Canada's 'housing bubble' deemed close to bursting

[someone123]

Originally Posted by suburbanite

People have to vote with their wallet. I'm willing to bet you live in a place that looks far more like the second picture than the first.

But there are a lot of political factors that keep the more walkable housing that a lot of people seem to want out of the market. Suburban development controls are one. A lot of greenfield development is banned and Canada isn't building much new infrastructure so even if a lot of nice new neighbourhoods were built they wouldn't have the kinds of transportation connections that these Montreal neighbourhoods have. If you take that Montreal rowhouse street and put it out in the 905 where shopping or jobs are a 10-60 minute drive away it doesn't work anymore.

[GenWhy?]

Originally Posted by suburbanite

People have to vote with their wallet. I'm willing to bet you live in a place that looks far more like the second picture than the first.

Don't they? Otherwise wouldn't the most walkable neighbourhoods in Canada be less expensive than suburban areas?

[SignalHillHiker]

Originally Posted by suburbanite

People have to vote with their wallet. I'm willing to bet you live in a place that looks far more like the second picture than the first.

It’s basically illegal to build neighbourhoods like that in Canada today. Even if a developer is willing to reproduce comparable architecture, it’ll be on a wider street in a mostly-residential area, far from anywhere worth going. It’ll be crippled by zoning and history.

We’ve also had car-dependent suburbia for so long that a lot of people simply don’t know any better. I don’t mean the hostile NIMBYs. There are people just like us who would love dense, walkable neighbourhoods if they had the opportunity to experience them, but never have, never will, and will never think of it.

I’m fortunate to be debilitatingly attached to my smaller, affordable city so it’s no great sacrifice for me to be here. But if I had a friend in my situation in VAN or TO, I’d tell them find an urban core you can live with and afford to live in. If I lived in Toronto, with my salary, I’d be in a basement with three roommates in Ajax somewhere. My life would not be urban in the slightest. Yet here, I’m in the middle of everything. I walk everywhere. It’s dense and active and rewarding. You can do that somewhere too, I bet.

[suburbanite]

Originally Posted by someone123

But there are a lot of political factors that keep the more walkable housing that a lot of people seem to want out of the market. Suburban development controls are one. A lot of greenfield development is banned and Canada isn't building much new infrastructure so even if a lot of nice new neighbourhoods were built they wouldn't have the kinds of transportation connections that these Montreal neighbourhoods have. If you take that Montreal rowhouse street and put it out in the 905 where shopping or jobs are a 10-60 minute drive away it doesn't work anymore.

The problem as I see it is that trying to solve the issue from the supply side is almost impossible without completely scrapping the development framework that we've been operating under for almost 75 years now. All those neighbourhoods that we love are relics from a time when municipalities themselves would subdivide smaller tracts of land and sell individual lots to end users. That is how you get fine-grained streetscapes of row houses,or commercial blocks that aren't dominated by the same chains in every neighbourhood. That was more feasible when the government was trying to bring in as many immigrants as possible to fill our vast empty spaces, and servicing costs were a fraction of what they are today given the lack of modern amenities that we've all come to expect with a new home.

The reality in today's world is that providing the level of housing that we've come to expect is not cheap. I'm looking at a spreadsheet now that forecasts $60 million to service 412 lots on a 98 acre site. Now that developers bear those costs, they can't afford to risk trying to lease 30 small individual commercial units to try and recreate Queen West in Brampton. Their investors/stakeholders demand a healthy IRR and that typically means, lease your grocery store, your LCBO, your Shoppers, and a couple chain restaurants and start earning a return as soon as possible.

Do people have the appetite for the increased local taxes to bring that kind of activity back into the hands of the municipality? Not to mention, even if the city did do that, whose to say the people who end up buying those lots wouldn't end up just building regular suburban crap on them anyway?

Municipalities have benefitted tremendously from the current model from a fiscal standpoint at least. It would be a monumental task to bring forth some sort of fundamental change in how we approach greenfield development.

[suburbanite]

Originally Posted by GenWhy?

Don't they? Otherwise wouldn't the most walkable neighbourhoods in Canada be less expensive than suburban areas?

The number of people looking to live in the latter is still far larger than the former, the supply is just extremely constrained. If they brought those desires to the suburbs and demanded a better product, we may get somewhere. It's kind of a chicken or the egg scenario though, since as it stands, it's basically impossible to deliver that kind of product even if people wanted it, and why would they try and force change to be able to deliver said product when the current stuff seems to work pretty well?

I have a dream that we get some benevolent developer who takes a 100 acre greenfield tract and builds a self-contained version of Cabbagetown on it, regardless of how terrible an investment it looks like. If it sells out while the Mattamy subdivision next door flounders, that's the only way I see things changing.

