Canada's 'housing bubble' deemed close to bursting

[DirectionNorth]

Originally Posted by Arrdeeharharharbour

Not too sure about that. Wouldn't we just have less housing perhaps creating a bigger bubble? And perhaps even a bigger homelessness problem?

Less demand = lower prices. While high prices does incentivize building, there will still be similar amounts of housing with lower prices (right now the biggest issue is zoning, not the willingness of builders to build housing).

Originally Posted by Arrdeeharharharbour

To add a bit more context to the conversation, I believe that in California proceeds from the sale of ones principal residence are non taxable only if one puts their proceeds back into housing. Once one has sold their principal residence they have two years to reinvest the proceeds into housing or face taxation on their proceeds. I really don't know if California has a housing bubble or not.

California absolutely has a housing bubble *cough* San Francisco *cough* . Like, 90% of the internet is in the Bay Area, so I don't know how relevant that is to us. Besides, if we're using California as a housing model, we're doomed ...

Originally Posted by theman23

That’s irrelevant because most people aren’t looking to raid their personal savings on a regular basis. Aside from low interest rates and supply constraints, one of the main reasons why prices have skyrocketed is because Canadians are able to dump all of their life savings into their primary home. It’s the most tax efficient investment vehicle available. The fact that this is true is why we’ll never see a capital gains tax under this current government. Adam Vaughan basically said as much during the last term.

Basically, enough people own homes that we won't see change.

Agreed. It's a statement on us as a country.

Anecdote time! As a younger person, it might just be the social circles I am in, but the US is used as a model more these days. I think there's a fairly good chance we see the mass-emigration of young people leading to corrective measures. Who knows?

[WarrenC12]

Originally Posted by cabotp

Buying a home and living in it and earning capital on it is easy because it takes no work or thought. Besides the fact that everyone needs a shelter. Thus why it ends up being the best investment.

Most people when they buy a home are not thinking of it has an investment but simply a place to live their lives. The fact that it might go up in value over time is simply just a bonus.

Investing in RRSPs or TFSAs requires an individual to work or think more.

I think that about sums it up.

Your initial argument was that it wouldn't lower prices. It most certainly will, while also providing a good revenue stream for the government to provide more services like pharmacare and dental care, or reduce income taxes.

[ssiguy]

Another way cities can create both affordable rentals and real estate is to get rid of their damn gold courses.

City owned golf courses are a horrid waste of precious land and instead of earning the city money thru property taxes, they cost the cities millions in subsidies every year.

As I stated earlier, it's not so much the buildings that cost the money but rather the land to build them on. The cities could donate a portion of the land {ie one-third with the rest going to parkland} and have developers build the units at a set price. The rentals/homes can only be purchased by Canadian residents who are first time buyers, must be occupied, and not flipped within 5 years without a VERY heavy fee. Also the homes can be sold by the owners at rates of return no higher than the rate of inflation. As an example a home built for $150k can be sold for only $180k in 5 years at inflation of 4%. This is done in Europe with great success.

Another thing they do in Europe is where ever government land is owned in a rural area near an urban centre where the land is cheaper, the land is donated and homes built with all residents paying a monthly fee {ie $25/month} that goes towards transit to connect the community with the city and it's transit system. Even a smaller 500 unit development would result in $12,500/month for good, reliable, all day transit connections and results in far less expensive parking for the units themselves.

There are ways to create affordable rentals/real estate that are far more financially sustainable over the long-term, faster to build, and without the stigma of low cost housing. What it requires is political will and a change in policy from the Liberal proposals of just throwing money at the problem.

[DirectionNorth]

Originally Posted by ssiguy

Another way cities can create both affordable rentals and real estate is to get rid of their damn gold courses.

Interesting idea ...

Originally Posted by ssiguy

City owned golf courses are a horrid waste of precious land and instead of earning the city money thru property taxes, they cost the cities millions in subsidies every year.

