Canada's 'housing bubble' deemed close to bursting

[whatnext]

Originally Posted by casper

We should also look at this through a historical lens. When by parents purchased a house in Vancouver in 1974 they were buying a house that was a 20 minute drive out of downtown in a Canadian city of around 1M. That was affordable for a middle class couple starting out.

Fast forward to day. Most Canadian cities of around 1 M are still relatively affordable. I am thinking of places like Calgary, Edmonton, Ottawa. Toss in some of the cities that are 300,000 to 1M and it is the same. Victoria, Saskatoon, Winnipeg are still relatively affordable. Getting a small 3bedroom bungalow in any of these cities is still in reach of many.

Vancouver has changed it is not a city of 1M. It is a city of 2.5M with a very dense core. Expectations are significantly different and it is closer to what should be expected in a larger city globally. I have a friend who is an engineer in Paris and her husband is a fire fighter. They raise their two kids in a small thee bedroom apartment in a three story walkup. It is a nice place but compact. That is the norm in many large cities in that 2M+ size range.

Nice try, but No. Vancouver is no Paris. In fact if you want comparably sized metros you're talking Sacramento or San Antonio.

So, let's see what you can get in Sacramento: Here's a nice 6 bed home close to the downtown core. $619k, a similar Vancouver property would be around $2 million
https://www.realtor.com/realestateandhomes-detail/2428-K-St_Sacramento_CA_95816_M95576-02711

Looking for a relative newbuild close to the heart of San Antonio, how about this 3 bed bungalow for $599k. That might get you a one bed condo in Vancouver.
https://www.realtor.com/realestateandhom...ng-Ave_San-Antonio_TX_78209_M87930-02251

[thewave46]

Originally Posted by Acajack

Immigration in Canada is still framed in virtuous "save the world" terms and our governments and many Canadians have generally been reluctant to ask the "but is it good for Canada and Canadians?" question with a cold, hard analysis in mind.

There's a lot of pieces in the equation, but I think the big bet right now by government is to get through the promises made to the Baby Boom without the whole house of cards collapsing. They're a huge, politically powerful cohort. Canada's had sub-replacement and declining fertility since 1972, so we've needed the immigration to keep the bottom filled and keep the music going.

What I'm more curious about is this: How sustainable is the economic growth of Canada given that it takes continued debt accumulation by government and almost-zero interest rates to keep the music going? If a lot of our economic growth is relatively illusory, when does the whole thing come apart? We're certainly not generating a lot of technological innovation anymore, and the pace of global technological advancement continues to decline, portending a much harder grind for the future.

It's morbidly fascinating to see the demographic profiles of various countries. Some countries look like they're going to be OK - that bulge isn't a huge outlier relative to the number of upcoming people. Things may wobble, but they won't implode. Other countries look less hopeful.

About the only optimistic take I have is that since our growth is largely a product of immigration, we can tailor our numbers should the economy not perform well. Also, that new Canadians tend to be harder working and less entitled than old stock ones.

[rofina]

Originally Posted by Nouvellecosse

I haven't personally noticed that myself other than with refugees which are a small proportion of total immigrants. I do hear both pro and anti immigration stances, but the most common "pro" stances I hear are along the lines of a) "diversity is our strength" ie, having a greater variety of ideas and perspectives makes us more dynamic and gives up a competitive edge, or b) immigrants are necessary to combat the aging population and stagnation due to low birth rates. When I talk to people locally, the question of places like Japan and parts of Europe come up, and the prevailing sentiment is that while they may be doing ok now, they're in for a demographic rude awakening in the coming decades while we're smart enough to use our embrace of diversity to offset this. I honestly don't recall ever hearing arguments for accepting non-refugee immigrants on the basis of helping them rather than us.

