Canada's 'housing bubble' deemed close to bursting

[TorontoDrew]

Thanks to provincial tax incentives many companies in B.C, Ont, and QC don't allow people to work outside of their own provinces. I had to prove my Ontario residency for my past 3 jobs.

[Innsertnamehere]

Originally Posted by Wigs

Even though they are both in the Town of Fort Erie, the other one was technically "Ridgeway" which is seen as nicer than rough "townie" Crystal Beach, unless you have lakefront.
It might not seem like a difference to those outside the Region, but trust me, talk to locals

Build quality, fit and finish, and layout due to smaller size is worse as well. $575k worse, not so much

Since Jarvis St for what should be the "downtown" of Fort Erie is crap (Coffee Culture couldn't even make a go of it), and Crystal Beach still has the "rough" locals reputation, Ridge Road in Ridgeway functions as the defacto centre with a village feel. Garrison Road (Hwy 3) functions as the stroad of everything.

Thanks. At the end of the day, the two townhouse are still less than 2km apart from each other. It can't be that different, and I imagine the ability to walk to the beach in like 4 minutes for the cheaper townhouse offsets any lost value from being closer to ridgeway for the original.

According to HouseSigma, the "$1.275m" townhouse had a tax assessment of $5,195 in 2021.

https://housesigma.com/web/en/map?zoom=1...type=%5B1%5D&id_listing=bqB176WJwOv3ZajD

The last townhouse unit to sell in the complex was sold in September 2021 for $643k:

https://housesigma.com/web/en/house/nbq6y106qk9Yo9DA/6-SASSAFRAS-Row-Ridgeway-L0S1N0-40165889

According to market trends, the average sale price in Ridgeway since then has increased from $630k to $802k - so I would probably assign a real value for the townhouse in the $850-$900k range. Still nuts, just not $1.275.

[SignalHillHiker]

Originally Posted by TorontoDrew

Thanks to provincial tax incentives many companies in B.C, Ont, and QC don't allow people to work outside of their own provinces. I had to prove my Ontario residency for my past 3 jobs.

A friend of mine ran into this - working remote in Ontario, her mother was hospitalized, released, so she came home for four weeks just to make sure her mother was fine living on her own. When she put in the request to work four weeks from here, they said no because they were introducing a policy that remote workers still had to be in Ontario. They let her ("I'm going. I'll take the vacation time, or I can work, up to you.") but clearly not going to be a possible, permanent thing.

[Wigs]

Originally Posted by Innsertnamehere

Thanks. At the end of the day, the two townhouse are still less than 2km apart from each other. It can't be that different, and I imagine the ability to walk to the beach in like 4 minutes for the cheaper townhouse offsets any lost value from being closer to ridgeway for the original..

Oh but it is. Just like 2km in Hamilton or Buffalo can be the difference between "ghetto" and million dollar+ homes. Decades old perception is hard to overcome.
The fact that it's walking distance to the beach but asking price of $575k less should tell you that.

Crystal Beach = wealthy Americans and Canadians on the lakefront, and a mix of seasonal cottagers and the rough local townies everywhere else.
I've asked my Uncle who's 79. It's had the rough reputation since at least the late 1950s

[whatnext]

BMO's Chief Economist is firm in debunking the myth that Canada's housing supply is the main problem regarding affordability:

BMO chief economist denies Canada’s housing supply ‘myth’
SCOTT BARLOW MARKET STRATEGIST
PUBLISHED 9 HOURS AGO

BMO chief economist Doug Porter adamantly denies Canada’s housing affordability issue has been caused by lack of supply,

“How many times have we all been told in the past year that Canada’s raging housing market is largely due to the fact that we have “the lowest supply of housing in the G7″? ... First, Canada’s supply is not particularly out of line with the OECD average, and certainly not much different than any of the UK, U.S., or Australia. (And we have made the point many times that given a younger population than Europe or Japan, we would naturally have a lower ratio—kids don’t own homes.) Second, a technical point, Canada is in fact NOT lower than the U.S., so it isn’t even the lowest in the G7. Yet, somehow, our average home prices are (roughly) 60% higher on average than in the U.S., with essentially the same level of supply per capita. Yes, we should do all we can to encourage supply; but clearly there is more at work here than that. ".....

https://www.theglobeandmail.com/investin...mist-denies-canadas-housing-supply-myth/

[casper]

Originally Posted by whatnext

BMO's Chief Economist is firm in debunking the myth that Canada's housing supply is the main problem regarding affordability:

BMO chief economist denies Canada’s housing supply ‘myth’
SCOTT BARLOW MARKET STRATEGIST
PUBLISHED 9 HOURS AGO