As I stated earlier, it's not so much the buildings that cost the money but rather the land to build them on. The cities could donate a portion of the land {ie one-third with the rest going to parkland} and have developers build the units at a set price. The rentals/homes can only be purchased by Canadian residents who are first time buyers, must be occupied, and not flipped within 5 years without a VERY heavy fee. Also the homes can be sold by the owners at rates of return no higher than the rate of inflation. As an example a home built for $150k can be sold for only $180k in 5 years at inflation of 4%. This is done in Europe with great success.

Another thing they do in Europe is where ever government land is owned n a rural near an urban centre where the land is cheaper, the land is donated and homes built with all residents paying a monthly fee {ie $25/month} that goes towards transit to connect the community with the city and it's transit system. Even a smaller 500 unit development would result in $12,500/month for good, reliable, all day transit connections and results in far less expensive parking for the units themselves.

There are ways to create affordable rentals/real estate that are far more financially sustainable over the long-term, faster to build, and without the stigma of low cost housing. What it requires is political will and a change in policy from the Liberal proposals of just throwing money at the problem.

I don't know what they do in Europe. I personally agree with building over golf courses, and the position you post is very interesting (and something we should look into as a country).

I question the quality of the units should the a developer have control over the project. I would rather have the city manage the whole thing itself. The units should be larger than the shoebox condo; they should be mid-high rise units with multiple bedrooms each unit, and a living space.

The rural development idea is also interesting, although infrastructure inflation (and the fact that nothing at that distance from jobs and services is ever going to be very transit-friendly) make it infeasible to me. Would rather do that in urban areas, upzone the inner suburbs. Even the $50 monthly transit fee would only give $500 million dollars annually, which would be very little in the scheme of things. Maybe communities could choose to contribute to transit funding in their neighborhood (The EIFD model from California could be used or something).

[yaletown_fella]

Originally Posted by cabotp

I hope you realize in 20-40 years things will still be the same. The difference is a Gen Z like you will be nearing retirement and not wanting to see the value of your home drop.

The circle goes round and round and always has since the beginning of time.

I hate to be negative but I don't think most younger millenials and gen Z will own homes unless they inherit it from their parents. Unless the government steps up we will see a lot of dystopian communal housing developments start to pop up; $1200 for a room with a shared bath and kitchen facilities in the suburbs.

I'm taking a hard look at a 2 bedroom condo for sale on James St South in Hamilton. It'd deplete most of my savings for a robust 40% down payment. It's a walkable urban transit friendly area close to the core. It also has a large parkade so gives me flexibility if I want to do supplementary gig/delivery type work from a car in the evening. Seems like the best of both worlds. The idea of long walks from the escarpment to the downtown is pretty romantic too.

Condo fees are $550 a month, property taxes $3500.

Right by the Medical Arts Building in a neighbourhood with some pretty attractive brick and stone Victorian rowhouses. There are also a couple new developments by Core Urban just down the street featured recently on the Canadian proposals thread.

Im tempted to wait for a 1 bedroom in the same building to come on the market, as the condo fees will also be 30% less on avg. But $300,000 for a 2 bed 2 bath is hard to come by and I fear I'll be priced out if I wait. As a renter, I fear if my current landlord sells the place, then rent inflation will eat me alive. Or if the market corrects, then I may regret leaving the GTA and dumping most of my savings into this but who knows... I'm certainly not the only one in this dilemma now.

[FarmerHaight]

Originally Posted by mikevbar1

I don't seem to understand why any political entity doesn't see the financial opportunity to actively incentivize rich homeowners to self-develop (densify!) their own lots for bank. It wouldn't solve the affordability crisis completely of course, but it would be a start, no?

Large developers have the patience and financial backing to go after big projects. Meanwhile private property owners that would be the perfect fit to build "missing middle" housing are handcuffed by zoning regulations, a lengthy and expensive permitting process, and NIMBY neighbors. I don't think any adjustment to the property ownership model in Canada needs to change to incentive homeowners to densify their lots; it needs to be easier to tear down a SFH and build tri- or quad-plexes in its place.

