Canada's 'housing bubble' deemed close to bursting

[yaletown_fella]

Originally Posted by MolsonExport

"🞵🞵🞵🞵 what's best for Canadian families, what about the poor corporations?"

Plenty of Canadian families live below their means and rent. Theyd agree with me that we shouldnt be bailing out the greedy families /amateur flippers who overleveraged themselves on a McMansions and leased BMW SUV.

[MonkeyRonin]

Originally Posted by ssiguy

The issue in Vancouver is not that they are building enough housing but rather not building the right type of housing. Vancouver's ridiculous land-use policies which zone 80% of the city as SFH is why Vancouver city looks like glass tower downtown surrounded by suburbia. Vancouver has no "missing middle" housing and allows widescale speculation by both foreigners and domestics outbidding the average person.

Minor quibble: Vancouver has tons of missing middle housing. Apartments under 5 stories are the most common form of housing in Metro Van, and there are entire neighbourhoods comprised almost entirely of low-rise apartments, duplexes, and townhomes. Unsurprisingly, these are also home to some of the most affordable rents in the inner city.

The problem is that they just haven't been built in significant enough quantity for the last several decades.

[someone123]

Originally Posted by MonkeyRonin

Minor quibble: Vancouver has tons of missing middle housing. Apartments under 5 stories are the most common form of housing in Metro Van, and there are entire neighbourhoods comprised almost entirely of low-rise apartments, duplexes, and townhomes. Unsurprisingly, these are also home to some of the most affordable rents in the inner city.

A lot of affordability depends on rent control: how old the buildings are and how long the tenants have been there. I think the max allowed increase in 2022 in BC is going to be 1.5%. It is not that old walkups are particularly great.

In some ways those old apartments are quite bad. They aren't particularly high density, some don't have elevators, and many in Vancouver are quite ugly. There are some nice old early 20th century apartment buildings that should be preserved but they are rare. A lot of East Van and inner Burnaby really should just be redeveloped and high density should be permitted.

At Broadway and Quebec Street you will see a 4 storey residential built a few years ago that replaced a 3 storey office building. It's an easy 10-15 min bike ride to downtown, and will soon have a subway running directly in front of it. That's the kind of poor planning that doesn't make sense but abounds in the City of Vancouver outside of some select areas. Some other municipalities like Burnaby or New West are better although they have their sacred cow neighbourhoods too with SkyTrain stations surrounded by dumpy old houses that now cost millions.

[MonkeyRonin]

Originally Posted by someone123

A lot of affordability depends on rent control: how old the buildings are and how long the tenants have been there. I think the max allowed increase in 2022 in BC is going to be 1.5%. It is not that old walkups are particularly great.

In some ways those old apartments are quite bad. They aren't particularly high density, some don't have elevators, and many in Vancouver are quite ugly. There are some nice old early 20th century apartment buildings that should be preserved but they are rare. A lot of East Van and inner Burnaby really should just be redeveloped and high density should be permitted.

I was just apartment hunting in Vancouver a few months ago, and from personal experience - on average, buildings like these have the best bang-for-the-buck. They're cheaper than newer condos or heritage character properties, and at least compared to the condos have larger, more usable floor plans. Even if they lack some modern conveniences like in-suite laundry.

There are better examples of newer missing middle. Stuff like this: https://goo.gl/maps/7iZ4nT4EsZKnbyKV6. But these are less common and tend to be geared more towards the higher-end market.

[LightingGuy]

Originally Posted by yaletown_fella

Why should rates be kept below inflation? How is thwt fair on savers?

Why should savers be expected to subsidize people with high levels of household debt? Unlike getting a high paying job, going into credit card debt is a 100% a personal choice. When Im making 50k per year I accept that buying brand name clothes, UBER Eats, dining out, driving a car or international vacations is not in the cards for me.

Not everyone can do high level algreba or become a software engineer, but anyone whos not disabled and in the workforce should be able to do basic arithmatic/budgeting

This is why I think crypto is here to stay and will have an increasing presence in the world's financial system. As this situation unfolds I think there will be a lot more demand for decentralized currencies. I don't know specifically what that role will be though.

[Wigs]

Originally Posted by rousseau

My mortgage payment is $1,600 and I'll retire a millionaire when we eventually sell this place. I'm on the "winning" side, but I worry about how fugging unfair this is. I vividly remember the 1970s and 80s when social and economic mobility were etched in axiomatic stone. I could not imagine being twenty-five right now.

This is why I'm a centrist and can't go too far to the right, notwithstanding the culture war skirmishes I get involved in on SSP. As much as I like minimal government intervention in most things, I recognize the need for good regulation and policy in a fair society.

There simply has to be a way to reduce rents, at the very least. Renting should be cheaper than mortgage payments as a general rule. Something's wrong when that gets out of whack.

