Canada's 'housing bubble' deemed close to bursting

[ssiguy]

Leased homes, regardless of the length, do not qualify for CMHC financing or nearly any other loaning institution without massive down payments which no one can accumulate when rental prices are so high. Basement suites are fine but leave the renters in precarious situation as rent controls don't apply so their rent can be increased greatly or they can just be turfed out with no reason given. Also exceptionally few basement suites are more than just bachelors so God forbid if a couple wants a kid.............what do you call your first ultrasound in Vancouver?.........an eviction notice.

We need a significant housing crash and the 30% I quoted was a bare minimum but in places like BC or Toronto it should be over 50%. Remember prices just went up by 25% in the last year. Right now in these markets, the real estate prices bear absolutely no resemblance to local wages because they are built on nothing more than free money and wild speculation.

[thewave46]

Man there are a lot of people just waving the gasoline can around and screaming "We have to burn it down!", as if they didn't live through 15-20% interest rates at one time in their lives.

In my experience, using methadone to wean a junkie off is a more effective treatment than cold turkey.

[someone123]

You could easily point out the opposite sentiment with interest rates and housing; we have to subordinate all other economic interests to the preservation of housing wealth. The Bank of Canada goes back to 2019 rates and threatens raising them by another 1-2% during an era of out of control inflation (the rates didn't cause the inflation, they are catching up) and lots of people want to make it into a story about what bad stuff will happen if housing prices fall. The BoC has a 2% inflation target and is just doing its thing, though we now know they undershot.

[swimmer_spe]

Originally Posted by ssiguy

Leased homes, regardless of the length, do not qualify for CMHC financing or nearly any other loaning institution without massive down payments which no one can accumulate when rental prices are so high. Basement suites are fine but leave the renters in precarious situation as rent controls don't apply so their rent can be increased greatly or they can just be turfed out with no reason given. Also exceptionally few basement suites are more than just bachelors so God forbid if a couple wants a kid.............what do you call your first ultrasound in Vancouver?.........an eviction notice.

We need a significant housing crash and the 30% I quoted was a bare minimum but in places like BC or Toronto it should be over 50%. Remember prices just went up by 25% in the last year. Right now in these markets, the real estate prices bear absolutely no resemblance to local wages because they are built on nothing more than free money and wild speculation.

CMHC is governed by the laws. That means the governments can change the laws. So, if a politician was serious on fixing this issue, they should change the laws.

[theman23]

Originally Posted by casper

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.

I'm not really seeing what you're proposing here. What are these links supposed to prove? I already know that social housing exists in Canada. Is $1.5 billion spread across the country going to make a difference? No, but thanks for the laugh.

There are fundamental problems to how we value housing as an investment class in this country, and throwing more money into public housing isn't going to fix that. It's window dressing to distract from the real problem.

[casper]

Originally Posted by theman23

I'm not really seeing what you're proposing here. What are these links supposed to prove? I already know that social housing exists in Canada. Is $1.5 billion spread across the country going to make a difference? No, but thanks for the laugh.

There are fundamental problems to how we value housing as an investment class in this country, and throwing more money into public housing isn't going to fix that. It's window dressing to distract from the real problem.

For those that benefit from the $1.5 billion, obviously it will make a difference.

My point is simple. We need a diverse mix of social housing that is operated at arms length from government. Each of those housing societies has its own unique mission and community it is trying to serve. We need government to provide loan guarantees and then get out of the way. The vast majority of these societies are not going to default. End result is the cost to government is almost nothing.

Keeping mortgage rates low will also help get these built.

[theman23]

Originally Posted by casper

For those that benefit from the $1.5 billion, obviously it will make a difference.

My point is simple. We need a diverse mix of social housing that is operated at arms length from government. Each of those housing societies has its own unique mission and community it is trying to serve. We need government to provide loan guarantees and then get out of the way. The vast majority of these societies are not going to default. End result is the cost to government is almost nothing.

Keeping mortgage rates low will also help get these built.

You can't be serious. By that same token, giving a million bucks to a homeless man on the street will obviously make a difference to that one individual. But clearly it'll do little to solve homelessness in Vancouver.

I'm still not understanding why you think these housing societies will get around to actually building the housing units without direct government intervention. The same forces that shape supply and demand for market units will apply to them. There has been no shortage of cheap money these last few years and we've seen a severe worsening of affordability, but now you're arguing that all we need to solve the housing problem is to hand out even more cheap loans? If all the government needed to do was hand out money and get out of the way, why are we in this situation?

[ssiguy]

Originally Posted by casper

For those that benefit from the $1.5 billion, obviously it will make a difference.

My point is simple. We need a diverse mix of social housing that is operated at arms length from government. Each of those housing societies has its own unique mission and community it is trying to serve. We need government to provide loan guarantees and then get out of the way. The vast majority of these societies are not going to default. End result is the cost to government is almost nothing.

