Canada's 'housing bubble' deemed close to bursting

[cabotp]

Originally Posted by casper

Good example of housing design that address the affordability problem.

The Vancouver Special allowed a single family home buyer to get into a home, and rent out one floor to help pay the mortgage. These are not built any more but the most of area where there were built in Vancouver are now being built out with building that support three units.

https://www.cbc.ca/news/canada/british-columbia/stories-about-here-vancouver-special-1.6434818

Originally the Vancouver Special basement suite was illegal. They were also mass produced because they were cheap to build.

[MolsonExport]

Long-skyrocketing London home-sale prices dropped in April. Here's why

The average sale price of London-area homes fell by more than $50,000 in April, a month-over-month decline expected after two consecutive interest rate hikes and a tax hike, realtors say.

[WarrenC12]

Originally Posted by MolsonExport

Long-skyrocketing London home-sale prices dropped in April. Here's why

What is the tax hike they are talking about?

[goodgrowth]

Originally Posted by cabotp

Building higher density doesn't solve the land shortage.

It just means more people are fighting over smaller portions of the pie.

The size of the pie will never increase.

Building up literally adds new space.

[Innsertnamehere]

Originally Posted by WarrenC12

What is the tax hike they are talking about?

expansion of the non-residents house tax in Ontario.

I'm not surprised prices are on the decline again, what happened this spring was clearly the market boiling over and was never sustainable. Seemed like a dead-repeat of 2017 all over again, and I expect similar results with prices dropping 20-30% from the peak then flatlining more or less for several years.

[whatnext]

Originally Posted by MolsonExport

Long-skyrocketing London home-sale prices dropped in April. Here's why

Canadian real estate is still wildly overpriced.

[ssiguy]

The rise in the non-resident tax certainly was a factor and especially in London's case as now being provincewide as opposed to just GGH focused.

Nationwide, the reason for the decline in sales and build up of inventory has far more to do with the increase {and future increases] in interest rates. It really exemplifies how over leveraged Canadians are when a small increase in rates sends the market plunging.

People often think there is only one side of interest rate increases.................higher mortgage payments and reduced qualification levels but that is only one side of the equation. The flip side that people often forget it that such increases also encourages people to save as opposed to sticking all their investments into real estate. People rightfully say when interest rates are rock bottom that there is not point of putting your money into bonds or keeping it in the bank because it gets them no interest. You might as put it under the mattress.

As interest rates rise, the incentive to save increases as expected returns on their housing investment declines while their return on savings increases. The idea of buying real estate at the expense of savings as we have seen in the last few years does a complete 180.

[suburbanite]

Originally Posted by ssiguy

The rise in the non-resident tax certainly was a factor and especially in London's case as now being provincewide as opposed to just GGH focused.

Nationwide, the reason for the decline in sales and build up of inventory has far more to do with the increase {and future increases] in interest rates. It really exemplifies how over leveraged Canadians are when a small increase in rates sends the market plunging.

People often think there is only one side of interest rate increases.................higher mortgage payments and reduced qualification levels but that is only one side of the equation. The flip side that people often forget it that such increases also encourages people to save as opposed to sticking all their investments into real estate. People rightfully say when interest rates are rock bottom that there is not point of putting your money into bonds or keeping it in the bank because it gets them no interest. You might as put it under the mattress.

As interest rates rise, the incentive to save increases as expected returns on their housing investment declines while their return on savings increases. The idea of buying real estate at the expense of savings as we have seen in the last few years does a complete 180.

I don't think we're necessarily feeling the interest rate effect on those who currently own homes yet. Most who bought in at the peak of the market are probably fixed at around 2% for a few more years. I think it's reducing the number of active buyers right now as no one wants to get into the market in this tumultuous transitionary period and is waiting to see where the market settles. I have heard from a few developers that more deals are falling apart due to financing now though.

I don't doubt that there are lots of Canadians who overextended themselves, but I think it will be a little while longer before we see some of that product enter the market as they realize what it actually means to live at the limits they were stress-tested at.

[Nouvellecosse]

Toronto lags major urban centres on new housing construction, says Canada’s housing agency

While residential construction increased 63 per cent in Calgary, it rose only 9 per cent in Toronto, says new report from the Canada Mortgage and Housing Corp.

