Canada's 'housing bubble' deemed close to bursting

[casper]

Originally Posted by GenWhy?

For market rental, but especially for buildings with price capped below-market rental for the life of the building (which this 39-storey building has 20% of units at) building taller is the only economically way to make this possible. My company has been doing these for years in Vancouver (rental and below-market) and escalating land prices are terrible for building rental since we are all competing for the same limited allowable (rezone-able) land. At the moment 6-storey rental buildings almost anywhere in the city is barely possible. Typically only possible if the Owner has been sitting on the land you want to develop for over 15 years.

Exactly. We need a system that provides a bonus for rental with some percentage of rental. Perhaps the bonus goes up the high the percentage of non-market.

[yaletown_fella]

I just saw a Toronto Community Housing building on Finch near Leslie with the sign 'affordable parking spaces'. How do people on a low income afford to drive? Dosent seem feasible unless you are going to live paycheck to paycheck and never retire.

[lio45]

Speaking of parking, I have noticed parking spots in downtown Montreal are now worth close to $100k apiece.

https://www.centris.ca/fr/terrain~a-vendre~montreal-ville-marie/12366949?view=Summary

https://www.centris.ca/fr/terrain~a-vendre~montreal-ville-marie/10581122?view=Summary

https://www.centris.ca/fr/terrain~a-vendre~montreal-le-sud-ouest/24381687?view=Summary

If Montreal is there, then in Toronto, it must be $150k-$200k...? Pricier than a decent house in several parts of the country!

$100k gets you "housing" in downtown Montreal, i.e. with that money, you can buy a flat surface of real estate that's the size of your vehicle, and you can park there and live in your vehicle permanently.

[whatnext]

Ooooh, I sense SSP heads exploding over this piece in the G&M today:

Politicians are selling us a myth on housing: that more supply will be our salvation
GARY MASON NATIONAL AFFAIRS COLUMNIST
PUBLISHED YESTERDAY

Federal Conservative leadership candidates are getting a lot of attention these days for their proposed solutions to Canada’s housing crisis.

A couple of weeks ago, Conservative MP Pierre Poilievre gained nationwide plaudits for a slick video denouncing insane house prices across the country. He blamed them on “gatekeepers” – municipal politicians – who he said are adding hundreds of thousands of dollars to the cost of every new home built. Mr. Poilievre never says how he would get rid of these extraordinary (or, more accurately, imaginary) costs these “gatekeepers” are adding to the price of housing – but hey, it’s the soundbite that’s important...

... they’re all empty and simplistic words. In fact, not one thing these folks are recommending is going to rein in house prices on their own.

A massive new condominium complex being built in the heart of Vancouver by the developer Westbank shows us why. The project will add 3,323 homes to the city – so it’s exactly the kind of boost in housing supply that everyone’s talking about.

There’s only one problem: only 13 per cent of the homes for sale or rent are deemed “affordable” – i.e. those that can be obtained on a low-to-middle-class family income. The rest are luxury units being sold between $2,000 and $2,500 per square foot. So a two-bedroom 1,000-square-foot condo built at $2,250 per square foot would go on the market at a minimum of $2.25-million. The units are being marketed to the wealthy, even if they don’t live in Vancouver or even in Canada – and they’re going to sell.

Dozens of similar condo towers are being planned for Vancouver over the next few years. Does anyone think the developers behind them are going to decide to build their units at half the cost as Westbank? Not a chance. They’re in the game to make money, too. All new housing supply is going to be priced at current market rates at a minimum, and most likely higher....

....There are other issues that aren’t easily fixable. More than 100,000 people poured into B.C. in the last year. You’re never going to build enough housing quickly enough to satiate the soaring demand those kind of immigration levels create.

Supply issues do result in rising prices. Immigration is the lifeblood of this country, but it will continue to come at a cost, surging house prices among them...

https://www.theglobeandmail.com/opinion/...yth-on-housing-that-more-supply-will-be/

[Innsertnamehere]

how does that even stand up as an arguement?

Of course a new luxury condo will not be affordable. New housing is expensive and will always be the most expensive housing out there. We only build about 1% of new housing a year, the other 99% of housing is older and therefor less valuable. Why is it a surprise if new housing isn't good for the bottom 50% of incomes if it's in the top 1% in terms of age?