One concern I have with this thread is the narrative that wages are notably lower due to immigration which has little to no basis in evidence. It's just an intuitive sounding "truism" that is often repeated uncritically.

https://thetyee.ca/Analysis/2021/10/19/Immigration-Doesnt-Reduce-Wages/
https://fullfact.org/immigration/immigration-wages/

Rather than just fixating on who benefits from immigration, one must also consider who benefits from the use of immigrants as scapegoats. The business interests that have continually lobbied governments to push for neoliberal policies that have exasperated inequality certainly comes to mind. Perhaps the biggest correlation to wage stagnation is the drop in union rates and the overseas outsourcing of jobs.


http://www.huffingtonpost.com/2013/09/18/union-membership-middle-class-income_n_3948543.html

I've actually always found it a little amusing how the "desperate immigrants willing to work for peanuts" are so often the people blamed for taking everybody's money. Like... if you wanna know who's taking all the money, look for the people with the most money, not the least.

This is the most counter intuitive post.

Of course an abundance of labor is going to drive labor costs down.

The US is living through the opposite now. People are dropping out of the labor force left, right, and center.

Look what that's doing to wage inflation in the states.

I can assure you McDonalds, and Amazons of the world are not raising minimum wage out of good will; they do it because people wont show up for less.

Unions achieved increased wages by, well, unionizing people.

Wages can increase with a labor shortage - Canada was on track until the immigration spigot got turned back on.

As Immigrants Pour In, Wages Stagnate in Surging Canadian Economy
https://www.bloomberg.com/news/articles/...-wage-growth-in-canada-s-strong-recovery

The results are simultaneously terrific and problematic: Companies have been filling job postings at a breakneck clip in recent months, pushing payrolls back above pre-pandemic levels and allowing them to ramp output back up. But workers, with fewer labor shortages acting as leverage, are scoring tiny wage increases -- currently running at 2% on average -- that leave them poorer after inflation of almost 5% is factored in.

There has been a “surge in Canadian prime-aged population,” says Avery Shenfeld, the chief economist at Canadian Imperial Bank of Commerce. These new immigrants, he says, are “less likely to say ‘shove it’ to work in sectors where shortages are most acute.”

In the U.S., which has orchestrated a sharp drop in immigration, the labor-market dilemma is the inverse: Workers are scoring the biggest pay hikes in decades -- nearly matching soaring inflation

“Much of that surge seems to be attributable to recent newcomers picking up jobs in sectors with low pay,” says Armine Yalnizyan, a research fellow at the Atkinson Foundation. “So are Canadian workers really better off?”

[lio45]

Originally Posted by Wigs

$287,000 price increase in 2 years.

A fully tax-free gain, if you made sure to have your personal snail mail sent to that average Hamilton property during your brief ownership/flipping.

[someone123]

Originally Posted by rofina

I can assure you McDonalds, and Amazons of the world are not raising minimum wage out of good will; they do it because people wont show up for less.

It is really complicated and I think Canada does relatively well due to the points system (while Europe and the US do worse in some ways). Examples:

1) A bunch of completely unskilled people move to a city and the number of potential burger flippers grows to 2x. McDonald's wage goes down, or, if they're at minimum wage, they get pickier about who they choose to hire.

2) Some highly skilled people move to a city, doubling the highly skilled workforce. It didn't have enough workers before but now it does so Google opens up an office there and pays its employees a lot.

3) A new immigrant family moves to a stagnant town. They start up their own business, opening up a shop in an empty storefront, selling new popular products that the town didn't offer before.

(1) makes individuals in the city worse off but may make the newcomers better off, (2)/(3) make everyone better off (and 3 is a "weak economy better off with immigration" scenario, which I think is accurate in parts of say Atlantic Canada). And it's hard to know what these second-order effects will be. I think this should be an area people openly debate, and it's not clear what the "sweet spot" is. And it definitely affects housing prices and more specifically land prices.

[someone123]

Originally Posted by whatnext

Nice try, but No. Vancouver is no Paris. In fact if you want comparably sized metros you're talking Sacramento or San Antonio.