It now costs $1,710 for a typical 1 bedroom and $2,140 for a 2 bedroom apartment in St. Catharines. It now costs 71% more to rent in St. Catharines than Edmonton
More expensive than Hamilton, Ottawa, Montreal, Calgary etc.
https://www.zumper.com/blog/rental-price-data-canada/

[someone123]

Originally Posted by MonkeyRonin

I was just apartment hunting in Vancouver a few months ago, and from personal experience - on average, buildings like these have the best bang-for-the-buck. They're cheaper than newer condos or heritage character properties, and at least compared to the condos have larger, more usable floor plans. Even if they lack some modern conveniences like in-suite laundry.

There are better examples of newer missing middle. Stuff like this: https://goo.gl/maps/7iZ4nT4EsZKnbyKV6. But these are less common and tend to be geared more towards the higher-end market.

It is true but how much of the affordability is due to these buildings being run down with almost no maintenance? I have lived in buildings like that, and in student housing that cost about the same but was much nicer and probably wasn't subsidized much. I think good quality modern rental highrises would be better in every way and Vancouver does not have nearly enough of them.

I find the "missing middle" stuff a bit odd although actually I live in missing middle housing right now (where I have ~0 interactions with neighbours or the ground floor from inside my unit). If you are in a townhouse that is different, and some people prefer a door to outside, but there isn't much difference between being in a flat on floors 2-8 vs. 15. If you are worried about streets being lively you can put townhouses or lower residential units in highrises. Shadow and wind effects depend on design and how buildings are situated. If Vancouver had plentiful as-of-right 30 storey apartment buildings all through East Van and Burnaby, I think they would eventually become more affordable than the current walk ups.

[yaletown_fella]

Originally Posted by MonkeyRonin

I was just apartment hunting in Vancouver a few months ago, and from personal experience - on average, buildings like these have the best bang-for-the-buck. They're cheaper than newer condos or heritage character properties, and at least compared to the condos have larger, more usable floor plans. Even if they lack some modern conveniences like in-suite laundry.

There are better examples of newer missing middle. Stuff like this: https://goo.gl/maps/7iZ4nT4EsZKnbyKV6. But these are less common and tend to be geared more towards the higher-end market.

I find condos from circa 2002-2008 almost always have superior layouts compared to condos from 2012- , Especially the kitchen with the earlier condos offering full size refrigerators and an L shaped layout with ample cabinet and counter space. I could care less about fancy european appliances built into the wall, if the kitchen dosent even offer enough space to cook a meal.

What I really can't stand is the dough-brain mentality that went behind developers promoting "chic modern european" kitchens along one wall with next to no counter space and extra small refrigerators. And the dough brained acceptance by the consumer. A prime example are the units in One Bloor East. Total garbage.

i could just picture the response from the sales representative in the sales centre, scratching their head.

"durrrrr, why do you need a full size kitchen? , everyone just orders Uber Eats nowadays!"

People would look at a single guy or gal as though they have 3 heads if you told them that you cook from scratch at home, and want a bachelor or 1 bedroom with a proper kitchen.

Most people don't realise that most of the jobs that allowed people to afford to eat UBEREats lunches/dinners every day (on top of funding a high quality of life and retirement) are likely going to be the next on the chopping block, as companies can no longer borrow money for free and create BS surrogate middle management jobs out of thin air like they once did.

If Canadian government/BOC wasnt so obsessed with promoting "homeownership as a great investment" so heavily through tax breaks/loose monetary policy, maybe the consumer would be more hesistant and demand the higher quality condo units that are typical in mid size American cities (or the higher quality types of loft units built in the early 2000s) , instead of people rushing to 🞵🞵🞵🞵🞵🞵 up any unit they can because of FOMO.

[whatnext]

Originally Posted by WarrenC12

I agree we need more dense housing, but the near zero vacancy rate would indicate that any housing will help.

Yes, I'm sure overpriced schlock like this is helping with affordability. What's a poor offshore buyer to do if we didn't have one of Justin's big donors churning out 1 bedroom condos for $1.5 million?

[MolsonExport]

Originally Posted by yaletown_fella

Plenty of Canadian families live below their means and rent. Theyd agree with me that we shouldnt be bailing out the greedy families /amateur flippers who overleveraged themselves on a McMansions and leased BMW SUV.

Ah, is that who is suffering? Only the greedy families /amateur flippers who overleveraged themselves on a McMansions and leased BMW SUVs?

give me a 🞵🞵🞵🞵🞵🞵🞵 break.

[MolsonExport]

Lakelocker is back pushing crypto.

[lio45]

Originally Posted by MolsonExport

Lakelocker is back pushing crypto.

No he’s not.

