Canada's 'housing bubble' deemed close to bursting

[someone123]

Originally Posted by theman23

These are 14% drops from February, not YOY.

I'm not sure how we can get to a good state of housing affordability without declines in real prices (which I guess implies nominal drops since wage growth is comparatively limited) and those drops are pretty mild. -0.4% in Vancouver. If the population is completely allergic to any housing corrections ever, things will just get worse and worse. Not just in terms of poor affordability but misallocation of capital into real estate and low productivity.

[ssiguy]

Originally Posted by someone123

I'm not sure how we can get to a good state of housing affordability without declines in real prices (which I guess implies nominal drops since wage growth is comparatively limited) and those drops are pretty mild. -0.4% in Vancouver. If the population is completely allergic to any housing corrections ever, things will just get worse and worse. Not just in terms of poor affordability but misallocation of capital into real estate and low productivity.

The drops are fairly mild in Vancouver city but in the NoF & SoF prices are plunging. This is due to the fact that these areas tend to be of lower income and therefore the residents are much more price sensitive.

It's very true that we cannot reach more reasonable level without a MAJOR correction of at least 30% in the overpriced markets. This, however, is not just true of real estate but also rentals.

It is not coincidence that our most expensive real estate markets are also our most expensive rental markets. They are directly related because high real estate means that mid-lower income residents who would be able to afford a condo/townhome in an affordable market cannot afford such purchases............it keeps thousands of would be buyers in the rental market.

[someone123]

There are the parts of metro Vancouver and BC that went crazy during covid as people decided they wanted to live farther out since they could work from home and half the stuff in town was closed and urban living was generally miserable. Maybe they started reconsidering after "110 weeks to flatten the curve" finally worked and covid was eliminated as a threat to humanity.

Langley detached was up to $1.75M or so. That's where Vancouver was in 2015. Apparently suburban Ontario is crashing too.

[casper]

Originally Posted by theman23

These are 14% drops from February, not YOY.

I would attribute the 14% to the BOC move. Given it is in communities that are a bit of a skytrain or commuter rail trip perhaps the post-COVID return to work played a factor. However I would expect the BOC to be the main cause.

[casper]

Originally Posted by ssiguy

The drops are fairly mild in Vancouver city but in the NoF & SoF prices are plunging. This is due to the fact that these areas tend to be of lower income and therefore the residents are much more price sensitive.

It's very true that we cannot reach more reasonable level without a MAJOR correction of at least 30% in the overpriced markets. This, however, is not just true of real estate but also rentals.

It is not coincidence that our most expensive real estate markets are also our most expensive rental markets. They are directly related because high real estate means that mid-lower income residents who would be able to afford a condo/townhome in an affordable market cannot afford such purchases............it keeps thousands of would be buyers in the rental market.

I agree we need a correction, but it can't be at a level that destabilizes the economy. 30% is to much. I think 15% is as a max is reasonable but concerning. Inflation will add effectively add another 15% over the next three years.

[swimmer_spe]

Originally Posted by ssiguy

The drops are fairly mild in Vancouver city but in the NoF & SoF prices are plunging. This is due to the fact that these areas tend to be of lower income and therefore the residents are much more price sensitive.

It's very true that we cannot reach more reasonable level without a MAJOR correction of at least 30% in the overpriced markets. This, however, is not just true of real estate but also rentals.

It is not coincidence that our most expensive real estate markets are also our most expensive rental markets. They are directly related because high real estate means that mid-lower income residents who would be able to afford a condo/townhome in an affordable market cannot afford such purchases............it keeps thousands of would be buyers in the rental market.

It is almost as though we need rent controls and even property price controls.
I cannot understand why a $1 million house is a tear down.

Originally Posted by casper

I agree we need a correction, but it can't be at a level that destabilizes the economy. 30% is to much. I think 15% is as a max is reasonable but concerning. Inflation will add effectively add another 15% over the next three years.

Overpriced homes are a good way to destabilize the economy. When that essential worker cannot afford housing, how will you fill those positions as they leave for cheaper areas?

[SpongeG]

the million-dollar house is the price of the land. You tear it down and build a new house with one or two rental suites inside it.

[casper]

Originally Posted by swimmer_spe

It is almost as though we need rent controls and even property price controls.
I cannot understand why a $1 million house is a tear down.



Overpriced homes are a good way to destabilize the economy. When that essential worker cannot afford housing, how will you fill those positions as they leave for cheaper areas?

That essential worker who is making a modest salary will not be able to afford a single family home in the City of Vancouver. Perhaps in a more remote area. That has been the case for a decade or two. There is no way of fixing that. We should not even try.

What we need to ensure is that the essential worker can afford a home to live in Vancouver. That is going to be a condo or rental apartment. Ideally large enough to raise a family. We need more building owned by housing societies and co-ops. I am all for government being more active in creating affordable multi-family housing.