Despite seeing residential construction increase last year, Toronto and other major urban centres aren’t keeping up with population growth, says a new report from Canada’s national housing agency.

https://www.thestar.com/business/real_es...ruction-says-canadas-housing-agency.html

Guess we shouldn't expect prices to drop any time soon.

[GenWhy?]

"from 2020 to last year, with a 63 per cent increase (or 15,017) more units), Toronto only saw a 9 per cent increase in starts (41,898 units) over the same period."

Doesn't seem the worst to me considering Calgary's numbers are probably mostly greenfield:

Calgary: population 1.6m, area 825km2
Toronto: population 2.87m, area 630km2

[travis3000]

Originally Posted by MolsonExport

Long-skyrocketing London home-sale prices dropped in April. Here's why

We don't need any government interventions. The market will take care of itself. High interest rates and coming out a pandemic are more than enough to change the psyche of the Canadian home buyer/seller. Real estate like any investment is more emotional than logical.

Prices are dropping and will continue to drop through the year. My guess is a 10-30% drop from the February highs when the dust settles. All depends on the area of course.

[Nouvellecosse]

Originally Posted by GenWhy?

"from 2020 to last year, with a 63 per cent increase (or 15,017) more units), Toronto only saw a 9 per cent increase in starts (41,898 units) over the same period."

Doesn't seem the worst to me considering Calgary's numbers are probably mostly greenfield:

Calgary: population 1.6m, area 825km2
Toronto: population 2.87m, area 630km2

Those are city propers (individual municipalities) while the article clearly states that it's comparing CMAs (metro areas). But regardless, if a metro area is growing by a certain amount, it needs a proportional amount of new housing whether its greenfield or infill.

[Rico Rommheim]

Originally Posted by Nouvellecosse

Toronto lags major urban centres on new housing construction, says Canada’s housing agency

While residential construction increased 63 per cent in Calgary, it rose only 9 per cent in Toronto, says new report from the Canada Mortgage and Housing Corp.



https://www.thestar.com/business/real_es...ruction-says-canadas-housing-agency.html

Guess we shouldn't expect prices to drop any time soon.

How in the hell can a city that has a billion towers constantly u/c , brand new town centers, and brand new satellite towns under development for the past 25 years possibly lag in housing construction?

edit:

Despite seeing residential construction increase last year, Toronto and other major urban centres aren’t keeping up with population growth, says a new report from Canada’s national housing agency.

Lol nvm.

[thebasketballgeek]

Originally Posted by Nouvellecosse

Toronto lags major urban centres on new housing construction, says Canada’s housing agency
[/url]

Guess we shouldn't expect prices to drop any time soon.

From the article it also said Calgary built 5,500 single-detached homes while Toronto only built 7,000. So 36% of housing starts in Calgary are single-family while in Toronto it’s only 16% of housing starts.

This is the main problem with Alberta they don’t have much in the way of constructing greenfield, so they go with the cheapest option in letting a developer build all the new infrastructure. While 25 years down the line the city will have to pay all those costs to maintain those edge of city developments that they allowed to be constructed willy-nilly. Don’t get me started on all the environmental and economic inefficiencies that come with most of these green fields. Well at least Calgary is rich and desirable so the growth will be paid for by more growth, but hopefully they can really start pushing infill or at the very least build suburbs that don’t make you a slave to the car.

But looking at per-capita housing starts for both CMAs, Calgary is blowing Toronto out of the water with 104 starts/10k residents compared to Toronto at 67 starts/10k residents.

[goodgrowth]

Originally Posted by thebasketballgeek

From the article it also said Calgary built 5,500 single-detached homes while Toronto only built 7,000. So 36% of housing starts in Calgary are single-family while in Toronto it’s only 16% of housing starts.

This is the main problem with Alberta they don’t have much in the way of constructing greenfield, so they go with the cheapest option in letting a developer build all the new infrastructure. While 25 years down the line the city will have to pay all those costs to maintain those edge of city developments that they allowed to be constructed willy-nilly. Don’t get me started on all the environmental and economic inefficiencies that come with most of these green fields. Well at least Calgary is rich and desirable so the growth will be paid for by more growth, but hopefully they can really start pushing infill or at the very least build suburbs that don’t make you a slave to the car.