[LightingGuy]

Originally Posted by yaletown_fella

I find condos from circa 2002-2008 almost always have superior layouts compared to condos from 2012- , Especially the kitchen with the earlier condos offering full size refrigerators and an L shaped layout with ample cabinet and counter space. I could care less about fancy european appliances built into the wall, if the kitchen dosent even offer enough space to cook a meal.

If Canadian government/BOC wasnt so obsessed with promoting "homeownership as a great investment" so heavily through tax breaks/loose monetary policy, maybe the consumer would be more hesistant and demand the higher quality condo units that are typical in mid size American cities (or the higher quality types of loft units built in the early 2000s) , instead of people rushing to 🞵🞵🞵🞵🞵🞵 up any unit they can because of FOMO.

I never really got this impression from our governments. Not sure what tax breaks there are. For example, in the US you can write off your mortgage interest every year, but not here. We also pay very steep land transfer taxes (in Ontario at least) which actually makes it harder to buy.

If anything, it seems to me that our governments are overly fearful of the homeowners. For example in most parts of the country property taxes can't be increased by more than 1% per year.

In Vancouver and Toronto the problem is lack of supply, driven by politicians who don't understand one of the simplest economic concepts - supply/demand. It's absolutely mind boggling to me, since it's so basic. (Or maybe the do understand and just don't care, which is also possible and even more concerning)

The good thing now though is that the population at large is seeing first hand what happens when you try to 🞵🞵🞵🞵 with supply/demand and what the unintentional side effects are of greenbelts, zoning, NIMBYism, so we're probably going to see this swing hard in the other direction shortly. Millennials will be running the country soon enough.

[niwell]

Originally Posted by LightingGuy

In Vancouver and Toronto the problem is lack of supply, driven by politicians who don't understand one of the simplest economic concepts - supply/demand. It's absolutely mind boggling to me, since it's so basic. (Or maybe the do understand and just don't care, which is also possible and even more concerning)
.

I'd argue that this is the simplistic viewpoint, and while at an extreme macro level may be true is really missing the point. And discounts all externalities to the real estate market / related investments. There's no way we are building our way out of this under the current economic system unless many people are willing to take a bath (so long retirement!) including many corporate entities and REITs (again, so long retirement!). Who exactly is going to subsidize what is very far from a rational market?

yaletown_fella is absolutely right on this IMO.

Originally Posted by MolsonExport

Ah, is that who is suffering? Only the greedy families /amateur flippers who overleveraged themselves on a McMansions and leased BMW SUVs?

give me a 🞵🞵🞵🞵🞵🞵🞵 break.

And there's the rub. We've backed ourselves into such an untenable corner that most "solutions" do entail regular people suffering. Which is why it probably won't happen, and we'll end up with a bunch of regular people who managed to get in when things were still attainable, dependents who are lucky enough to benefit off of them. And the rest.

[thewave46]

Here comes the contradiction falling apart.

1. Limited supply.
2. Still increasing demand, with a goal of ~1/2 million new people per year in 2025.
3. Rising interest rates.

As long as most of the homes in the country are either owned outright/well on their way to being paid off, there will be no structural change. Supply will be limited due to governmental restrictions (SFH is bad!) and our inability to build when we can build houses.

All rising interest rates will do is drive rental demand in the short-term, because if new buyers barely qualified before for a mortgage, they sure don't now, and prices haven't come down that much.

A major housing price collapse will either require nuking the economy (have fun re-enacting the early 1990s) and/or a glut of supply coming onto the market (not happening right now for reasons).

It's kind of morbid to think I'm living the last hurrah of a lifestyle. Maybe that's just it though - the locals are just too entitled, so we'll take in a bunch of people with much lower expectations. First world resource colony, with the oligopoly running the rental-exclusive market for the proletariat, and the bourgeoisie riding out the last of a lifestyle.

[MolsonExport]

Anyone else think that the BoC will drop interest rates dramatically once the recession kicks in (and it is coming hard and fast)? I get the reasons for aping what our American cousins are doing (to shore up the value of the currency and future yields on government debt obligations) but meanwhile things seem to be getting a lot worse on the ground for a heck of a lot of people. In terms of the housing market, I can't really see anyone that is currently benefiting. Rents are through the roof, supply is still scarce, current mortgage rates incur higher servicing costs on real estate that is slipping in value....

[casper]

Originally Posted by thewave46

Here comes the contradiction falling apart.

1. Limited supply.
2. Still increasing demand, with a goal of ~1/2 million new people per year in 2025.
3. Rising interest rates.

As long as most of the homes in the country are either owned outright/well on their way to being paid off, there will be no structural change. Supply will be limited due to governmental restrictions (SFH is bad!) and our inability to build when we can build houses.

All rising interest rates will do is drive rental demand in the short-term, because if new buyers barely qualified before for a mortgage, they sure don't now, and prices haven't come down that much.

A major housing price collapse will either require nuking the economy (have fun re-enacting the early 1990s) and/or a glut of supply coming onto the market (not happening right now for reasons).