[casper]

Originally Posted by SpongeG

the million-dollar house is the price of the land. You tear it down and build a new house with one or two rental suites inside it.

BC assessment separates out the land from building. In the neighborhood I grew up in the city of Vancouver, anything built in the 1980s or earlier is worth almost nothing.

Just now I am looking at putting a rental suite into the basement of a 1950s bungalow. The building is assessed at $47k the land at $1.7M. The suite is likely going to add an extra $100-150k to the value. It is insane, but buildings are depreciating assets. Land is not.

[theman23]

Originally Posted by casper

That essential worker who is making a modest salary will not be able to afford a single family home in the City of Vancouver. Perhaps in a more remote area. That has been the case for a decade or two. There is no way of fixing that. We should not even try.

What we need to ensure is that the essential worker can afford a home to live in Vancouver. That is going to be a condo or rental apartment. Ideally large enough to raise a family. We need more building owned by housing societies and co-ops. I am all for government being more active in creating affordable multi-family housing.

As it stands, the essential worker cannot afford a home in Vancouver or a remote area in BC regardless of how it is built.

Being all for “ government being more active in creating affordable multi-family housing” is just code for “doing nothing to solve structural problems in our economy so they can protect my investment”.

[someone123]

Originally Posted by theman23

As it stands, the essential worker cannot afford a home in Vancouver or a remote area in BC regardless of how it is built.

The median worker in metro Vancouver earns around $40k a year and the median "couple family" earns around $95k and can afford around a 50% share of the median condo. High earners are rarer and that group still can't afford to enter the medium to high end market right now without help.

Not sure how the government is supposed to subsidize new housing for nearly everybody in metro Vancouver or Toronto (or Welland etc. which probably have Osaka level real estate prices now; nothing to see here folks). I think we would be better off just having a functional affordable housing market and to have that prices need to come down and/or wages go up.

(Inflation per se is not going to help affordability; income growth is needed.)

[casper]

Originally Posted by someone123

The median worker in metro Vancouver earns around $40k a year and the median "couple family" earns around $95k and can afford around a 50% share of the median condo. High earners are rarer and that group still can't afford to enter the medium to high end market right now without help.

Not sure how the government is supposed to subsidize new housing for nearly everybody in metro Vancouver or Toronto (or Welland etc. which probably have Osaka level real estate prices now; nothing to see here folks). I think we would be better off just having a functional affordable housing market and to have that prices need to come down and/or wages go up.

(Inflation per se is not going to help affordability; income growth is needed.)

The average single family home in the city of Vancouver is zoned to have a secondary suite in the basement and a laneway house above the garage. That provide an extra $60k in revenue. You still need to figure out the down-payment.

Yes, Japan has a near free for all zoning system and very small lots relative to Canada. If we wanted to do that in Canada it would amount to taking every lot in Vancouver and lowing it to be sub-divided with one house facing the lane and the other facing the street. We are not going there, but the laneway suit provisions are a nice compromise in that direction.

[casper]

Originally Posted by theman23

As it stands, the essential worker cannot afford a home in Vancouver or a remote area in BC regardless of how it is built.

Being all for “ government being more active in creating affordable multi-family housing” is just code for “doing nothing to solve structural problems in our economy so they can protect my investment”.

Not at all. I am very much in favor of creating long-term solutions. Creating multi-family housing that is owned by non-profits with a focus on affordable rent and by co-ops takes those properties out of the private market for ever and ensuring they are not subject to land values continuing to go up as we grow.

[theman23]

Originally Posted by someone123

The median worker in metro Vancouver earns around $40k a year and the median "couple family" earns around $95k and can afford around a 50% share of the median condo. High earners are rarer and that group still can't afford to enter the medium to high end market right now without help.

Not sure how the government is supposed to subsidize new housing for nearly everybody in metro Vancouver or Toronto (or Welland etc. which probably have Osaka level real estate prices now; nothing to see here folks). I think we would be better off just having a functional affordable housing market and to have that prices need to come down and/or wages go up.

(Inflation per se is not going to help affordability; income growth is needed.)

It's akin to throwing scraps to starving dogs to distract them while the landowners get to enjoy laws and tax structures that keep them fat. Nearly 2/3s of this country's population lives in an area thats seriously unaffordable. The scale of direct government intervention required to make that affordable would have to be on par or greater than what we've seen in countries like Singapore, but I doubt the land owners or investors who espouse token solutions would be in favour of this.

[casper]

Originally Posted by theman23

It's akin to throwing scraps to starving dogs to distract them while the landowners get to enjoy laws and tax structures that keep them fat. Nearly 2/3s of this country's population lives in an area thats seriously unaffordable. The scale of direct government intervention required to make that affordable would have to be on par or greater than what we've seen in countries like Singapore, but I doubt the land owners or investors who espouse token solutions would be in favour of this.

My understanding is Singapore is big on 100 year leases. We have that in Vancouver. Some of the lowest cost condos for sales ae leasehold on the balance of a 99 year lease. Are these popular? I don't know. Not certain I would buy one.

