Canada's 'housing bubble' deemed close to bursting

[someone123]

Originally Posted by Hali87

In practice I think these redevelopments would have collectively added about a thousand units and about half of them would have been "affordable".

It's remarkable how slowly/badly those developments have gone overall. There are lots of parts of Halifax with tons of constructions and then some strange government-owned lot that's been fenced off for years. In many cases they have also demolished seemingly reasonably useful buildings or allowed them to degrade. There is always some argument about why the building is at "end of life" but the picture does not really fit with what you see in other places.

When the city built the new library there was no plan for what to do with the old one so it just sits there empty. There were some visioning exercises showing adaptive reuse possibilities but as far as I know nothing has happened. Maybe not a housing project but an example of the weird culture and dysfunction, where old buildings and land are often just forgotten about or plans grind to a halt if there are any speed bumps.

I think a lot of our current problems are at their root cultural and political. A norm of community consultation that started to pop up in the 70's for valid reasons has turned into a strange lack of energy and an idea that we can't build stuff unless everybody is on board. And then certain policy areas are more abstract and basically exempt from this so they evolve independently and incompatibly. In a de facto way our society is structured to worry much more about maintaining speculatively accumulated wealth or opinions of homeowners about land they don't own than making sure people aren't living in tents. And institutionally we don't distinguish much between different groups of people; if you're a poor older person living in the town you grew up in you compete for rental housing with people from around the world who chose to move to the same town 1 month ago.

[ssiguy]

A report in Better Dwelling today...........OFSI {Canada's bank regulator} has just confirmed what everyone already knows, Canada's economic growth has been based purely on debt.

The report stated that Canadians now owe $308 billion in HELOC loans in 2022 which is up a numbing $27 billion in the last year alone. In other words, $27 billion of Canada's economic growth last year had absolutely nothing to do with productivity gains and everything to do with personal debt. This is a frightening reflection of how Canada's economic growth in the last decade {and last 30 years in BC} has been built upon nothing more than real estate flipping and debt accumulation. It's this kind of highly unproductive economic "growth" that has led to the OECD stating that over the next 40 years Canada will have the lowest productivity gains of any of the 20 member countries.

This is not only an inevitable housing crash but also a desperately needed one. Canada must get off it's real estate addicted economy and back to what made us once one of the highest income countries in the world..........high productivity. It will be a very painful transition but it is one we must have to try to right the boat before it's too late.

[someone123]

Originally Posted by ssiguy

This is not only an inevitable housing crash but also a desperately needed one. Canada must get off it's real estate addicted economy and back to what made us once one of the highest income countries in the world..........high productivity. It will be a very painful transition but it is one we must have to try to right the boat before it's too late.

One goal should be to make sure that the pain is borne proportionally by people who accumulated so much wealth from this system in the first place. Instead I have a feeling that the Canadian "we" will mean that one demographic got the money and benefits of accumulating the debts and then another demographic will pay them off after being locked out of the wealth bonanza.

In practical terms this may mean not bailing real estate speculators out and being more creative than taxing the hell out of mid-range income to keep the party going.

[Truenorth00]

Originally Posted by someone123

One goal should be to make sure that the pain is borne proportionally by people who accumulated so much wealth from this system in the first place. Instead I have a feeling that the Canadian "we" will mean that one demographic got the money and benefits of accumulating the debts and then another demographic will pay them off after being locked out of the wealth bonanza.

How do we do this in a country which does not tax wealth and shelters the largest source of capital gains most people have?

There's also the much wider issue of public finances and liabilities for social services. A lot of Boomers could see chunks of wealth they were counting on for retirements wiped out. This increases the burden on governments and in turn on working age tax payers.

Originally Posted by someone123

In practical terms this may mean not bailing real estate speculators out and being more creative than taxing the hell out of mid-range income to keep the party going.

The specuvestors aren't the problem. They are toast. Nobody has sympathy for them. The problem is the overleveraged primary residence owners. Particularly those who bought in the last two years. Many could end up underwater for years. A lot of the arguments I've seen for a bailout focus on this group. The argument being that banks could write-off enough debt to bring them 100% LTV at renewal time. Of course, that in turn raises a lot of questions about fairness and moral hazard.

[someone123]

Originally Posted by Truenorth00

How do we do this in a country which does not tax wealth and shelters the largest source of capital gains most people have?

Like I said I don't think it will be fixed in a way that "saves" current young people in their 20's and 30's. I think the Boomer cohort will get friendly policies from cradle to grave and the fallout from that will be what it will be (few paths to wealth for younger people, low wages, high debt and taxes). The problems have been worsening for many years and the current federal government doesn't seem to care much.