What those 3,000 luxury units do is give 3,000 homes to those rich people who would otherwise live elsewhere, in older housing units, pushing out the people on the income levels below them.

So yea, A luxury condo penthouse may not seem like a solution for affordable housing in a literal sense, but filtering is a real thing in housing, like any other capitalist market, and building a luxury penthouse unit creates a unit for someone who would otherwise live somewhere else, opening that unit up for someone with less money than they do. And so on and so forth.

It's not hard. People seem to think for some reason housing can break the bounds of both standard economics as well as physics itself, because the market is complex and people are so emotionally attached to it.

At the end of the day, more housing units physically means more units for people to live in. If we don't build those housing units, how do you expect affordability to increase, without cutting demand (i.e. telling people to move away)? More housing is never a bad thing for affordability.

Same thing with classical economics. I don't think many would dispute that increased supply of a product wouldn't impact prices. If a retailer orders 50 barbeques to sell in the spring and by fall has only sold 30 of them, they are going to put them on sale to clear the inventory. If they only ordered 20, they would notice them selling faster than expected and increase prices to make a bit of profit. Nobody disputes that type of capitalist economics. But for some reason, that doesn't work for housing?

The wider problem we have, particularly in some markets like Toronto and Vancouver, is that new housing is so expensive so as there are very few people who can afford it. This is what restricts supply, and drives up pricing of housing across the entire market.

To fix housing affordability, we have to fix how expensive it is to build houses. That means things like cutting approval times, allowing higher densities, but also things like reducing government fees, finding creative ways to cut construction costs (like perhaps encouraging more affordable built forms like missing middle housing, or enacting building code reform), etc.

Being able to build new housing units affordably is key to increasing supply. The US has seen an explosion of inner city apartment construction as a result of the relatively new 5+1 apartment built form, which allows for apartments to be built at much lower cost than historically. To the point where outside a handful of cities, it has become the almost exclusive method of constructing new apartments. It delivers new stock at a price per unit that can't be beat.

Those are the kinds of innovations we need to dig us out of this hole. We need to find ways to build lots of units, fast, and affordably. How can we deliver housing that is affordable and easy to construct? That's where we will see the biggest impacts on housing affordability. Focusing on lower-scales that have stick construction, minimizing the amount of expensive structured parking construction required, minimizing approval timelines, maximizing soft site availability (upzoning), etc.

[GenWhy?]

Originally Posted by yaletown_fella

I just saw a Toronto Community Housing building on Finch near Leslie with the sign 'affordable parking spaces'. How do people on a low income afford to drive? Dosent seem feasible unless you are going to live paycheck to paycheck and never retire.

Living in Vancouver, I can't even afford (according to my personal budget) a car and all the baggage it comes with making almost $80k

[GenWhy?]

"The rest are luxury units being sold between $2,000 and $2,500 per square foot. So a two-bedroom 1,000-square-foot condo built at $2,250 per square foot would go on the market at a minimum of $2.25-million. The units are being marketed to the wealthy, even if they don’t live in Vancouver or even in Canada – and they’re going to sell."

The rest are MARKET rate, being sold at what the local market can bear in a capitalist free market system. I've yet to hear a politician of any rank mention how they would cap the price a condo sells at initially, and then again maybe 10 years down the road unless it was a co-op. And barely anyone talks about co-ops because they need subsidies.

[someone123]

Originally Posted by GenWhy?

The rest are MARKET rate, being sold at what the local market can bear in a capitalist free market system.

The logic is that if something is expensive then it is good. Consequently a shack in Odessa ON is now inherently better than a house located in Tampa FL. And anybody who owns a shoebox condo in metro Vancouver is spoiled because the price of it makes it an inherently awesome place to live and we should not be concerned about objective comparison or the life choices people have available to them (e.g. spend all money on cramped housing unless you want to move away from your family/friends, uproot kids, find a new job, and so on).

I wish there were more charts of the most basic sensible metrics, such as square feet of livable area constructed versus population growth over time, mean commuting time/distance, and price per square foot vs. incomes. By and large I don't think Canada even has good public data nor is the public debate anchored to anything coherent.