BMO chief economist Doug Porter adamantly denies Canada’s housing affordability issue has been caused by lack of supply,

“How many times have we all been told in the past year that Canada’s raging housing market is largely due to the fact that we have “the lowest supply of housing in the G7″? ... First, Canada’s supply is not particularly out of line with the OECD average, and certainly not much different than any of the UK, U.S., or Australia. (And we have made the point many times that given a younger population than Europe or Japan, we would naturally have a lower ratio—kids don’t own homes.) Second, a technical point, Canada is in fact NOT lower than the U.S., so it isn’t even the lowest in the G7. Yet, somehow, our average home prices are (roughly) 60% higher on average than in the U.S., with essentially the same level of supply per capita. Yes, we should do all we can to encourage supply; but clearly there is more at work here than that. ".....

https://www.theglobeandmail.com/investin...mist-denies-canadas-housing-supply-myth/

Is he looking at the country a whole or specific markets. There are places in Canada where there is an over supply of homes. Others where there is shortage.

[theman23]

I think it’s a perfect storm of immigration, supply, cheap money and tax policy that favours housing as an investment class. We probably have to tackle two or three things for us to make a significant dent in the market, but we’ll probably do none.

[thebasketballgeek]

Originally Posted by whatnext

BMO's Chief Economist is firm in debunking the myth that Canada's housing supply is the main problem regarding affordability:

BMO chief economist denies Canada’s housing supply ‘myth’
SCOTT BARLOW MARKET STRATEGIST
PUBLISHED 9 HOURS AGO

BMO chief economist Doug Porter adamantly denies Canada’s housing affordability issue has been caused by lack of supply,

“How many times have we all been told in the past year that Canada’s raging housing market is largely due to the fact that we have “the lowest supply of housing in the G7″? ... First, Canada’s supply is not particularly out of line with the OECD average, and certainly not much different than any of the UK, U.S., or Australia. (And we have made the point many times that given a younger population than Europe or Japan, we would naturally have a lower ratio—kids don’t own homes.) Second, a technical point, Canada is in fact NOT lower than the U.S., so it isn’t even the lowest in the G7. Yet, somehow, our average home prices are (roughly) 60% higher on average than in the U.S., with essentially the same level of supply per capita. Yes, we should do all we can to encourage supply; but clearly there is more at work here than that. ".....

https://www.theglobeandmail.com/investin...mist-denies-canadas-housing-supply-myth/

I don’t understand the last line. He even stated “Yes, we should do all we can to encourage housing supply; but clearly there is more at work here then that.”

So he admitted that housing supply is still a concern, but decided to right an article about it being a “myth.” If you post an article stating an issue is a “myth” it will take away from this being a concern for the general population and look at other factors that won’t have nearly the impact to prices as increasing supply does.

Also, using the UK, Australia, and the US as examples is foolish they are all struggling with housing affordability as well. France has 540 units per 1,000 residents for comparison and is more affordable then any of those countries listed. Japan is above the average and is renowned for its affordability. Again let’s focus on getting to the G7 average and build 1.8 million homes to catch up before making hypotheticals when the facts are right in front of us. I have brought up Canadian cities having absurdly low vacancy rates before. Not building more supply will just continue to exert massive pressure on existing housing stock.

Of course it’s a lot more then housing supply such as low interest rates, poor land use planning, infatuation for single-family houses, NIMBYism, too much red tape, parking requirements, high immigration, and housing acting as an investment are all prominent factors. However, lack of supply relative to demand still seems to be the prominent issue.

Imo this article, as usual of the Globe and Mail recently, falls flat on its message.

[lio45]

Originally Posted by thewave46

Tech is the industry that has the most mobility, yet its workers live in the highest-cost regions. San Francisco and Seattle are eye-watering in terms of housing cost, yet attract top tech talent.

The ratio "people's net incomes / property prices" is actually not that bad in San Francisco and Seattle, compared to Vancouver or Toronto.

[whatnext]

Originally Posted by thebasketballgeek

I don’t understand the last line. He even stated “Yes, we should do all we can to encourage housing supply; but clearly there is more at work here then that.”

So he admitted that housing supply is still a concern, but decided to right an article about it being a “myth.” If you post an article stating an issue is a “myth” it will take away from this being a concern for the general population and look at other factors that won’t have nearly the impact to prices as increasing supply does.

