a business prof and housing advocate:

https://mikepmoffatt.medium.com/ontarian...e-city-of-toronto-should-be-89619a46aebd

A short summation:

TL;DR version: Ontario’s official plan seeks to grow the City of Toronto’s population by 700,000 between now and 2051. This plan also implicitly calls for 1–1.5 million residents, on net, to leave the City and move to other parts of the province. This is a plan for sprawl and the eventual paving over of the Greenbelt.

There's a lot more in his piece. But the planning is absolutely absurd. So in that environment, if you're a real estate why would you not buy SFDs and convert the basements in the core. The City and province just told you that they don't plan on building enough housing to meet demand for the next three decades. So in this case, don't blame the investors. Blame the politicians, planners and bureaucrats who are absolutely refuse to acknowledge the reality of demand and plan for it.

[milomilo]

Originally Posted by rofina

Completely disagree.

Good luck competing with a fund that can, and always will, outbid you.

Good luck when the 3 buyer competing with you are funds.

Good luck ever returning these houses as individual housing units to the housing stock.

There is not one upside here for the average person.

You could use these arguments for all aspects of capitalism. And you'd be totally wrong. Profit is good.

How is this fundamentally different to other businesses where corporations exist, sometimes alongside individual business owners? Or how is it different to a corporation owning a building full of rental units - something the groupthink says is desirable?

[someone123]

Originally Posted by milomilo

You could use these arguments for all aspects of capitalism. And you'd be totally wrong. Profit is good.

But some areas do get regulated, particularly when they become monopolistic.

There's a big power imbalance between corporations and individuals when it comes to housing, and the markets are inherently local and so tiny and easy for large-scale commercial operations to corner if they so desire. It would be pretty trivial for investors to manipulate say Vancouver detached housing prices if they were completely unregulated. Of course, there already is some regulation, though there are many loopholes. Rental units are generally heavily regulated too.

I tend to think that financialization of the Vancouver housing market has been a negative. Not just for the people but maybe for economic output too, since businesses that could otherwise be quite productive here struggle due to real estate costs. It has a positive aspect too, a one time transfer of wealth to whoever happened to own Vancouver real estate circa 2000, and that was why it was acceptable.

[milomilo]

Originally Posted by Truenorth00

Blame the politicians, planners and bureaucrats who are absolutely refuse to acknowledge the reality of demand and plan for it.

This x1,000,000.

[milomilo]

Originally Posted by someone123

But some areas do get regulated, particularly when they become monopolistic.

There's a big power imbalance between corporations and individuals when it comes to housing, and the markets are inherently local and so tiny and easy for large-scale commercial operations to corner if they so desire. It would be pretty trivial for investors to manipulate say Vancouver detached housing prices if they were completely unregulated. Of course, there already is some regulation, though there are many loopholes.

Rental units are generally heavily regulated too.

If there was zero regulation it would be vastly easier to build housing and the price would be far lower, in fact corporations couldn't even own anything since property rights are regulations themselves. If we were to say there was a continuum of markets from anarchy (no regulation) to communism (100% regulation), housing markets are far closer to the latter than the former.

If we start getting to the point where cities are dominated by small numbers of corporate holdings then we can talk about monopoly protection, but a billion dollars of housing is nothing, 4000 units according to the article.

[someone123]

Originally Posted by milomilo

If there was zero regulation it would be vastly easier to build housing and the price would be far lower, in fact corporations couldn't even own anything since property rights are regulations themselves. If we were to say there was a continuum of markets from anarchy (no regulation) to communism (100% regulation), housing markets are far closer to the latter than the former.

If we start getting to the point where cities are dominated by small numbers of corporate holdings then we can talk about monopoly protection, but a billion dollars of housing is nothing, 4000 units according to the article.

Vancouver housing construction is already dominated by a small number of corporations. I dunno about ownership but, well, give it time.

I understand what you are saying about regulation but the reality on the ground in Vancouver is there are a ton of different regulations, most of them are going nowhere, and tweaking minor ones is politically difficult. So a binary line of reasoning about how regulations caused the problem in the first place is kind of pointless. Vancouver basically needs an all-hands-on-deck approach to solving the affordability crisis (government funding of meaningful projects, regulations forcing developers to build certain kinds of housing, more zoning, faster approvals and lower development fees, and so on). That being said, I don't think it will be solved. I think younger people here who don't already own real estate are just kind of screwed and should consider moving away if things like ownership or having a family are important to them. In the long run, I expect the city to become more and more of a playground for the wealthy and childless. It is not the end of the world but I don't think Canada has a great depth of other cities to move to beyond Toronto and Vancouver.