[GenWhy?]

If you allow outright in areas served by transit lines (500m radius?) 6-storey outright (woodframe's max) for rental and 4-stroreys for condo you'd get a better competitive price for land, which maxes things more feasible, incentivizes.

[whatnext]

Originally Posted by Innsertnamehere

how does that even stand up as an arguement?

Of course a new luxury condo will not be affordable. New housing is expensive and will always be the most expensive housing out there. We only build about 1% of new housing a year, the other 99% of housing is older and therefor less valuable. Why is it a surprise if new housing isn't good for the bottom 50% of incomes if it's in the top 1% in terms of age?

What those 3,000 luxury units do is give 3,000 homes to those rich people who would otherwise live elsewhere, in older housing units, pushing out the people on the income levels below them..

This project is literally being built over a mall and along a busy transit line. This is exactly the kind of location we are continually being told is "perfect for workers". The fact that Westbank is building this here and also has a showroom in Hong Kong tells you everything you need to know.

And the article is right, why would any developer sell for less seeing the prices being achieved for this one?

[casper]

Originally Posted by whatnext

This project is literally being built over a mall and along a busy transit line. This is exactly the kind of location we are continually being told is "perfect for workers". The fact that Westbank is building this here and also has a showroom in Hong Kong tells you everything you need to know.

And the article is right, why would any developer sell for less seeing the prices being achieved for this one?

As others have said it is still a positive. People will eventually move into these condos. That will free up units elsewhere. Perhaps some of those are in China.
That is fine. However that is far from the majority.

You need a multi-dimensional plan. Westbank can build these. Provide incentives for rentals. Fund more co-op housing and more social housing. We just need to flood the market with housing.

Building less housing is the wrong plan.

[Innsertnamehere]

Originally Posted by whatnext

This project is literally being built over a mall and along a busy transit line. This is exactly the kind of location we are continually being told is "perfect for workers". The fact that Westbank is building this here and also has a showroom in Hong Kong tells you everything you need to know.

And the article is right, why would any developer sell for less seeing the prices being achieved for this one?

workforce housing will always be old housing. New housing by it's nature will never be for the bottom 50% of incomes, which I already explained.

These 3,000 units will be sold to or rented out to people in the upper ranges of household income, but those tenants / owners will move there from some other worse units which will now be open for people of more modest means to rent. Perhaps the new residents in this development will move out of an older, smaller apartment building in South Granville or something, making a space for those workforce employees there. If this development hadn't been built, those tenants would have stayed in South Granville, and those workforce employees would have nowhere to go.

You will never achieve market-wide housing affordability by building only subsidized housing. That will only create an "affordable by lottery" type system.

[someone123]

Originally Posted by Innsertnamehere

workforce housing will always be old housing. New housing by it's nature will never be for the bottom 50% of incomes, which I already explained.

I wonder how true this really is in every city. Theoretically houses depreciate, but in practice in Canada inner city areas are often more desirable, there's a lot of population growth in many areas, and there isn't always much turnover. Around here there are lots of older people in $2M houses while young people buy brand new condos. There is a supply of older cheaper condos on the market around here but it's quite small, while detached houses or even many/all townhouses are completely out of reach for the lower end of the income distribution regardless of how old they are.

[casper]

Originally Posted by someone123

I wonder how true this really is in every city. Theoretically houses depreciate, but in practice in Canada inner city areas are often more desirable, there's a lot of population growth in many areas, and there isn't always much turnover. Around here there are lots of older people in $2M houses while young people buy brand new condos. There is a supply of older cheaper condos on the market around here but it's quite small, while detached houses or even many/all townhouses are completely out of reach for the lower end of the income distribution regardless of how old they are.

I have an older relative with one of those $2M houses in East Vancouver. Three bedroom bungalow built in the late 1950s The house is assessed at $40k and the rest is land value. The value of the house will continue to go down reflecting its age. The value of the land will continue to go up.

The land value is what it is because of the lack of supply for SFH. It is a short walk to Joyce station. The condo towers built in the 1980a are "affordable". Those are not bad units. They tend to be larger than new construction. Perhaps the cabinets are a bit dated.