Keeping mortgage rates low will also help get these built.

We wouldn't have to build as many social units if we hadn't had such low interest rates to begin with. Higher interest rates make people think twice about borrowing hence making them live within their budget while at the same rewarding them for savings.

Low interest rates are not the solution to either our high real estate or rental prices but rather the cause of it. If we REALLY want affordable housing them interest rates must at least double from where they are now.

[yaletown_fella]

Originally Posted by ssiguy

Leased homes, regardless of the length, do not qualify for CMHC financing or nearly any other loaning institution without massive down payments which no one can accumulate when rental prices are so high. Basement suites are fine but leave the renters in precarious situation as rent controls don't apply so their rent can be increased greatly or they can just be turfed out with no reason given. Also exceptionally few basement suites are more than just bachelors so God forbid if a couple wants a kid.............what do you call your first ultrasound in Vancouver?.........an eviction notice.

We need a significant housing crash and the 30% I quoted was a bare minimum but in places like BC or Toronto it should be over 50%. Remember prices just went up by 25% in the last year. Right now in these markets, the real estate prices bear absolutely no resemblance to local wages because they are built on nothing more than free money and wild speculation.

I used to live in a basement apartment and my rent was never increased above inflation. I believe rent control did apply to basement units in Ontario if you rented a basement suite before 2019. This is what I was told, however, I rented from a rental corporation so I might have had more protection than someone renting from a family who lives in the house upstairs.

I was renting it at $801 in 2021 (plus utilities) and it's now around $845 which is consistent with the CPI inflation figures.

I ultimately had to move out because of dampness(waterproofing hadnt been repaired in decades and sump pump wasnt installed). Besides this dampness and the kitchen sink backing and flooding my unit from the upstairs unit clogging the sink, it was a tremendous deal.

[yaletown_fella]

Originally Posted by casper

For those that benefit from the $1.5 billion, obviously it will make a difference.

My point is simple. We need a diverse mix of social housing that is operated at arms length from government. Each of those housing societies has its own unique mission and community it is trying to serve. We need government to provide loan guarantees and then get out of the way. The vast majority of these societies are not going to default. End result is the cost to government is almost nothing.

Keeping mortgage rates low will also help get these built.

Yes , and in 2007 the US didnt have to worry about the subprime market since it was contained

Loan guarantees by the public sector are the mother of bad ideas. How is it fair to tax savers and renters living within their means to prop up the stupid dreams and decadence of homeowners and speculators living out of their means?

Why not allow the economy to deleverage and wait for prices to decline to more reasonable levels? We wouldnt be having this discussion if it were the 90s. The difference is the policy makers of the 2000s gave into the political pressure of the greedy (regardless of the political party they claimed to identify with) and now we are paying the price as a society.

[yaletown_fella]

Originally Posted by ssiguy

We wouldn't have to build as many social units if we hadn't had such low interest rates to begin with. Higher interest rates make people think twice about borrowing hence making them live within their budget while at the same rewarding them for savings.

Low interest rates are not the solution to either our high real estate or rental prices but rather the cause of it. If we REALLY want affordable housing them interest rates must at least double from where they are now.

I agree, but we won't be able to reason with most people. Most economists are indoctrinated to believe that a strong economy needs 2% or greater inflation and that price stability or deflation is the worst possible scenario.

[swimmer_spe]

Everyone is looking at the financial reasons for the housing bubble, but no one is looking at the mental reasons.

Remember, 2 years ago, when the lockdown first happened? That had people look at their tiny apartments and condos and ask "Why?"
Why should I live here?
Why should I live like this?

And so, if they could, the moved. Then more people kept asking why .And they moved.There is more to living than a 1 bedroom apartment within walking distance of the subway. There is more to life than having everything so close.

When someone wants a house with a yard, then then start to think of what they really want. I know of a couple that lived in a downtown Toronto condo who moved to rural New Brunswick. We used to see the drain of young people from the rural areas to the big cities. I feel that we are seeing the reverse of that. It is driven by mental reasons, not financial. Yes, the expensive markets will cool, but smaller areas won't. They are where the demand is.

[casper]

Originally Posted by yaletown_fella

Yes , and in 2007 the US didnt have to worry about the subprime market since it was contained

Loan guarantees by the public sector are the mother of bad ideas. How is it fair to tax savers and renters living within their means to prop up the stupid dreams and decadence of homeowners and speculators living out of their means?

Why not allow the economy to deleverage and wait for prices to decline to more reasonable levels? We wouldnt be having this discussion if it were the 90s. The difference is the policy makers of the 2000s gave into the political pressure of the greedy (regardless of the political party they claimed to identify with) and now we are paying the price as a society.