It's kind of morbid to think I'm living the last hurrah of a lifestyle. Maybe that's just it though - the locals are just too entitled, so we'll take in a bunch of people with much lower expectations. First world resource colony, with the oligopoly running the rental-exclusive market for the proletariat, and the bourgeoisie riding out the last of a lifestyle.

No need to nuke the economy.

As for "resource colony" that describes Rural Canada. Honestly it is not a bad lifestyle. Land is cheap in those regions of the country. The dominant form of new house construction is probably SFH. When you get outside of the major cities there is lots of land and the drivers to do SFH are far less. There is a stronger correlation between the cost of building a new house and the market value than anything else.

The urban centers of Canada are where we have the problems and those regions are under pressure. Those regions are dominated by services or new economy. Natural resources plays a role but only so much as servicing those resources.

[casper]

Originally Posted by niwell

I'd argue that this is the simplistic viewpoint, and while at an extreme macro level may be true is really missing the point. And discounts all externalities to the real estate market / related investments. There's no way we are building our way out of this under the current economic system unless many people are willing to take a bath (so long retirement!) including many corporate entities and REITs (again, so long retirement!). Who exactly is going to subsidize what is very far from a rational market?

yaletown_fella is absolutely right on this IMO.

Government is dropping a lot of money into social housing and co-ops. Those are basically new built rental.

[LightingGuy]

Originally Posted by niwell

I'd argue that this is the simplistic viewpoint, and while at an extreme macro level may be true is really missing the point. And discounts all externalities to the real estate market / related investments. There's no way we are building our way out of this under the current economic system unless many people are willing to take a bath (so long retirement!) including many corporate entities and REITs (again, so long retirement!). Who exactly is going to subsidize what is very far from a rational market?

yaletown_fella is absolutely right on this IMO.

We're both right actually. Loose monetary policy + artificially low supply has caused this.

Ultra low interest rates and QE (over the past 13 years, not just covid era) have certainly contributed, but they aren't the only culprit.

The best example is Edmonton. Over the past 13 years their population has grown faster than most places across the country, have amongst the highest incomes, lowest income and sales taxes (ie. even more disposable income), and they have had the exact same interest rates as the rest of the country. If interest rates alone were the culprit then Edmonton should've seen their housing prices skyrocket much faster than Toronto and Vancouver - accept the exact opposite has happened. They've had a very stable affordable housing market throughout the last decade. The reason for this is that local policies don't prevent developers building what consumers are clearly demanding.

During the oil boom of the late 2000s they had a huge run-up in prices, but then the bubble burst, and the one thing the local governments didn't do was try to "do something" when the bubble burst. They simply just let developers build build what consumers were demanding without getting in the way, and letting it come to a natural equilibrium.

Back to Toronto/Vancouver - you are right, there's no way out of this without someone paying (or "subsidizing"). Either the governments do:
1. Nothing - in which case current younger (and future) generations pay for it through a lack of wealth growth.
2. We get rid of the restrictive infill policies, but don't expand our urban boundaries, in which case younger generations get more quantity, but still shittier quality since they're not going to have access to what they actually want. I would argue that in this case everyone will be subsidizing this, except those who own SFH detached houses - they will continue to be the beneficiaries.
3. We get rid of restrictive urban boundary policies as well (which basically means if someone who owns a plot of land, wants to build something more productive on that plot of land with them taking the risk), in which case we will see a much bigger mix of housing being of all types and sizes being built to whatever there is demand for in the market. This will naturally lead to either a longterm flatlining or decline in home prices, meaning it's the current owners who will be subsidizing.

But no matter which choice is made, someone is going to pay and "subsidize" this - we just need to decide who that is. Not making a decision is also making a decision.

[thewave46]

Originally Posted by MolsonExport

Anyone else think that the BoC will drop interest rates dramatically once the recession kicks in (and it is coming hard and fast)? I get the reasons for aping what our American cousins are doing (to shore up the value of the currency and future yields on government debt obligations) but meanwhile things seem to be getting a lot worse on the ground for a heck of a lot of people. In terms of the housing market, I can't really see anyone that is currently benefiting. Rents are through the roof, supply is still scarce, current mortgage rates incur higher servicing costs on real estate that is slipping in value....

Stomping inflation is goal #1 right now. Once that pressure abates, maybe?

Which blows for borrowers in the short-term, but long-term marcoeconomic stability is better than having ~7-8% annualized inflation. I have no desire to re-live the 1970s. Whether one is getting screwed by high interest rates or high inflation is mostly a matter of choosing one's poison.

We just lived in the anomaly period of extremely low interest rates, low inflation due to imported cheaper goods from overseas (meanwhile inflation just kept humming along domestically), cheap energy, and rising home values.

It had to come apart. It was a question of how, and how screwed we'd be.