Canada's 'housing bubble' deemed close to bursting

[lio45]

Originally Posted by rousseau

Ugh, no thanks. It's frustrating looking at all the viable options Americans have by comparison. Crikey, if I were an American in my thirties feeling squeezed in a coastal city I would totally be scouring the midwest for groovy places to live like Pittsburgh or Cincinnati. Or Burlington Vermont.

When you're in the middle of the island that is southern Ontario you basically have nowhere else to go. From what I recall there used to be a contingent of twenty-something "creatives" and misfits that would run off to the cheap rents of the Plateau in Montreal, but those days are over.

Your point is really good but you’re really wrong with one of the examples you picked: Burlington is popular and thus, crazy expensive.

For good urban walkable bang-for-the-buck in the Northeast, forget Burlington; the best way to get what you want is in an all-black inner city Albany ‘hood of attached Victorian multiplexes (some are even actual brownstones; still dirt cheap).

[Hali87]

Originally Posted by goodgrowth

Going to be sorta hilarious when Edmonton is inevitably like 3 million people and still cheaper than 90% of Canadian cities...

It seems like a real possibility for a few reasons. For one thing it's relatively quick and inexpensive to build there because the city is surrounded by flat, clear land that's easy to build on, plus the fuel and electricity used in the construction process (and then as a cost-of-living later) is significantly cheaper than in many provinces, plus the materials and services are taxed less than in other places. Other than the River Valley, there aren't many natural features that would drive up property values or construction costs. It's the least leisure-and-tourism oriented of Canada's large cities and consequently this doesn't create pressure on prices/availability for working people/students/etc the way it seems to in many places.

On top of that the existing housing stock there tends to both fairly modest/reserved/generic (ie not flashy or complicated to maintain) and modern/postwar (so no premium on price for being "historic", less retrofitting, good insulation, compatible replacement parts are cheaper and easier to find, etc).

Edmonton overall feels very practical and value-for-money oriented, and the fact that so much of its housing stock is just kind of plain and non-descript will be a huge advantage in terms of affordability over the next decade or so. There's also a steady amount of new construction there, and abundant opportunities to add density without tearing down any existing buildings, and a nearly unlimited amount of space to sprawl into, and the road/transit infrastructure tends to feel "overbuilt" by Canadian standards and has fewer pressures on capacity than average, and so it will be able to continue to sprawl for longer before running into major problems. I think that 10 years from now it will be the most affordable major city in the West and likely the entire country, and will have relatively good outcomes in terms of things like traffic and crime/social issues.

[lio45]

It’s amusing to see the consensus on inspections here. The key to my wealth-building has been to buy quickly and without conditions, often even sight unseen (sometimes while I was thousands of kms away). It’s one of my basic rules.

One of my good friends (an engineer, nerdy, the type to carefully considerate every move) was trying to get into real estate (years ago, back when it was very accessible, at least here) and it didn’t work, he asked me how I was doing it, I quickly realized his problem. A good deal will never just sit there long enough for a really slow, really careful investor to be the one who manages to grab it; someone else will move faster and get it before you. Always.

[suburbanite]

Originally Posted by lio45

It’s amusing to see the consensus on inspections here. The key to my wealth-building has been to buy quickly and without conditions, often even sight unseen (sometimes while I was thousands of kms away). It’s one of my basic rules.

One of my good friends (an engineer, nerdy, the type to carefully considerate every move) was trying to get into real estate (years ago, back when it was very accessible, at least here) and it didn’t work, he asked me how I was doing it, I quickly realized his problem. A good deal will never just sit there long enough for a really slow, really careful investor to be the one who manages to grab it; someone else will move faster and get it before you. Always.

Real estate is very often a "gut instinct" type of business. Sure if you're talking about institutional investors looking at a billion dollar portfolio of stabilized assets, there's a level of due diligence and analysis that will be undertaken, but the residential development side can still have a very Wild West type of vibe.