I am not saying give low interest loans to individuals or businesses.

I am taking about given low interest loans to not-for-profits who mission is to build affordable housing. In BC the more common model was for the province or city to own the building and contract the not-for-profit to operate it. I am saying is let the not-for-profit own the building.

Co-ops (which are different than the non-profits) but produce similar results were population in the 1970-90s. Then government stopped funding new co-ops. They are now getting back into it.

There is a report out today about Broadway in Vancouver. The city is rezoning that corridor. The previous draft zoning was recently updated to remove 5 floors from the cap and increase the minimum frontage for a development application. The industry ran the numbers and one company is now saying the business case for rentals do not work under the new proposed zoning. So the city should be the 5 floors back in and remove the minimum frontage clause.

[casper]

Originally Posted by swimmer_spe

Everyone is looking at the financial reasons for the housing bubble, but no one is looking at the mental reasons.

Remember, 2 years ago, when the lockdown first happened? That had people look at their tiny apartments and condos and ask "Why?"
Why should I live here?
Why should I live like this?

And so, if they could, the moved. Then more people kept asking why .And they moved.There is more to living than a 1 bedroom apartment within walking distance of the subway. There is more to life than having everything so close.

When someone wants a house with a yard, then then start to think of what they really want. I know of a couple that lived in a downtown Toronto condo who moved to rural New Brunswick. We used to see the drain of young people from the rural areas to the big cities. I feel that we are seeing the reverse of that. It is driven by mental reasons, not financial. Yes, the expensive markets will cool, but smaller areas won't. They are where the demand is.

The selling feature of that one bedroom shoe box condo in the downtown core is the coffee shop at the corner, the music venue down the block, the move theater the next block over, etc. All those things that were shutdown due to COVID.

I agree, a lot of people decided to make new life choices and I think the next census data is going to show a boom in rural and small centers.

That said, there are always going to be people looking for the urban lifestyle.

[whatnext]

Originally Posted by casper

I am not saying give low interest loans to individuals or businesses.

I am taking about given low interest loans to not-for-profits who mission is to build affordable housing. In BC the more common model was for the province or city to own the building and contract the not-for-profit to operate it. I am saying is let the not-for-profit own the building.

Co-ops (which are different than the non-profits) but produce similar results were population in the 1970-90s. Then government stopped funding new co-ops. They are now getting back into it.

There is a report out today about Broadway in Vancouver. The city is rezoning that corridor. The previous draft zoning was recently updated to remove 5 floors from the cap and increase the minimum frontage for a development application. The industry ran the numbers and one company is now saying the business case for rentals do not work under the new proposed zoning. So the city should be the 5 floors back in and remove the minimum frontage clause.

What, developers claiming they can't make enough money on rentals, how novel.

[casper]

Originally Posted by whatnext

What, developers claiming they can't make enough money on rentals, how novel.

Here is the link to the article:

https://dailyhive.com/vancouver/broadway-plan-vancouver-rental-housing-feasibility

The argument is they need an extra 5 stories to make the numbers work.

They are also arguing that requiring building to have 150ft front instead of 100 ft will force developers to buy land assemblies that drive up the cost of land.

[SignalHillHiker]

There are pictures making the social media rounds here of lines down the street waiting to view shitty basement apartments in suburban hellscapes around the city. Apparently it's been normal here for a while for every listing to get dozens of applications. I've been out of the rental market for a decade so I didn't know. That's sad.

They really need to count rental payment experience toward qualifying for a mortgage. If you've paid $1,500/month in rent for two years, it shouldn't be as much of an issue to qualify for at least a $1,000/month mortgage, which would get you into lots of working class homes here.

[swimmer_spe]

Originally Posted by casper

The selling feature of that one bedroom shoe box condo in the downtown core is the coffee shop at the corner, the music venue down the block, the move theater the next block over, etc. All those things that were shutdown due to COVID.

I agree, a lot of people decided to make new life choices and I think the next census data is going to show a boom in rural and small centers.

That said, there are always going to be people looking for the urban lifestyle.

This is probably going to continue for some time. My hope is that rural and smaller centres are ready for the exodus from the big cities.

[WarrenC12]

Originally Posted by swimmer_spe

This is probably going to continue for some time. My hope is that rural and smaller centres are ready for the exodus from the big cities.

Hasn't it already stopped? The outlying suburbs from Vancouver area already showing the biggest real estate declines.

Very small towns and rural areas might be a little different.

[someone123]

Originally Posted by whatnext

What, developers claiming they can't make enough money on rentals, how novel.

The economics will depend on land prices which will be set by the most profitable use. If that use is instantly presold speculative investor condos then sure, apartments probably won't be competitive profit-wise. However the city could provide additional zoned space for rentals. At the end of the day the land prices will reflect the zoning.