The towers being built today will become affordable in 20-30 years.

[svlt]

Originally Posted by casper

I have an older relative with one of those $2M houses in East Vancouver. Three bedroom bungalow built in the late 1950s The house is assessed at $40k and the rest is land value. The value of the house will continue to go down reflecting its age. The value of the land will continue to go up.

The land value is what it is because of the lack of supply for SFH. It is a short walk to Joyce station. The condo towers built in the 1980a are "affordable". Those are not bad units. They tend to be larger than new construction. Perhaps the cabinets are a bit dated.

The towers being built today will become affordable in 20-30 years.

The sale price will be but in 30 years the maintenance cost will be eye-wateringly high as is typical of older condos here.

[someone123]

Originally Posted by svlt

The sale price will be but in 30 years the maintenance cost will be eye-wateringly high as is typical of older condos here.

Yeah, some of those "affordable" older $400,000 condos can have tens of thousands in deferred maintenance as well as high condo fees.

You roll the dice when dealing with stratas and I didn't do very well. A lot of our facilities have been closed since 2019 and we are getting hit with a special levy when this complex is only in the 10-15 year old range. Over time more and more units have shifted to rental (since this city is full of amateur investor landlords) and we had the tenants from hell move in a while ago (second time this happened; last time the unit below apparently had a huge rat infestation and were smoking pot and playing loud music 24/7; unit price is now probably in the $700k ballpark).

I suspect the strata system as implemented in BC worked better when condos were a somewhat well to do thing mostly for middle aged and up rather than the cheapest possible housing ownership option with mixed rentals that can sometimes be really out of whack with the sale price.

[casper]

Originally Posted by someone123

Yeah, some of those "affordable" older $400,000 condos can have tens of thousands in deferred maintenance as well and high condo fees.

You roll the dice when dealing with stratas and I didn't do very well this that. A lot of our facilities have been closed since 2019 and we are getting hit with a special levy when this complex is only in the 10-15 year old range.

I suspect the strata system as implemented in BC worked better when condos were a somewhat well to do phenomenon rather than the cheapest possible housing ownership option.

In SK within the first 3 years of construction you need to do the engineering study that defines the reserve fund. There limited scope for deferring maintenance.

in BC until a few years ago I don't think that was required.

[whatnext]

Originally Posted by Innsertnamehere

workforce housing will always be old housing. New housing by it's nature will never be for the bottom 50% of incomes, which I already explained.

These 3,000 units will be sold to or rented out to people in the upper ranges of household income, but those tenants / owners will move there from some other worse units which will now be open for people of more modest means to rent. Perhaps the new residents in this development will move out of an older, smaller apartment building in South Granville or something, making a space for those workforce employees there. If this development hadn't been built, those tenants would have stayed in South Granville, and those workforce employees would have nowhere to go.

You will never achieve market-wide housing affordability by building only subsidized housing. That will only create an "affordable by lottery" type system.

What? What are you defining as "workforce"? The amount of white collar workers shut out by Vancouver's high prices thanks to projects like this is huge.

[whatnext]

Originally Posted by GenWhy?

For market rental, but especially for buildings with price capped below-market rental for the life of the building (which this 39-storey building has 20% of units at) building taller is the only economically way to make this possible. My company has been doing these for years in Vancouver (rental and below-market) and escalating land prices are terrible for building rental since we are all competing for the same limited allowable (rezone-able) land. At the moment 6-storey rental buildings almost anywhere in the city is barely possible. Typically only possible if the Owner has been sitting on the land you want to develop for over 15 years.

Let's not forget that the provincial NDP gave Vancouver Mayor Kennedy Stewart the opportunity to blunt land costs by allowing cities to create Rental Only zoning. This could easily be done on the West End with the justification that he area is historically and predominantly rental.

[goodgrowth]

I like how supply and demand just seem to go out the window with housing like it's just some special category...

There's enough examples of cities to show that it is very much supply and demand. Dallas and Houston are over double Vancouver's population and you can get basically a mansion for 500K. Why is that? You think Texas of all places has defeated the capitalist developers?