I'm closely involved with a large integrated developer in the GTA, and I've seen land purchases in excess of $50 million go conditional in less than 24 hours. You see something come to market, you have a general idea of the planning framework in the area, the time to develop, and what the end value of the serviced lots will be and you pull the trigger. It has definitely been easier for the past 20 years in the GTA where even if you were wrong on some of your initial instinctual assumptions, delays in development actually probably ended up earning you more money as the growth in home prices drastically outpaced any holding/financing costs on the acquisition.

I personally wouldn't run a business like that, but these are mostly private family companies that don't answer to outside investors and can afford to take swings like that. It's also partly the reason that Mattamy was able to come in and carve out a significant piece of the market. Peter Gilgan brought an institutional lense to a market dominated by in some ways, unsophisticated (but multi-billion dollar) mom and pop shops.

[niwell]

Originally Posted by lio45

It’s amusing to see the consensus on inspections here. The key to my wealth-building has been to buy quickly and without conditions, often even sight unseen (sometimes while I was thousands of kms away). It’s one of my basic rules.

I think there's a difference between purchasing a place you want to use for yourself vs something that's solely an investment. Also the environment for the latter in Southern Ontario is likely very different than what you've experienced.

[swimmer_spe]

Originally Posted by casper

I don't work in construction so I am no expert, but I popped in and have a look every week or two during construction. Nothing looked off to me.

Ok, I though it was weird how they fully enclosed the exterior then the following week had to cut a hole in be able to get the dry wall into the second floor.

When I sold a few years later the new buyer had an inspection. The only thing the inspector found was the dishwasher was a fire hazard. Apparently GE had a recall to replace a motor that I was not aware of. The home inspector clearly checked all the appliances for recall notices.

That is one house that you know of in a subdivision of how many? Read various news sources and do a bit more research on it and you will find that there are some things that are done in a questionable way. Some of those things are decks that are not structurally sound, fences that fall over, no insulation in a garage, or even no barrier to block emissions in a garage from entering a house.

Originally Posted by goodgrowth

Going to be sorta hilarious when Edmonton is inevitably like 3 million people and still cheaper than 90% of Canadian cities...

It speaks to the overall atmosphere of the various places. The more sought after places are seeing higher prices. One would think how some people talk of freedom that Edmonton would be just the place to go. And one would think that how terrible people talk of Toronto and Ontario as a whole that it would be seeing crashing prices.

Originally Posted by Truenorth00

Won't be that hilarious when you have 2 hr one way commutes in Edmonton at a third the population of the GTA.

Could they be the next city to get some sort of GO like commuter rail?

[Harrison]

Originally Posted by swimmer_spe

Could they be the next city to get some sort of GO like commuter rail?

Well we are finally getting a regional transit commission (Edmonton Metropolitan Transit Services Commission) and a smart card, Arc, and the plan calls for regional bus service to start. Regional rail isn't anticipated yet, but I could see some LRT extensions to St. Albert, Beaumont and maybe Sherwood Park constructed over the next 15-25 years.

[someone123]

Originally Posted by suburbanite

I personally wouldn't run a business like that, but these are mostly private family companies that don't answer to outside investors and can afford to take swings like that.

The amount of risk taken depends on the capabilities and capital you have and appetite for risk depends on the buyer. A given risk might bankrupt one buyer while another can deal with it profitably or it just averages out with all of the other deals.

A lot of people are looking for a home, they don't really know how to identify or fix problems, and they're sinking a huge portion of their total wealth into one property.

It reminds me of the VC ecosystem or insurance where different people can have wildly different rational outlooks.

[swimmer_spe]

Originally Posted by Harrison

Well we are finally getting a regional transit commission (Edmonton Metropolitan Transit Services Commission) and a smart card, Arc, and the plan calls for regional bus service to start. Regional rail isn't anticipated yet, but I could see some LRT extensions to St. Albert, Beaumont and maybe Sherwood Park constructed over the next 15-25 years.

Sounds like they actually are thinking ahead. The challenge will be when it comes time to get some sort of regional rail downtown.

[whatnext]

Bwaahhhhaaahaha, I hope the seller gets burned:

Vancouver teardown listed for $3.5M one year after selling for $2.5M
Andrew Weichel
Updated May 25, 2022 5:32 p.m. PDT

A teardown on Vancouver's west side has been listed for just under $3.5 million, a year after it was purchased by a numbered company for $2.5 million.