[Nashe]

GenX:

I'm in a weird spot where I was fairly easily able to get into the market well before the door started to close but now am really gonna be stuck where I am because even if I sell at a premium, I'll have to buy at one too. I guess I'll just live here and make upgrades until I croak!

GenZ can take solace in the fact that once all these Boomers shuffle off the mortal coil (they've started) there should be a glut that drives down prices again. We'll see, I guess.

[thewave46]

Originally Posted by GenWhy?

Don't they? Otherwise wouldn't the most walkable neighbourhoods in Canada be less expensive than suburban areas?

Walkability is a small factor. Location is the big one in desirability.

Walkability is a pre-WWII thing. Pre-war neighbourhoods needed to be and were designed around the concept. They are also located in desirable core areas.

A walkable neighbourhood in Vaughan would not have much higher desirability, because everything else is not walkable. At most, it might make better use of the land.

Post-WWII Canada is suburbia on land or suburbia in the sky.

[lio45]

Originally Posted by someone123

You can say this for any generation since WWII and most since about 1600 in North America. Baby Boomers could have done much better than buying a Vancouver house.

Yeah, I've always found it a fascinating topic to look at how each era inevitably features its own specific "get rich" means available to people who have the foresight and balls to go for it, and how if you want to try to reuse a "proven" method that worked really well for early investors/believers but are late to the party, it won't work as well (if it works at all).

[lio45]

Originally Posted by thewave46

The curious thing would be to see how Gen Z/Millennial ownership level correlates to their Gen X/Boomer parents at a given age. My bet is that it is much lower and gets lower the younger the demographic.

That's a very safe bet!

Again though, the cutoff is somewhere within the Millennials. If I had been only a few years younger, my path would have been markedly different.

[suburbanite]

Originally Posted by lio45

That's a very safe bet!

Again though, the cutoff is somewhere within the Millennials. If I had been only a few years younger, my path would have been markedly different.

I'd say the cutoff is somewhere around 1990 (if we're talking just owning one house to live in). I was born in 1994, my Coworker was born in 1988. He bought a house in central Toronto for $700k when he was 28. My options at the same age start at about $1.5 million if you're lucky.

If you're talking about actually chaining together multiple real estate investments through refinancing your previous properties, you need a little more runway and the cutoff point is probably somewhere in the early to mid-eighties.

[Acajack]

Originally Posted by suburbanite

The number of people looking to live in the latter is still far larger than the former, the supply is just extremely constrained. If they brought those desires to the suburbs and demanded a better product, we may get somewhere. It's kind of a chicken or the egg scenario though, since as it stands, it's basically impossible to deliver that kind of product even if people wanted it, and why would they try and force change to be able to deliver said product when the current stuff seems to work pretty well?

I have a dream that we get some benevolent developer who takes a 100 acre greenfield tract and builds a self-contained version of Cabbagetown on it, regardless of how terrible an investment it looks like. If it sells out while the Mattamy subdivision next door flounders, that's the only way I see things changing.

I think that walkability is a nice-to-have for a lot of people (increasingly so) but I think in terms of wants and needs for the vast majority of people a place to park a car (preferably covered) and a yard are higher priorities.

Sure if you can find a decently renovated SFH in Parkdale in Toronto with its own driveway or parking pad (even better with a carport or garage) and a small backyard, a couple of blocks from a walkable traditional main street and transit, and not too far from a Canadian Tire and Home Depot with parking - most people would go for that in a have-your-cake-and-eat-it-too scenario.

But I think for most of us housing choices are based on prioritizing and what makes sense in terms of cost and other factors.

[lio45]

Originally Posted by suburbanite

I'd say the cutoff is somewhere around 1990 (if we're talking just owning one house to live in). I was born in 1994, my Coworker was born in 1988. He bought a house in central Toronto for $700k when he was 28. My options at the same age start at about $1.5 million if you're lucky.

If you're talking about actually chaining together multiple real estate investments through refinancing your previous properties, you need a little more runway and the cutoff point is probably somewhere in the early to mid-eighties.

Yeah, that's pretty much exactly how I see it (and I think someone123 will be agreeing with us). Early 1980s birth and you had enough earning years to be able to load up on cheap real estate before the 2008 market crash made everything double overnight; mid 1980s birth, you could at least buy a SFH before 2008.

[someone123]

Originally Posted by lio45

Yeah, I've always found it a fascinating topic to look at how each era inevitably features its own specific "get rich" means available to people who have the foresight and balls to go for it, and how if you want to try to reuse a "proven" method that worked really well for early investors/believers but are late to the party, it won't work as well (if it works at all).