There's also the much wider issue of public finances and liabilities for social services. A lot of Boomers could see chunks of wealth they were counting on for retirements wiped out. This increases the burden on governments and in turn on working age tax payers.

It depends on their wealth level and the outcome. Canada already pays for healthcare regardless of how rich somebody is and charge very low taxes on the pool of retirement savings. The government has no duty to ensure a certain level of retirement and step in if your savings go from $3M to $1M. They pay for CPP and OAS.

Older people today are the wealthiest segment of society and the wealthiest in history. If their wealth went down a bit they wouldn't all be in the poor house. Some would just scale back their cruises or whatever. I don't mean to sound callous and don't wish anybody to be poorer, but I think there is often misplaced disproportionate worry about that group and too much tax burden on other groups, such as people with 0 wealth who earn $40k a year and will never have a retirement anywhere near the current median.

[swimmer_spe]

Originally Posted by Truenorth00

Can you post that "room for rent" in Halifax here?

[Truenorth00]

Now that the bubble is finally bursting, I'd love to see some policy discussion on better regulation. The amount of realtors and mortgage brokers who give financial and macroeconomic advice is nuts. I'm still seeing realtors pushing, "Buy now or be priced out forever!"

Financial advisors or accountants would lose their license or worse for the kind of advise many Realtors gave. Their profession needs to be made accountable.

[swimmer_spe]

Originally Posted by ssiguy

A report in Better Dwelling today...........OFSI {Canada's bank regulator} has just confirmed what everyone already knows, Canada's economic growth has been based purely on debt.

The report stated that Canadians now owe $308 billion in HELOC loans in 2022 which is up a numbing $27 billion in the last year alone. In other words, $27 billion of Canada's economic growth last year had absolutely nothing to do with productivity gains and everything to do with personal debt. This is a frightening reflection of how Canada's economic growth in the last decade {and last 30 years in BC} has been built upon nothing more than real estate flipping and debt accumulation. It's this kind of highly unproductive economic "growth" that has led to the OECD stating that over the next 40 years Canada will have the lowest productivity gains of any of the 20 member countries.

This is not only an inevitable housing crash but also a desperately needed one. Canada must get off it's real estate addicted economy and back to what made us once one of the highest income countries in the world..........high productivity. It will be a very painful transition but it is one we must have to try to right the boat before it's too late.

By keeping interest rates high it will incentivize people to save and not spend. For the last few decades, there has been no incentives to save anything. So, now we have the opportunity to pay down the debt that will become increasingly expensive to have and to start saving. Things like reverse mortgages and ridiculous high payday loans may become a thing of the past.

Originally Posted by Truenorth00

Now that the bubble is finally bursting, I'd love to see some policy discussion on better regulation. The amount of realtors and mortgage brokers who give financial and macroeconomic advice is nuts. I'm still seeing realtors pushing, "Buy now or be priced out forever!"

Financial advisors or accountants would lose their license or worse for the kind of advise many Realtors gave. Their profession needs to be made accountable.

Well, let's start with the end of "luxury" builds for new subdivisions. Ending McMansions will be a good thing if that is all we see.

[theman23]

Originally Posted by someone123

Like I said I don't think it will be fixed in a way that "saves" current young people in their 20's and 30's. I think the Boomer cohort will get friendly policies from cradle to grave and the fallout from that will be what it will be (few paths to wealth for younger people, low wages, high debt and taxes). The problems have been worsening for many years and the current federal government doesn't seem to care much.



It depends on their wealth level and the outcome. Canada already pays for healthcare regardless of how rich somebody is and charge very low taxes on the pool of retirement savings. The government has no duty to ensure a certain level of retirement and step in if your savings go from $3M to $1M. They pay for CPP and OAS.

Older people today are the wealthiest segment of society and the wealthiest in history. If their wealth went down a bit they wouldn't all be in the poor house. Some would just scale back their cruises or whatever. I don't mean to sound callous and don't wish anybody to be poorer, but I think there is often misplaced disproportionate worry about that group and too much tax burden on other groups, such as people with 0 wealth who earn $40k a year and will never have a retirement anywhere near the current median.

A few years ago Adam Vaughan (then the federal Liberal minister for housing) was on TVO and basically admitted that the federal government did not see the housing crisis as a problem because the Liberal's base had benefitted greatly from it. Almost certain that Vaughan himself (and most other MPs) also have skin in the game.

Originally Posted by swimmer_spe

Well, let's start with the end of "luxury" builds for new subdivisions. Ending McMansions will be a good thing if that is all we see.

Not sure what that has to do with the problem he highlighted or how we would go about doing this.

[lio45]

Of course it’s not a problem for the Liberals and their base.