It's unclear how the seller decided on the asking price, which is approximately 40 per cent higher than the property last sold for in February 2021. CTV News has reached out to the realtor for more information.

The listing has raised some eyebrows on social media, but Tom Davidoff, a housing researcher and professor at UBC's Sauder School of Business, told CTV News the price didn't strike him as "totally crazy," given the state of the market....

https://bc.ctvnews.ca/vancouver-teardown-listed-for-3-5m-one-year-after-selling-for-2-5m-1.5918791

[swimmer_spe]

Originally Posted by whatnext

Bwaahhhhaaahaha, I hope the seller gets burned:

Vancouver teardown listed for $3.5M one year after selling for $2.5M
Andrew Weichel
Updated May 25, 2022 5:32 p.m. PDT

A teardown on Vancouver's west side has been listed for just under $3.5 million, a year after it was purchased by a numbered company for $2.5 million.

It's unclear how the seller decided on the asking price, which is approximately 40 per cent higher than the property last sold for in February 2021. CTV News has reached out to the realtor for more information.

The listing has raised some eyebrows on social media, but Tom Davidoff, a housing researcher and professor at UBC's Sauder School of Business, told CTV News the price didn't strike him as "totally crazy," given the state of the market....

https://bc.ctvnews.ca/vancouver-teardown-listed-for-3-5m-one-year-after-selling-for-2-5m-1.5918791

Maybe it is time to raise taxes on non private citizen owned residential properties.

[suburbanite]

Originally Posted by someone123

A lot of people are looking for a home, they don't really know how to identify or fix problems, and they're sinking a huge portion of their total wealth into one property.

I agree that if you are buying a personal home, and you are not going to get a home inspection on the fear that you will miss out on the deal, then you better have ~20% of the home value in liquid funds as a contingency, or be the handiest person on the planet.

[whatnext]

You've been had Canada:

Following a Trail of Tainted Money From China Into Vancouver Real Estate
by Jared Ferrie (OCCRP) and Robert Cribb (Toronto Star)
26 May 2022
Also published by our partner Toronto Star (Canada, in English).

A man accused of paying bribes in one of China's biggest-ever military corruption scandals allegedly funneled at least 114 million Canadian dollars into banks in that country before investing more than CA$32 million in luxury Vancouver real estate.

Before moving from China to Canada in 2006, Chen Runkai told immigration officials that he made at most 41,000 Canadian dollars a year. His wife, he said, was employed as a clerk.

Despite their modest incomes, a series of money transfers poured CA$114 million into the Chen family’s Canadian bank accounts a few years later.

Chen, it turns out, is wanted for arrest by the Chinese government on charges of bribery for his alleged role in a major corruption scandal involving a senior military official, OCCRP and the Toronto Star have learned. Now, he’s fighting to stay in Canada, where his family has two mansions in Vancouver overlooking the Pacific.

He is the owner of a Tudor-style home with mountain and ocean views he purchased in 2016 for CA$15.6 million. It sits a few doors down from another mansion his daughter purchased in 2012 for about CA$14 million — without a mortgage — when she was 25, while listing her occupation as “student.”..

....The federal government has been quietly analyzing the source of Chen’s wealth through documents dating back to before he arrived in Canada in 2006 through the now defunct Immigrant Investor Program.

Chen told authorities that he and his wife had amassed CA$1.26 million to bring into Canada. But from 2010, far more money started moving into Chen family bank accounts in Canada.

It started with CA$15.1 million sent from four different companies in Hong Kong and mainland China, documents in the case study show. Millions more followed. Money was sent through offshore companies in tax havens and an underground banking network of companies and Hong Kong currency exchanges, some with connections to organized crime, according to the case study. By the end of 2014, the Chen family had moved over CA$114 million into Canada in this way....