Originally Posted by rofina

Plenty of homes are owned by permanent residents. The issue is not the citizenship, the issue if the origin of funds.

I understand that foreign money, especially if it comes from illegal activities, is a problem. My point was the CPC saw an easy opportunity to address housing while placating their supports who think foreign = bad, but I am not sure that banning foreign buyers for a couple years would have anything more than a negligible impact on housing prices.

Originally Posted by WarrenC12

Exactly. It's a weird distortion to have something we consider essential to life (a home) simultaneously be the best investment vehicles possible.

Nothing else is non-taxable like your personal residence. Blows away the already favorable taxation rules on RRSPs, TFSAs, etc.

I am not an expert on the history of mortgages, but I do know that they used to be for shorter terms and required a much larger down payment. The problem with a 30-year mortgage that may take 40 percent of more of a family's monthly income, is that it prohibits them from investing in any other retirement funds. I think raising the capital gains inclusion rate to 75% or more or tweaking the principal residence exemption formula could curb house-flipping somewhat. But if you make it too difficult to sell your principal residence and walk away with any proceeds, you will have a lot of Canadians with no retirement savings.

Originally Posted by cabotp

Buying a home and living in it and earning capital on it is easy because it takes no work or thought.

Investing in RRSPs or TFSAs requires an individual to work or think more.

It takes a lot of work to buy a home. 30 years of consistent employment in fact. My parent's generation may have put too much emphasis on sticking with one employer for your whole life, but I think plenty of my peers would shake at the thought of committing to 30 years of mortgage payments.

I would argue that any idiot can make sporadic contributions to their RRSP, listen to Buffet's advice to invest in the S&P 500, and walk away with a sizeable nest egg at the end of the day. People give financial advisors too much credit

Originally Posted by ssiguy

City owned golf courses are a horrid waste of precious land and instead of earning the city money thru property taxes, they cost the cities millions in subsidies every year.

Maybe its because I grew up playing a public course in Saskatoon, but I don't think they are a "horrid waste" of anything. Golf courses are often the only sizeable "green lungs" of big cities, and public courses keep the game affordable so that anyone can play. Some of them are also great habitats for birds, deer, rabbits, and other wildlife. It would be easy to make a similar case to sell off public libraries, or public pools, or public parkland. But all of these public facilities serve a purpose and make urban life much more pleasant.

[rousseau]

Originally Posted by yaletown_fella

I hate to be negative but I don't think most younger millenials and gen Z will own homes unless they inherit it from their parents. Unless the government steps up we will see a lot of dystopian communal housing developments start to pop up; $1200 for a room with a shared bath and kitchen facilities in the suburbs.

I'm taking a hard look at a 2 bedroom condo for sale on James St South in Hamilton. It'd deplete most of my savings for a robust 40% down payment. It's a walkable urban transit friendly area close to the core. It also has a large parkade so gives me flexibility if I want to do supplementary gig/delivery type work from a car in the evening. Seems like the best of both worlds. The idea of long walks from the escarpment to the downtown is pretty romantic too.

Condo fees are $550 a month, property taxes $3500.

Right by the Medical Arts Building in a neighbourhood with some pretty attractive brick and stone Victorian rowhouses. There are also a couple new developments by Core Urban just down the street featured recently on the Canadian proposals thread.

Im tempted to wait for a 1 bedroom in the same building to come on the market, as the condo fees will also be 30% less on avg. But $300,000 for a 2 bed 2 bath is hard to come by and I fear I'll be priced out if I wait. As a renter, I fear if my current landlord sells the place, then rent inflation will eat me alive. Or if the market corrects, then I may regret leaving the GTA and dumping most of my savings into this but who knows... I'm certainly not the only one in this dilemma now.