Also, using the UK, Australia, and the US as examples is foolish they are all struggling with housing affordability as well. France has 540 units per 1,000 residents for comparison and is more affordable then any of those countries listed. Japan is above the average and is renowned for its affordability. Again let’s focus on getting to the G7 average and build 1.8 million homes to catch up before making hypotheticals when the facts are right in front of us. I have brought up Canadian cities having absurdly low vacancy rates before. Not building more supply will just continue to exert massive pressure on existing housing stock.

Of course it’s a lot more then housing supply such as low interest rates, poor land use planning, infatuation for single-family houses, NIMBYism, too much red tape, parking requirements, high immigration, and housing acting as an investment are all prominent factors. However, lack of supply relative to demand still seems to be the prominent issue.

Imo this article, as usual of the Globe and Mail recently, falls flat on its message.

But as he says Japan and France would have units per capita because of their old populations. Canada's younger demographic skew means you have a lot more people who wouldn't be in a position to be living on their own.

[lio45]

Originally Posted by SignalHillHiker

If any of ye were in my shoes, would you switch to a locked in rate now or wait it out a few years more? Maybe lock in before that locked-in rate rises above 3%? I’ve zero experience with variable rate mortgages. 1.7% right now.

Depends what you get offered.

So far, in 17 years of real estate, for most of my rates I have nearly always chosen variable, but sometimes I'll occasionally lock them for 1, 3 or 5 years, depending on what's offered at the time. If it's close to the variable rate and the consensus at the time is that rates will be going up a bit over the next few years, then that's when I will sometimes take the fixed rate.

On average, since you don't have a crystal ball, you're certainly better off with variable (mathematical fact).

I locked one of my mortgages for seven years in 2007 at a fixed rate that was the cheapest anyone had ever seen in decades at that point. I was still paying ~7% into 2014 with that one.

I can't blame myself for that choice, i.e. the equivalent right now would be to lock it for seven years at ~1.7% and there would be honestly no reason to refuse that.

[lio45]

Originally Posted by theman23

I think it’s a perfect storm of immigration, supply, cheap money and tax policy that favours housing as an investment class. We probably have to tackle two or three things for us to make a significant dent in the market, but we’ll probably do none.

Agreed. Maybe for clarity I'd rename your "supply" category as "supply/zoning/NIMBYism/red tape", but otherwise, you've hit the nail on the head.

[lio45]

Originally Posted by SignalHillHiker

A friend of mine ran into this - working remote in Ontario, her mother was hospitalized, released, so she came home for four weeks just to make sure her mother was fine living on her own. When she put in the request to work four weeks from here, they said no because they were introducing a policy that remote workers still had to be in Ontario. They let her ("I'm going. I'll take the vacation time, or I can work, up to you.") but clearly not going to be a possible, permanent thing.

If you're working remotely, why on Earth do you need to be physically in Ontario?

I get that you'll earn your income in Ontario (and pay Ontario's income taxes, etc.) but there's no reason why it should need to be mandatory to be physically there. Your Ontario employer will do those "deductions at the source" anyway; it's easy for them to send their remote worker based in Newfoundland their net pay only, while sending the income tax portion of that person's gross pay to Queen's Park.

[kwoldtimer]

Originally Posted by lio45

Depends what you get offered.

So far, in 17 years of real estate, for most of my rates I have nearly always chosen variable, but sometimes I'll occasionally lock them for 1, 3 or 5 years, depending on what's offered at the time. If it's close to the variable rate and the consensus at the time is that rates will be going up a bit over the next few years, then that's when I will sometimes take the fixed rate.

On average, since you don't have a crystal ball, you're certainly better off with variable (mathematical fact).

I locked one of my mortgages for seven years in 2007 at a fixed rate that was the cheapest anyone had ever seen in decades at that point. I was still paying ~7% into 2014 with that one.

I can't blame myself for that choice, i.e. the equivalent right now would be to lock it for seven years at ~1.7% and there would be honestly no reason to refuse that.

What's a 5-year closed at the moment? 3.5 - 4%?

[lio45]

Originally Posted by kwoldtimer

What's a 5-year closed at the moment? 3.5 - 4%?

That's crazy (for owner-occupied residential property), I wouldn't take that. I'd stay variable.

I'm refinancing something, I'll see what choice I make, but it will likely be variable if the fixed offers look like that.

Residential property that I bought for $180k just before the 2008 crash, I've refused offers into the seven figures lately for it. Fairly typical of Canadian real estate in a midsized-or-larger city.

I figure I should try to tap into that equity for other projects, it's stupid to let it sit like that. (That one is easier to finance than most of the others because it's fully residential.)