Many of the buildings on first nations lands are 100 year leases. First nations have been busy developing condo towers. So yes, we have some of that.

I think co-ops or housing societies are a better option than having the government own the land long-term and provide 100 year leases.

Perhaps we need transferable co-op leases that can be passed along to close relatives.

[theman23]

Originally Posted by casper

My understanding is Singapore is big on 100 year leases. We have that in Vancouver. Some of the lowest cost condos for sales ae leasehold on the balance of a 99 year lease. Are these popular? I don't know. Not certain I would buy one.

Many of the buildings on first nations lands are 100 year leases. First nations have been busy developing condo towers. So yes, we have some of that.

I think co-ops or housing societies are a better option than having the government own the land long-term and provide 100 year leases.

Perhaps we need transferable co-op leases that can be passed along to close relatives.

It isn't even comparable. Virtually all housing in Singapore is leaseholds, and almost all of it is public housing.

I'm not sure what you're trying to debate. It doesn't matter if a property is a leasehold condo or co-op, how do you propose we actually build these units?

[casper]

Originally Posted by theman23

It isn't even comparable. Virtually all housing in Singapore is leaseholds, and almost all of it is public housing.

I'm not sure what you're trying to debate. It doesn't matter if a property is a leasehold condo or co-op, how do you propose we actually build these units?

Federal and/or provincial government providing low or zero interest loans or loan guarantees to co-ops and housing societies to buy land and build houses. The last federal budget dumped a bunch of money into that. The City of Vancouver has been making deals with housing societies to lease land they own for housing.

It is going on now. What we need to do is expand on that model. In Vancouver we have lots of housing societies, these are just a few:
- Vancouver Native Housing Society https://vnhs.ca/
- Red Door Housing Society https://reddoorhousing.ca/
- McLaren (targeting people with HIV) https://mclarenhousing.com/
- Tikva (for Jewish faith) https://tikvahousing.org/
- YWCA (for single mothers) https://ywcavan.org/programs/housing/arbutus-project
- Social Housing for Artists https://www.bcabca.ca/
- Catalyst Targeting Mean Income earners https://catalystcommdev.org/

If you search MLS for condos in Vancouver many of the condos at the bottom end of the price are lease-hold. Many of those are on land owned by first nations communities.

[theman23]

What is a "bunch"? My research shows me that 4% of housing in Vancouver is public housing. Are we going to be increasing that by an order of magnitude to solve the affordability problem? I'd like to hear more specifics as to what level of direct government intervention you're thinking we need to make an impact.

Also, are low interest or no interest loans really that helpful in an era where people are freaking out about an overnight rate of 1.5%?

Barring expropriation and historical increases in funding in the form of grants, public housing is mostly going to amount to window dressing when it comes to tackling this problem.

[casper]

Originally Posted by theman23

What is a "bunch"? My research shows me that 4% of housing in Vancouver is public housing. Are we going to be increasing that by an order of magnitude to solve the affordability problem? I'd like to hear more specifics as to what level of direct government intervention you're thinking we need to make an impact.

Also, are low interest or no interest loans really that helpful in an era where people are freaking out about an overnight rate of 1.5%?

Barring expropriation and historical increases in funding in the form of grants, public housing is mostly going to amount to window dressing when it comes to tackling this problem.

City of Vancouver put out some numbers in 2017. So somewhat dated. (That is what google found for me, assume there some newer data somewhere).

https://vancouver.ca/files/cov/housing-characteristics-fact-sheet.pdf

There are not very clearly about where they are double counting. Assuming they are not double counting that works our to 23%. If they are double counting it is about half that.

Many of these developments are owned by the city or province and leased to the housing society or co-op that operates it. Some co-ops own their own land. Some housing societies own their own land.

I don't think we want to give low interest loans to individuals. We want to give them to housing societies and co-ops to buy land on the open market and cover the construction cost.

The feds are putting $1.5 into co-op housing:

https://www.cbc.ca/news/canada/british-c...ment-to-co-op-housing-say-feds-1.6424087

The one thing that needs to be fixed is maintenance. The co-op should create and maintain a reserve fund based on an engineering study to cover long term maintenance. I think we want these things to be self sufficient and once they pay back the initial investment to be independent of government.

[someone123]

Not against co-op housing but it's not clear why it's a solution to problems with zoned land or labour/material costs, or why you wouldn't also want to fix the multi-unit market (e.g. if government-led co-op projects get around exorbitant development fees, why not fix that in general?). Of course the government can apportion a percentage of zoning to co-op but that doesn't increase supply, and the $1.5B spent comes substantially from that bulk of the middle class that now has a hard time affording housing.

From the other end there is the problem of speculation and credit which leads to huge demand for construction but I don't think that can reasonably be solved by creating a parallel housing supply of co-ops. In fact you can make it worse for the "losers" who don't get the co-op units.