Why not go for this instead and save yourself from letting $6,600 a year in maintenance fees evaporate into the ether? Guaranteed you'll get a better resale value out of it as well.

https://www.realtor.ca/real-estate/23854656/78-walnut-street-s-hamilton#view=neighbourhood

[Nite]

We Know Why Housing Is Expensive

• Video Link

[lio45]

Housing is cheap in Toronto and Vancouver: rents in those two cities are a fraction of what they are in American cities.

Real estate, on the other hand, is pricy, evidently due to speculation (rents would be higher, otherwise).

[Nite]

Originally Posted by lio45

Housing is cheap in Toronto and Vancouver: rents in those two cities are a fraction of what they are in American cities.

Real estate, on the other hand, is pricy, evidently due to speculation (rents would be higher, otherwise).

Speculation is caused by low supply and low supply is cause by an elastic market where supply doesn't follow demand.
The cause of this elasticity is the root to Canada housing issues.
I contend that the cause of this elasticity is local policies at the municipal level that stops more housing being built.

[lio45]

Originally Posted by Nite

Speculation is caused by low supply and low supply is cause by an elastic market where supply doesn't follow demand.
The cause of this elasticity is the root to Canada housing issues.
I contend that the cause of this elasticity is local policies at the municipal level that stops more housing being built.

The supply of housing is adequate considering the lowish demand for housing in cities like Toronto and Vancouver; the affordable rents (compared to American and European cities) unarguably show there's no housing supply problem.

Maybe the supply of brick-and-mortar bitcoins doesn't follow the demand for brick-and-mortar bitcoins, but that's unrelated to housing.

[Al Ski]

Lack of supply is not a problem.
But we all know that.
What we have is an speculator/investor/commodification problem.
But again, we all know that.
The World Has Millions Of Vacant Homes, And 1.3 Million Are In Canada: OECD
https://betterdwelling.com/the-world-has...es-and-1-3-million-are-in-canada-oecd/#_

[Al Ski]

When you see that business that has been thriving for 50 years suddenly close because their rent has doubled upon lease renewal due to 'new ownership' - then the property sits vacant for 5 years with 'For Lease' signs plastered all over it - do you not think "Huh? How does that make any sense?"
How could not having a rent-paying tenant be preferable to having one?
The same dystopian financial incentives apply to both residential and commercial.
We have a financial system problem, not a supply problem.

[SpongeG]

you can a condo for $44,000 in Detroit

thats like 1970s prices lol

• Video Link

[Al Ski]

Originally Posted by SpongeG

you can a condo for $44,000 in Detroit

thats like 1970s prices lol

• Video Link

And how many people have $44,000 CASH in Detroit? Or in Canada, for that matter (and not mommy and daddy cash)?
And she only owns 2 units!
"OMG! I spent sooo much more on renovations!"
You really have to put this stupid video into perspective.
This is obviously a person with no money worries, shilling for real estate.
She "Just decided to travel!"
Yeah, you meet a lot a lot of these people while travelling. Mommy and daddy have them covered.

[casper]

Originally Posted by yaletown_fella

I hate to be negative but I don't think most younger millenials and gen Z will own homes unless they inherit it from their parents. Unless the government steps up we will see a lot of dystopian communal housing developments start to pop up; $1200 for a room with a shared bath and kitchen facilities in the suburbs.

I'm taking a hard look at a 2 bedroom condo for sale on James St South in Hamilton. It'd deplete most of my savings for a robust 40% down payment. It's a walkable urban transit friendly area close to the core. It also has a large parkade so gives me flexibility if I want to do supplementary gig/delivery type work from a car in the evening. Seems like the best of both worlds. The idea of long walks from the escarpment to the downtown is pretty romantic too.

Condo fees are $550 a month, property taxes $3500.

Right by the Medical Arts Building in a neighbourhood with some pretty attractive brick and stone Victorian rowhouses. There are also a couple new developments by Core Urban just down the street featured recently on the Canadian proposals thread.