High gas prices can be a problem, but in Fort McMurray, it’s the other way around. Biden’s “I did that!” stickers are positive electoral propaganda over there.

[Truenorth00]

Originally Posted by lio45

Of course it’s not a problem for the Liberals and their base.

It's not just Liberal MPs who invest in real estate....

Of the 338 MPs writing housing policy in Canada, 38 per cent, or 128 MPs, are landlords.

That’s 62 Liberals, 54 Conservatives, six Bloc Quebecois, four NDP, one Green and one independent MP own real estate. The disclosures of two MPs — Liberal Karina Gould and Conservative Fraser Tolmie — aren’t yet available.

https://ricochet.media/en/3892/conflict-of-interest-should-mps-profit-off-the-rental-crisis

It's not like the previous government wasn't willing to inflate the bubble when it helped them. Part of Garth Turner's criticism that resulted in his ouster was allowing 40 yr mortgages.

[goodgrowth]

Originally Posted by theman23

A few years ago Adam Vaughan (then the federal Liberal minister for housing) was on TVO and basically admitted that the federal government did not see the housing crisis as a problem because the Liberal's base had benefitted greatly from it. Almost certain that Vaughan himself (and most other MPs) also have skin in the game.

Adam Vaughn has an election ad from 2015 literally called "PROTECT CONDO VALUES" and was basically complaining that government should protect housing as an investment and that Harper wasn't doing enough:

• Video Link

[theman23]

Originally Posted by goodgrowth

Adam Vaughn has an election ad from 2015 literally called "PROTECT CONDO VALUES" and was basically complaining that government should protect housing as an investment and that Harper wasn't doing enough:

• Video Link

The amount of doublespeak in that ad hurts my head, but its par for the course.

[thurmas]

Originally Posted by theman23

The amount of doublespeak in that ad hurts my head, but be par for the course.

I had to shake my head when he says at the 40 second mark its not about affordable housing its about making sure your housing remains affordable? and then at 1:06 not just about affordable housing but housing affordability? oh my. This election don't make a point make a change but also a point that changes the point in history we are in to produce the change we need.

[suburbanite]

Originally Posted by thurmas

I had to shake my head when he says at the 40 second mark its not about affordable housing its about making sure your housing remains affordable? and then at 1:06 not just about affordable housing but housing affordability? oh my. This election don't make a point make a change but also a point that changes the point in history we are in to produce the change we need.

"It's not about making new housing affordable, it's about ensuring that the carrying costs of the asset that makes up 80% of your retirement remain as low as possible."

I feel for anyone coming out of high school around this time. There really isn't anything to be optimistic about from any party in regards to fixing such a massive issue.

[swimmer_spe]

Watching CBC the National, I am hearing of Halal mortgages....
Let's add more layers to the bursting bubble.

[thurmas]

Originally Posted by swimmer_spe

Watching CBC the National, I am hearing of Halal mortgages....
Let's add more layers to the bursting bubble.

I would describe ours more as a layer cake of multiple — flavors creating a confluence of — that will leave us all heading to the toilet when we are done eating this real estate desert gone bad.

[whatnext]

Originally Posted by swimmer_spe

Watching CBC the National, I am hearing of Halal mortgages....
Let's add more layers to the bursting bubble.

Can one get Kosher mortgage as well?

[Truenorth00]

Originally Posted by swimmer_spe

Watching CBC the National, I am hearing of Halal mortgages....
Let's add more layers to the bursting bubble.

Islamic finance is substantially based on collateral than credit. Risk of default is lower.

[suburbanite]

Originally Posted by Truenorth00

Islamic finance is substantially based on collateral than credit. Risk of default is lower.

Do you mean risk of blown-out LTVs is lower? collateral value doesn't really impact someone's ability to keep paying their mortgage, but more conservative origination practices at least means the lender won't lose their shirt if they can't.

We sold off a portfolio of VTB mortgages that a GTA homebuilder had collected as part of their sales & marketing strategy. They were very well-capitalized and were sitting on cash so they would give out 3-year 0% mortgages on their new home sales as an extra incentive. 3 years of pure principal payments on a 25-year mortgage helped the buyers bring down the ultimate LTV when it came time to get long-term financing. It worked extremely well in muslim-heavy areas like Brampton and Milton, but the due diligence from buyers ended up being an absolute nightmare as the loan-to-income ratios were off the charts. I'm talking about people with $80,000 incomes buying $1.5 million homes in Milton. Even the president of the development company would tell us he had no idea how they could do it, but at the end of the 3 years, they would come up with the money, presumably from a combination of extremely large households pooling money together and Islamic lenders. I can't say it inspired much confidence in me though, especially as we are approaching unprecedented times with lenders' appraisals starting to come in below the presale price.