The old story is that once your crazy relatives start telling you about it (e.g. bitcoin) it was finished years ago as a good investment strategy. It depends but in a lot of cases you need greater fools to sell to; more greater fools than the lesser fools who bought (though you can have some investments like equities that just give you a good return because they are profitable.. do such things still exist?).

[Berklon]

Originally Posted by lio45

The irony is that the Gen Z "doomed to rent for life" cohort nonetheless had their own generation-specific paths to significant wealth (cryptocurrency, Tesla stock, etc.) that were totally accessible to them (and some still are, though we can't tell which ones absent a crystal ball).

Accessible if they have the money to buy into those investments in the first place. Gen Z's aren't exactly lined up with good paying jobs.

[suburbanite]

Also it's not completely fair to equate physical real estate with completely speculative non-tangible investments.

One could never accidentally lose the keys to their house and then have to write-off the investment completely like a bitcoin owner whose hard drive got wiped. Elon Musk can't send out one tweet that would diminish your home's value by 20%.

Risk-taking is always a factor in wealth accumulation, but not all risk is created equal.

The last two generations were at least operating in fairly well-regulated markets.

[yaletown_fella]

The vast majority of people who bought Bitcoin did not get in early. In fact year to date it's down 14% from it's high.

It's funny how people call Bitcoin "digital gold" when the greyscale is FAR more closely correlated to the Kathy Wood Innovation Fund than it is to the price of gold. To me, that screams that it's a bubble.

And of course, Bitcoin is not a store of value. The only reason people buy it is to speculate/make money on it going up. Im not sure which will crash first; the USD or Bitcoin.

It's funny how JP Morgan/Chase is one of the first major bank in the US to offer bitcoin funds to its clients, yet Jamie Dimon said he'd never personally touch bitcoin with a ten foot pole. The banks and brokerages that offer bitcoin funds might as well offer slot machine and lottery services while they are at it!

[Innsertnamehere]

This link from Stats Canada:

https://www150.statcan.gc.ca/n1/pub/75-006-x/2019001/article/00012-eng.htm

Is showing home ownership rates for those aged 25-34 increased slightly between 1999 and 2016, going from 43.4% to 44.4%.

Ages 19 to 24 decreased from 12.5% to 10.3%, but that's far from a typical homeownership age anyway and is probably most reflective of higher post-secondary rates than it is affordability.

35-44 also increased from 62.9% to 64.6%.

We'll have to see if this changed much in 2021 census data, but the 2016 data is indicating that Millennials are owning at higher rates than Gen X at least.

Notably, home ownership rates also increased even in the largest, most expensive metros, going from 54 to 58% in Toronto and 52 to 55% in Vancouver.

[Innsertnamehere]

Originally Posted by Berklon

Accessible if they have the money to buy into those investments in the first place. Gen Z's aren't exactly lined up with good paying jobs.

What? unemployment is at record lows and average wages are at record levels, even accounting for inflation.

[MolsonExport]

Originally Posted by Innsertnamehere

This link from Stats Canada:

https://www150.statcan.gc.ca/n1/pub/75-006-x/2019001/article/00012-eng.htm

Is showing home ownership rates for those aged 25-34 increased slightly between 1999 and 2016, going from 43.4% to 44.4%.

Ages 19 to 24 decreased from 12.5% to 10.3%, but that's far from a typical homeownership age anyway and is probably most reflective of higher post-secondary rates than it is affordability.

35-44 also increased from 62.9% to 64.6%.

We'll have to see if this changed much in 2021 census data, but the 2016 data is indicating that Millennials are owning at higher rates than Gen X at least.

Notably, home ownership rates also increased even in the largest, most expensive metros, going from 54 to 58% in Toronto and 52 to 55% in Vancouver.

I wonder how these figures break down for condos vs. SFH

[Innsertnamehere]

Originally Posted by MolsonExport

I wonder how these figures break down for condos vs. SFH

almost certainly less SFH ownership as SFD's have been declining as a percentage of Canadian dwellings for a while now. in 2001, SFDs accounted for 57.4% of Canadian dwellings, declining to 53.5% in 2016, and likely even further in 2021 (though that data is not yet available).

Just from a physical availability perspective, the ownership rate of SFDs in millennials is almost certainly smaller than Gen X and boomers.

Family composition of millennials is also substantially different though too, with smaller households, fewer children, larger numbers of single person households, and more child-free households, so it's hard to discern if the decline of larger SFD product types is necessarily forcing people into substandard housing.

In places like Toronto, it's well documented, but that's more challenging to fix as Toronto is obviously built out and cannot accommodate more SFDs in large numbers.