But looking at per-capita housing starts for both CMAs, Calgary is blowing Toronto out of the water with 104 starts/10k residents compared to Toronto at 67 starts/10k residents.

Weird because I feel like I see the most examples(online anyway) of infill from Calgary...and most are denser...not McMansion infill like you might see in Vancouver or Toronto.

[Innsertnamehere]

Originally Posted by travis3000

We don't need any government interventions. The market will take care of itself. High interest rates and coming out a pandemic are more than enough to change the psyche of the Canadian home buyer/seller. Real estate like any investment is more emotional than logical.

Prices are dropping and will continue to drop through the year. My guess is a 10-30% drop from the February highs when the dust settles. All depends on the area of course.

Most of Southern Ontario is already down at least 10% from February. the GTA is down 10% from February for April, and May sales seem to be indicating further drops.

My bet is we return to roughly summer 2021 pricing, which is similar to what occurred in 2017 (when prices dropped back to summer 2016 prices). That would be equivalent to about a 28% drop from February.

[kwoldtimer]

Originally Posted by Innsertnamehere

Most of Southern Ontario is already down at least 10% from February. the GTA is down 10% from February for April, and May sales seem to be indicating further drops.

My bet is we return to roughly summer 2021 pricing, which is similar to what occurred in 2017 (when prices dropped back to summer 2016 prices). That would be equivalent to about a 28% drop from February.

A 10% drop would be very light, istm. I wonder if buyers are not already holding off in anticipation of lower prices (vs higher mortgage rates)? Meanwhile, sellers might be more inclined to list sooner rather than later, which could increase inventory and feed the drop in prices. I guess we'll see how this plays out between now and the Fall.

[MolsonExport]

A 30% correction and then a holding pattern for at least 4 years is what the Doctor ordered for SW Ontario. The price increases of the past two years are completely insane and unsustainable. When Welland has the eye-watering prices of the GTA from just a few years back, you know things are insane. Houses that fetched 200K in London back in 2005 (when I moved here) are going upwards of $1 million now. Insane.

Sadly, I think interest rates will continue to rise, clobbering those that got into the market recently (as well as a few of us old-timers, still paying off that 20 year mortgage...I am on a variable rate).

[Innsertnamehere]

Originally Posted by MolsonExport

A 30% correction and then a holding pattern for at least 4 years is what the Doctor ordered for SW Ontario. The price increases of the past two years are completely insane and unsustainable. When Welland has the eye-watering prices of the GTA from just a few years back, you know things are insane. Houses that fetched 200K in London back in 2005 (when I moved here) are going upwards of $1 million now. Insane.

Sadly, I think interest rates will continue to rise, clobbering those that got into the market recently (as well as a few of us old-timers, still paying off that 20 year mortgage...I am on a variable rate).

That's essentially what happened in 2017, which I suspect will occur again. Prices skyrocketed in early 2017 before dropping back down to summer 2016 pricing and holding there pretty much until 2020.

The house I bought in spring 2020 would have cost only a small amount less if I had bought it in summer 2016, but would have been a lot more expensive if I bought it in spring 2017. I imagine it's a repeat here, where summer 2021 prices will be the "benchmark" for the next few years as incomes catch up.

Particularly if the political parties follow up on promises of increasing housing supply, which will drive down demand.

[thebasketballgeek]

Originally Posted by goodgrowth

Weird because I feel like I see the most examples(online anyway) of infill from Calgary...and most are denser...not McMansion infill like you might see in Vancouver or Toronto.

Generally the new subdivisions in Calgary and Edmonton range from 30-40 units per hectare which is definitely an improvement from what was previously being built. The problem is there are still many elements with the new subdivisions like the lack of mixed-uses, winding roads, and cul-de-sacs which still make the favoured mode of transportation the car. As a result the “town centres” in these developments don’t provide the desired effect of vibrant streetscapes and foot traffic to its full potential.

But yea Toronto and Vancouver McMansions are just as bad. They really need to look at Montreal which utilize middle housing like townhouses, row houses, and low rise apartments much more prominently to fill in the density.

Canada in general is quite behind the rest of the world in terms of housing variety which is ironic considering how diverse our population is.