I remember looking at flats in Paris and noting that they were in the same ballpark as here for around the same square footage, though generally with fewer modern private amenities (but better public amenities like transit). Really impressive since we know Paris is not as much of an alpha world city as Vancouver (no Japadog stand, no "pile of rusty cars" public art), yet they manage to attain comparable pricing.

One day I'll do a trip to Dallas to see how those 7 million metro people live since at 2.5 million here we already are stuck apparently with 3 bedroom flats (I've been ripped off... I have no 3rd bedroom!).

[lio45]

Originally Posted by rofina

I can assure you McDonalds [...] are not raising minimum wage out of good will; they do it because people wont show up for less.

Well, some McDonalds actually might raise wages needlessly just out of pure kindness; see for example how altruistic this guy is:

George Bolanis donated $39,000 in April 2002 to help build in a Beaconsfield school what is known as a “snoezelen room” which imparts a sense of light, touch and feel to handicapped students. He gave $29,000 to help build a sailboat for handicapped children which is moored at the Pointe Claire Yacht Club. He is also a sponsor of the Lakeshore General Hospital duck race.

https://www.ponctuation.com/businessProfile02.html

[lio45]

Originally Posted by someone123

I remember looking at flats in Paris and noting that they were in the same ballpark as here for around the same square footage, though generally with fewer modern private amenities (but better public amenities like transit). Really impressive since we know Paris is not as much of an alpha world city as Vancouver (no Japadog stand, no "pile of rusty cars" public art), yet they manage to attain comparable pricing.

One day I'll do a trip to Dallas to see how those 7 million metro people live since at 2.5 million here we already are stuck apparently with 3 bedroom flats (I've been ripped off... I have no 3rd bedroom!).

They can sprawl in every direction tho. Greater Arlington doesn’t cram 7 million people in an area the size of the Lower Mainland.

Though I kinda agree with those who say land isn’t a core issue since there’s no limit to the number of condos that can materialize (if allowed) where there used to be only thin air (literally!)

There’s no downside to selling as many new glass-and-steel bitcoins to BCMLs as they demand. At least at first sight...

[thewave46]

Originally Posted by someone123

It is really complicated and I think Canada does relatively well due to the points system (while Europe and the US do worse in some ways). Examples:

1) A bunch of completely unskilled people move to a city and the number of potential burger flippers grows to 2x. McDonald's wage goes down, or, if they're at minimum wage, they get pickier about who they choose to hire.

2) Some highly skilled people move to a city, doubling the highly skilled workforce. It didn't have enough workers before but now it does so Google opens up an office there and pays its employees a lot.

3) A new immigrant family moves to a stagnant town. They start up their own business, opening up a shop in an empty storefront, selling new popular products that the town didn't offer before.

(1) makes individuals in the city worse off but may make the newcomers better off, (2)/(3) make everyone better off (and 3 is a "weak economy better off with immigration" scenario, which I think is accurate in parts of say Atlantic Canada). And it's hard to know what these second-order effects will be. I think this should be an area people openly debate, and it's not clear what the "sweet spot" is. And it definitely affects housing prices and more specifically land prices.

I'm curious about how much value we're generating per immigrant.

If there's some great untapped potential in Canada that we need huge numbers of additional people to get access to, then so be it.

I get the distinct sense that we're not generating a lot of value, though. Mostly I get the sense we're using immigration to backfill the jobs the locals aren't interested in or that our low fertility has left a gap in.

A lot of economists treat all GDP growth as the same. I, however, distinguish between economic growth that's due to technological advancement and growth that's simply due to more people consuming more things. The latter is more driven by debt and when the avenues for taking on more debt are exhausted, there may be an unpleasant correction.

[someone123]

Originally Posted by lio45

They can sprawl in every direction tho. Greater Arlington doesn’t cram 7 million people in an area the size of the Lower Mainland.