....Although the Chen family’s money moved through five major Canadian banks, only one of them, UBS Bank (Canada), flagged the conspicuous transfers as suspicious. The volume of transfers in such a short time had the hallmarks of a money laundering technique called “layering,” in which “complex layers of financial transactions are used to obscure the source of the ownership of funds,” according to a report filed by UBS Canada flagging some of Chen’s 2011 transactions as suspicious....

https://www.occrp.org/en/investigations/...ey-from-china-into-vancouver-real-estate

[thewave46]

Originally Posted by lio45

It’s amusing to see the consensus on inspections here. The key to my wealth-building has been to buy quickly and without conditions, often even sight unseen (sometimes while I was thousands of kms away). It’s one of my basic rules.

One of my good friends (an engineer, nerdy, the type to carefully considerate every move) was trying to get into real estate (years ago, back when it was very accessible, at least here) and it didn’t work, he asked me how I was doing it, I quickly realized his problem. A good deal will never just sit there long enough for a really slow, really careful investor to be the one who manages to grab it; someone else will move faster and get it before you. Always.

From an investment point-of-view, certainly, this is the way to go. Like being the first in on IPO startups, the advantages to being the quick mover are high. The risks are higher too, especially for those who are not experts in the field (whether it be the details behind the financials of small companies, or the details of building construction/permits)

Would I apply the same logic to a non-expert setting up a retirement fund? Or someone who is purchasing a house as a home to live in first, with the investment consideration a far second? No.

A home inspection (even of questionable utility) shows some effort to diligence. Which is probably a good thing for non-experts purchasing the most expensive thing they'll ever own.

[lio45]

Originally Posted by thewave46

From an investment point-of-view, certainly, this is the way to go. Like being the first in on IPO startups, the advantages to being the quick mover are high.

Yeah, exactly. Buying only after careful inspections is the real estate investing equivalent of waiting until your shoe shine boy advises you to buy Tesla stock or Bitcoin to get on board.

I realize that when it’s your home and you’re not handy nor experienced, it’s different, I just found the contrast interesting.

[goodgrowth]

For the first time in 50 years, more Ontarians are moving to Quebec where housing can be half the price

https://www.thestar.com/business/real_es...where-housing-can-be-half-the-price.html

[thewave46]

Originally Posted by goodgrowth

For the first time in 50 years, more Ontarians are moving to Quebec where housing can be half the price

https://www.thestar.com/business/real_es...where-housing-can-be-half-the-price.html

I'd be curious where those Ontarians are coming from. Are they Eastern/Northeastern Ontarians making the jump over the border?

Or are they coming from father afield?

[goodgrowth]

Originally Posted by thewave46

I'd be curious where those Ontarians are coming from. Are they Eastern/Northeastern Ontarians making the jump over the border?

Or are they coming from father afield?

Not sure, I just think it's going to be amusing if Quebec gets an anglo influx due to the housing situation.

[Danny D Oh]

Originally Posted by rousseau

Ugh, no thanks. It's frustrating looking at all the viable options Americans have by comparison. Crikey, if I were an American in my thirties feeling squeezed in a coastal city I would totally be scouring the midwest for groovy places to live like Pittsburgh or Cincinnati. Or Burlington Vermont.

When you're in the middle of the island that is southern Ontario you basically have nowhere else to go. From what I recall there used to be a contingent of twenty-something "creatives" and misfits that would run off to the cheap rents of the Plateau in Montreal, but those days are over.

Americans can also lock in their mortgage rate for the entire term of their mortgage. If a government really wanted to make transformational change here they could make some policy changes on lenders to encourage this.

[ssiguy]

Saw a BNN segment yesterday about Canada's declining real estate sector and it was very telling.

The realtor from Vancouver stated there is definitely a slow down in the market and prices could come down modestly over the next year and this was due primarily because of rising interest rates. So far so good.

Then he was asked how the developers would react in such a situation and he was very frank in that he can see developers not going ahead with many planned projects. Wait a minute. I thought we had a shortage of supply so wouldn't it be the best time to build when demand is lowering so supply would increase?

This is not a natural lack of supply issue but rather a very calculated and manufactured supply issue by developers to maintain low supply to guarantee ever increasing prices.