Im tempted to wait for a 1 bedroom in the same building to come on the market, as the condo fees will also be 30% less on avg. But $300,000 for a 2 bed 2 bath is hard to come by and I fear I'll be priced out if I wait. As a renter, I fear if my current landlord sells the place, then rent inflation will eat me alive. Or if the market corrects, then I may regret leaving the GTA and dumping most of my savings into this but who knows... I'm certainly not the only one in this dilemma now.

I was in a similar position in the 1990s. Concern over the local economy stopped me from buying and I rented for long than I should have. All that happened was prices went up and I was spending more on rent. I should have purchased sooner.

We are going into a period of inflation. Buying now locks in the value of the property. At some point it will correct. However over time it will go up again.

[yaletown_fella]

Originally Posted by Al Ski

And how many people have $44,000 CASH in Detroit? Or in Canada, for that matter (and not mommy and daddy cash)?
And she only owns 2 units!
"OMG! I spent sooo much more on renovations!"
You really have to put this stupid video into perspective.
This is obviously a person with no money worries, shilling for real estate.
She "Just decided to travel!"
Yeah, you meet a lot a lot of these people while travelling. Mommy and daddy have them covered.

It's possible, on a minimum wage job, to save $44,000 by the time you are 30 if you are very frugal and save $3600 per year from the age of 18. Of course, you'll be buying your clothes from Walmart/thrift stores and making your all of your own meals with ingredients from No Frills and/or Food Banks.

I agree that getting approved to borrow the funds for renovation is more difficult and I agree the majority of these young "influencers" who travel are almost always bankrolled by their parents.

[yaletown_fella]

Originally Posted by casper

I was in a similar position in the 1990s. Concern over the local economy stopped me from buying and I rented for long than I should have. All that happened was prices went up and I was spending more on rent. I should have purchased sooner.

We are going into a period of inflation. Buying now locks in the value of the property. At some point it will correct. However over time it will go up again.

Thanks for your feedback. A 10 year fixed mortgage would be $664.

Assuming I can rent out the condo I'd probably have to be prepared to increase my expenditure by 3-5 grand per year as it's unrealistic to expect I'll get $1700 for by renting out a 2 bedroom 2 bath condo in Hamilton 12 months of the year.

Even finding a great tenant who'd pay $1400 12 months of the year would be lucky. I know the city is undergoing a bit of a boom with the LRT and densification so maybe I'll get lucky.

Chances are I'd have to find work in Hamilton and move in myself to make it work realistically.

I would assume , since it's roughly an 18 year old building, that the condo fees aren't going to be substantially jacked up beyond the rate of inflation. From the article I read, this usually happens soon after the developer transfers ownership of a brand new building to the Condo Corporation.

[lio45]

Originally Posted by yaletown_fella

It's possible, on a minimum wage job, to save $44,000 by the time you are 30 (...)

Originally Posted by Al Ski

And how many people have $44,000 CASH in Detroit? Or in Canada, for that matter (and not mommy and daddy cash)?

Is there any reason that I'm missing why banks wouldn't finance such a condo? You don't need $44k, you need ~$10k at most.

[lio45]

Originally Posted by Al Ski

Lack of supply is not a problem.
But we all know that.
What we have is an speculator/investor/commodification problem.
But again, we all know that.

Exactly. And that so-called "problem" isn't a problem for everyone; in fact, it's a problem for some and a windfall for others.

(That's a common situation: if for example you control oil drilling rights that you bought for cheap a long time ago in an oil-rich region, skyhigh oil prices that make some people who drive a lot feel extreme "pain at the pump" are of course a huge headache for some but they're great for you, etc.)

And way too many Canadians find that "problem" to be awesome for them, especially if you only consider the subset that reliably votes in elections, for it to be meaningfully addressed anytime soon by the people in charge.