Sure. But the earlier post said there is a thing that happens at metro size 2.5 million. There are so many different factors. Your city might get crowded at 25,000 people because it's on a tiny island, or maybe in the future we will have technology that allows for cities of billions of people who can all have palaces and get where they want to go in 5 minutes.

Though I kinda agree with those who say land isn’t a core issue since there’s no limit to the number of condos that can materialize (if allowed) where there used to be only thin air (literally!)

There’s no downside to selling as many new glass-and-steel bitcoins to BCMLs as they demand. At least at first sight...

I think the downside is that in practice there isn't enough zoned land, there's a cartel of builders, and there's only so much labour to build the buildings. The high end stuff tends to crowd out the low end stuff and often the bitcoin towers replace affordable 60's and 70's era buildings.

It's just a mess with many different problems. And the baseline in Vancouver is moderately expensive housing because of the geography.

[MonkeyRonin]

Originally Posted by Nouvellecosse

I've actually always found it a little amusing how the "desperate immigrants willing to work for peanuts" are so often the people blamed for taking everybody's money. Like... if you wanna know who's taking all the money, look for the people with the most money, not the least.

I don't think anyone here is blaming immigrants themselves for being willing to work for peanuts (certainly one can't find fault in an individual for taking their given opportunity to immigrate here to try seeking a better life). Rather, people are looking at the wealthy, corporate interests that are the ones who benefit most from being able to exploit a continual supply of desparate people willing to work for peanuts.

[Nouvellecosse]

Originally Posted by rofina

This is the most counter intuitive post.

Of course an abundance of labor is going to drive labor costs down.

The US is living through the opposite now. People are dropping out of the labor force left, right, and center.

Look what that's doing to wage inflation in the states.

I can assure you McDonalds, and Amazons of the world are not raising minimum wage out of good will; they do it because people wont show up for less.

Unions achieved increased wages by, well, unionizing people.

Wages can increase with a labor shortage - Canada was on track until the immigration spigot got turned back on.

As Immigrants Pour In, Wages Stagnate in Surging Canadian Economy
https://www.bloomberg.com/news/articles/...-wage-growth-in-canada-s-strong-recovery

The problem is that the claim being made is that immigrants are uniquely driving down wages rather than a generic increase in the labour supply. As if immigrants are somehow special. Yet somehow we're to believe that if the population were growing at the same rate with low immigration and high natural birth rates (which it was at many points during our history), that additional competition from population growth would somehow not affect wages? That Canadian born people are so fussy they would just refuse to work if wages weren't high enough and would what? Just stay unemployed? But obviously we know that's not true because the very claim that immigrants are driving down everyone's wages necessarily entails that this is forcing native born Canadians to accept lower wages. So obviously they are willing to accept lower wages if they need to.

In terms of the Bloomberg link, I already acknowledged that such assumptions regarding the relationship between immigration and wages are pervasive despite the lack of evidence, so posting more examples of the pervasiveness of these assumptions does little to further the discussion. Bloomberg's article is purely observational commentary assigning a casual explanation for what they observed without the cause actually be established based on commonly accepted ideas within the economic community. Whereas the first link I posted discussed an actual study on the matter conducted by an economist known for Nobel Prize winning economics research.

[whatnext]

Originally Posted by Nouvellecosse

The problem is that the claim being made is that immigrants are uniquely driving down wages rather than a generic increase in the labour supply. As if immigrants are somehow special. Yet somehow we're to believe that if the population were growing at the same rate with low immigration and high natural birth rates (which it was at many points during our history), that additional competition from population growth would somehow not affect wages? That Canadian born people are so fussy they would just refuse to work if wages weren't high enough and would what? Just stay unemployed? But obviously we know that's not true because the very claim that immigrants are driving down everyone's wages necessarily entails that this is forcing native born Canadians to accept lower wages. So obviously they are willing to accept lower wages if they need to.