[thebasketballgeek]

Originally Posted by whatnext

But as he says Japan and France would have units per capita because of their old populations. Canada's younger demographic skew means you have a lot more people who wouldn't be in a position to be living on their own.

The average age of a resident in France is only 1 year older then Canada, but the average US resident is 3 years younger then Canada. Yet both countries have a higher supply per capita with France having a significantly higher supply then Canada.

Because of low supply a lot of people aren’t able to move out at a younger age to a new house since it’s simply not affordable. I know many adults in their late 20s who still stay with their parents because of how unaffordable the market is because of the insane pressure on existing housing stock.

[SignalHillHiker]

Originally Posted by lio45

If you're working remotely, why on Earth do you need to be physically in Ontario?

I get that you'll earn your income in Ontario (and pay Ontario's income taxes, etc.) but there's no reason why it should need to be mandatory to be physically there. Your Ontario employer will do those "deductions at the source" anyway; it's easy for them to send their remote worker based in Newfoundland their net pay only, while sending the income tax portion of that person's gross pay to Queen's Park.

I can see such a rule making sense in the public service, obviously. Beyond that... I'm torn. If it's a local/provincial company, then fine. If it's national or international, you should be allowed to work anywhere.

In my friend's specific case it was one too many people taking meetings on foreign beaches.

[kwoldtimer]

Originally Posted by lio45

If you're working remotely, why on Earth do you need to be physically in Ontario?

I get that you'll earn your income in Ontario (and pay Ontario's income taxes, etc.) but there's no reason why it should need to be mandatory to be physically there. Your Ontario employer will do those "deductions at the source" anyway; it's easy for them to send their remote worker based in Newfoundland their net pay only, while sending the income tax portion of that person's gross pay to Queen's Park.

Government handouts for job creation, probably,

[yaletown_fella]

Originally Posted by thewave46

It is a good thing one wouldn't fear a job loss in a 20% environment, because 1983's unemployment rate was ~12%, a reflection of the after-effects of those murderous early 1980s interest rates - the effect of people defaulting and business collapsing.

The recession in the early 1990s (unemployment of >11%) was also a product of high interest rates (bank rates in 1990 = ~13%).

I'm not sure if you had the pleasure of living through that era, but that's the flip side of the coin. When one's strategy is just to coast on $100k of savings (must be nice to have that luxury!), it is not the story of the median Canadian.

Sure, interest rates should probably be higher and inflation is probably understated. I've no rose-coloured glasses about +10% over inflation interest rates, having seen the carnage.

Unemployment has been higher now than it was in the 90s when you count lower labour force particpation due to stagnant median( private sector )wages with ever decreasing purchasing power. More people than ever are working low level service sector jobs due to AI/outsourcing. The headline unemployment rate is intentionally misleading just like the fake consumer price index.

Figures like CPI and the *headline* unemployment rate have deliberately been designed to mislead, and therefore, placate the markets as well as create a positive consesus for loose monetary policy.

A much better judge of a healthy economy would be the growth of household savings (after inflation of course) and domestic production. Consumer spending on imported goods does not drive a healthy economy. It's just a trait of the bubble post-industrial years we've been living in.

Even if you believe the keynesian myth that consumer spending is what drives our economy, the reality is consumer spending has not increased since 2020, it only appears that way due to people paying inflated prices for the same goods and services. In fact if we see a 1% rise in unemployment this year, I definetly see the cowards at the BOC chickening out and easing rates by 0.5%

Most economists who have only been trained in nonsensical keynesian economics believe that inflation is a good thing and the sign of a strong economy. In fact almost all central banks have a target inflation rate of around 2% !!

Central banks love to use unemployment as an excuse to ease policy when in fact its their debt monetization that creates an environment where the average person isnt strongly incentivized to go to work in the first place.

In essence low rates and cheap money exacerbate unemployment especially combined with huge misallocation of capital towards growth stocks, particularly Cathie Wood innovation fund tech bubble stocks. Not to mention the inverted demographics age group pyramid issue that started to rear its head in the 90s. Without an ever-expending population like in the 50s-60s its impossible for the Keynesian pyramid scheme economy to be sustainable.

A middle aged person who has lived below their means and squirrled away 100k is not doing exceptionally well if they are not a homeowner or going to inherit a home. By the time Im 65 its very possible that same 100k will only have 10k purchasing power due to inflation. The inflation chickens have come home to roost unfortunately. We are only beginning to pay for sins of post 2008 policy. Just like the federal reserve I do not believe the BOC and govt whether they are red or blue have the ability or political courage to actually put out this inflation fire. The reason is unprecedented soveriegn debt

[yaletown_fella]

D/p.