In terms of the Bloomberg link, I already acknowledged that such assumptions regarding the relationship between immigration and wages are pervasive despite the lack of evidence, so posting more examples of the pervasiveness of these assumptions does little to further the discussion. Bloomberg's article is purely observational commentary assigning a casual explanation for what they observed without the cause actually be established based on commonly accepted ideas within the economic community. Whereas the first link I posted discussed an actual study on the matter conducted by an economist known for Nobel Prize winning economics research.

It's pretty clear that US wages are going up as they have clamped down on immigration.

It always surprises me that we have some posters who will argue that we have to vastly increase the supply of condos to bring housing prices down, yet they will turn around and argue that vastly increasing the supply of imported labour won't drive wages down.

[zoomer]

Originally Posted by casper

We should also look at this through a historical lens. When by parents purchased a house in Vancouver in 1974 they were buying a house that was a 20 minute drive out of downtown in a Canadian city of around 1M. That was affordable for a middle class couple starting out.

Fast forward to day. Most Canadian cities of around 1 M are still relatively affordable. I am thinking of places like Calgary, Edmonton, Ottawa. Toss in some of the cities that are 300,000 to 1M and it is the same. Victoria, Saskatoon, Winnipeg are still relatively affordable. Getting a small 3bedroom bungalow in any of these cities is still in reach of many.

Casper, I think you misspelled Vanderhoof. Like Victoria it starts with a V has an O, R and an A - so similar, but very different. Not sure how you consider Victoria affordable, it’s always been one of the most expensive markets in Canada. November numbers are just out:

“November’s average price paid for a single-family-home totalled $1,330,251, firmly outpacing October’s record average of $1,311,271. The median price, or the exact mid-point of what buyers paid throughout the month, settled at a record high of $1,235,000, beating out the former record set in October at $1,202,500.

Condominiums also saw their average and median valuations rise to record highs with an average of $648,867 paid per unit in November across 236 MLS sales, and a median price of $585,000.”

Is that affordable to a middle class couple? How many years do you have to save for that downpayment, even on a friggin condo! And how do you do that with skyrocketing rents? And now the supply has dried up to add a cherry on top.

https://victoria.citified.ca/news/victor...-for-houses-649k-for-condos-in-november/

[Acajack]

Originally Posted by WhipperSnapper

I couldn't have said it better. We could probably do more for the world eliminating hunger and homelessness on the forefront than using immigration to save the world while homelessness and hunger persists here.

I'm not a melting pot guy. I'm not enamoured by the fruitcake either. We are taking in people that have ingrained hatred for each other and expecting that to diffuse while maintaining cultural identity. We are also taking in people that are trying to get from the nonsense at home only to find the nonsense at home has migrated here too.

I have a reputation for being a bit harsh and ungenerous on these issues, but even so I don't think I am as pessimistic as you are.

For the most part I don't think Canada is really there yet in terms of the problems you describe, though I have to admit there are some signs that you might be right.

There is still a chance we won't go down that path either. (We generally haven't in the past, for example.)

[travis3000]

Originally Posted by WhipperSnapper

I struggle with the standard 5% commission on a $1.5 million dollar house that can be sold by an inexperienced agent over the 5% commission on the $50,000 property I purchased in 1995 sold by an agent that knew everything about the neighbourhood. It doesn't surprise me something like 1 in 12 (shot in the dark. I can't remember. It's was crazy number like this) Torontonians have a real estate license.

Its 6% in the USA. And TBH most commissions in the GTA can be found cheaper than 5% , usually around 3.5 to 4.25%.

[SpongeG]

Originally Posted by whatnext

Nice try, but No. Vancouver is no Paris. In fact if you want comparably sized metros you're talking Sacramento or San Antonio.

So, let's see what you can get in Sacramento: Here's a nice 6 bed home close to the downtown core. $619k, a similar Vancouver property would be around $2 million
https://www.realtor.com/realestateandhomes-detail/2428-K-St_Sacramento_CA_95816_M95576-02711

Looking for a relative newbuild close to the heart of San Antonio, how about this 3 bed bungalow for $599k. That might get you a one bed condo in Vancouver.
https://www.realtor.com/realestateandhom...ng-Ave_San-Antonio_TX_78209_M87930-02251

they are building a new condo here in Coquitlam in the Lougheed/Burquitlam area, units start in the mid $700,000s. There are a few units left in the Hensely just down the street and the remaining units available start at $1.6 million.

[SpongeG]

Originally Posted by someone123

It is really complicated and I think Canada does relatively well due to the points system (while Europe and the US do worse in some ways). Examples:

1) A bunch of completely unskilled people move to a city and the number of potential burger flippers grows to 2x. McDonald's wage goes down, or, if they're at minimum wage, they get pickier about who they choose to hire.

2) Some highly skilled people move to a city, doubling the highly skilled workforce. It didn't have enough workers before but now it does so Google opens up an office there and pays its employees a lot.

3) A new immigrant family moves to a stagnant town. They start up their own business, opening up a shop in an empty storefront, selling new popular products that the town didn't offer before.

(1) makes individuals in the city worse off but may make the newcomers better off, (2)/(3) make everyone better off (and 3 is a "weak economy better off with immigration" scenario, which I think is accurate in parts of say Atlantic Canada). And it's hard to know what these second-order effects will be. I think this should be an area people openly debate, and it's not clear what the "sweet spot" is. And it definitely affects housing prices and more specifically land prices.

there is also the gig economy which is keeping people out of the job pool. I have a former coworker who when we got laid off switched and went into a new field, I believe medical office type job, anyway she didn't get paid enough and eventually quit and is now doing something she much prefers freelancing and makes enough money to make a living all on her own terms.

I follow a lot of YouTubers and they can make good money, I just watched a profile today of one I follow, she is from Toronto and is creating her own brand and business on youtube, and is making a six figure salary now. She said she could have bought a house but instead has grown her business and has an office and has a staff of 5. Narcity has been doing a series of Millenial money makers. Many YouTubers since the pandemic have purchased homes and their content has been focusing on how they are renovating their recent home purchases.

[casper]

Originally Posted by whatnext

Nice try, but No. Vancouver is no Paris. In fact if you want comparably sized metros you're talking Sacramento or San Antonio.

So, let's see what you can get in Sacramento: Here's a nice 6 bed home close to the downtown core. $619k, a similar Vancouver property would be around $2 million
https://www.realtor.com/realestateandhomes-detail/2428-K-St_Sacramento_CA_95816_M95576-02711

Looking for a relative newbuild close to the heart of San Antonio, how about this 3 bed bungalow for $599k. That might get you a one bed condo in Vancouver.
https://www.realtor.com/realestateandhom...ng-Ave_San-Antonio_TX_78209_M87930-02251

The first property you lists was around $934k when you convert form US to CDN. The second is around $780k


If you are looking for a comparison for San Antonio in Canada that would be Calgary. Both around $1.5 M.

Here is something in Calgary that is on part with what that older house you found in San Antonio. It is in the same price range.

https://www.realtor.ca/real-estate/23763791/1223-13-avenue-sw-calgary-beltline

[Nouvellecosse]

Originally Posted by whatnext

It's pretty clear that US wages are going up as they have clamped down on immigration.

It always surprises me that we have some posters who will argue that we have to vastly increase the supply of condos to bring housing prices down, yet they will turn around and argue that vastly increasing the supply of imported labour won't drive wages down.

Something being clear in terms of you being persuaded of it =/= something being clear in terms of the research supporting it. Economies are complicated and are affected by a wide variety of factors so it's easy to isolate certain factors one wishes to focus on because it supports one's preferred policy prescriptions, while establishing an empirical basis for such analysis is much trickier.