Canada's 'housing bubble' deemed close to bursting

[LightingGuy]

Does Sudbury have an affordability issue? I know almost nothing about Sudbury.

[swimmer_spe]

Originally Posted by LightingGuy

Does Sudbury have an affordability issue? I know almost nothing about Sudbury.

It is no different than any other place across Canada that has seen housing pricing skyrocket.

[thewave46]

Originally Posted by LightingGuy

Does Sudbury have an affordability issue? I know almost nothing about Sudbury.

Relative to Ontario, Sudbury is still cheap.

Relative to its past history, Sudbury is expensive.

Land is not a concern; there are significant areas to develop in the outlying regions of the municipality. The abandoned hospital will rot, probably for another decade or two. The suburban mentality pervades doubly compared to other cities, downtown is a no-go zone for largish chunks of the citizenry.

The city stagnated for decades, so the bubble took longer to get here as slack in the housing market got soaked up. With people cashing out of other areas of the province and the local economy doing well, the money arrived. Whereas growth used to be: "Please, anything!" the money now flowing in has now crowded out cheap development. The city loves the cash cow of fees on developments. Off to the trough it goes.

Halfway useful people have more work than they can handle, the less ambitious can find a federal job by having a pulse, and the old complain of the homeless problem and downtown from their cocooned, defined-benefit pension life in suburbia.

[swimmer_spe]

Originally Posted by thewave46

Relative to Ontario, Sudbury is still cheap.

Relative to its past history, Sudbury is expensive.

Land is not a concern; there are significant areas to develop in the outlying regions of the municipality. The abandoned hospital will rot, probably for another decade or two. The suburban mentality pervades doubly compared to other cities, downtown is a no-go zone for largish chunks of the citizenry.

The city stagnated for decades, so the bubble took longer to get here as slack in the housing market got soaked up. With people cashing out of other areas of the province and the local economy doing well, the money arrived. Whereas growth used to be: "Please, anything!" the money now flowing in has now crowded out cheap development. The city loves the cash cow of fees on developments. Off to the trough it goes.

Halfway useful people have more work than they can handle, the less ambitious can find a federal job by having a pulse, and the old complain of the homeless problem and downtown from their cocooned, defined-benefit pension life in suburbia.

You have been able to eloquently describe the city to a Tee. You used to be able to get a house under $200k that was good to live in. That is no longer the case.

[McKellarDweller]

I have more relatives in the Sudbury area than anywhere else and have spent a great deal of time there visiting them on annual visits since the 80s. Those descriptions are painfully accurate.

[MolsonExport]

Originally Posted by LightingGuy

Mapped: How Global Housing Prices Have Changed Since 2010


https://www.visualcapitalist.com/cp/mapped-global-housing-prices-since-2010/

Yikes!



But prices have come down in many Canadian markets, sometimes by almost a third, since the peak in February 2022.

[LightingGuy]

Originally Posted by MolsonExport

Yikes!



But prices have come down in many Canadian markets, sometimes by almost a third, since the peak in February 2022.

I didn't notice that it was until Q2 2022, so yes now it would be more like 75%, not 90%.

[swimmer_spe]

Originally Posted by LightingGuy

I didn't notice that it was until Q2 2022, so yes now it would be more like 75%, not 90%.

If inflation is 2% per year, and we say this is a 20 year period, housing prices should not be more than 50% higher. So, that is still 25% over the amount it should be.

[LightingGuy]

Originally Posted by swimmer_spe

If inflation is 2% per year, and we say this is a 20 year period, housing prices should not be more than 50% higher. So, that is still 25% over the amount it should be.

The top image is already adjusted for inflation ("Real" growth). If it was steady with inflation then it should be 0%.

What you're talking about is "Nominal" growth which doesn't take inflation into account - that's the bottom picture which saw Canada's prices increase by 148%.

[Nite]

Originally Posted by swimmer_spe

If inflation is 2% per year, and we say this is a 20 year period, housing prices should not be more than 50% higher. So, that is still 25% over the amount it should be.

low inflation leads to low interest rates that fuel house prices rises though.
you need higher inflation to get slower house price growth, like what we are seeing now

[GenWhy?]

Originally Posted by swimmer_spe

When the census is done, a medium income is calculated. It could be based off of those metrics.

But, your issue is not that, it is the fact you think developers will only build high end real estate. My question is whether you think they would risk going out of business over it. My guess is, they would meet that minimum requirement and that would be all. They would likely even publish that price as a "Starting from $X" on their billboards and other advertising.

We will build a building with 10% at below-market rates when it makes sense, as in, we have to be able to build to the "X" percent that makes financial sense first, then add 10% below market. It's usually never the reverse. And these are not high end rentals. Just normal new rentals in Vancouver.

Vancouver already has programs like this in a few different areas requiring 20% below-market rental in rezoning projects. We have some towers at about 17-storeys, and low-rise at 6-storey (3 separate programs).

The one 17-storey building requires replacement of an existing rental 3-storey with great cost of tenant protections. So it barely works at 17-storeys.
The 6-storey building is replacing 3 SF homes, so minimal existing tenants, and just works at 6-storeys (should mention it's mixed-use and commercial rents get you primo $$$). You have to pretty much triple the density to make 20% work. 10% is really not worth the cost, and effort as it's like 4 units per average low-rise (maybe one 3 and 2-bed and two 1-bedroom units.

The better questions for us is always, "how dense and tall in which areas do you need to go in order for a project to work". When it works we'll build "X" building with below-market rents because... we can.

[swimmer_spe]

Originally Posted by LightingGuy

The top image is already adjusted for inflation ("Real" growth). If it was steady with inflation then it should be 0%.

What you're talking about is "Nominal" growth which doesn't take inflation into account - that's the bottom picture which saw Canada's prices increase by 148%.

So, about 100% over the rate it should be. Regardless, with wages stagnated, this 'growth' is why there is a housing problem.

Originally Posted by Nite

low inflation leads to low interest rates that fuel house prices rises though.
you need higher inflation to get slower house price growth, like what we are seeing now

The problem is, in smaller markets, the housing won't come down enough to allow for the higher interest rates. It is a catch 22.

Originally Posted by GenWhy?

We will build a building with 10% at below-market rates when it makes sense, as in, we have to be able to build to the "X" percent that makes financial sense first, then add 10% below market. It's usually never the reverse. And these are not high end rentals. Just normal new rentals in Vancouver.

Vancouver already has programs like this in a few different areas requiring 20% below-market rental in rezoning projects. We have some towers at about 17-storeys, and low-rise at 6-storey (3 separate programs).

The one 17-storey building requires replacement of an existing rental 3-storey with great cost of tenant protections. So it barely works at 17-storeys.
The 6-storey building is replacing 3 SF homes, so minimal existing tenants, and just works at 6-storeys (should mention it's mixed-use and commercial rents get you primo $$$). You have to pretty much triple the density to make 20% work. 10% is really not worth the cost, and effort as it's like 4 units per average low-rise (maybe one 3 and 2-bed and two 1-bedroom units.

The better questions for us is always, "how dense and tall in which areas do you need to go in order for a project to work". When it works we'll build "X" building with below-market rents because... we can.

Part of the other problem is how much profit you want. 1% profit sounds horrible. But when you rent and sell all units and gross $100 million or more, that 1% profit is not so little. However, I know that is not enough for most developers.

[GenWhy?]

Originally Posted by swimmer_spe

Part of the other problem is how much profit you want. 1% profit sounds horrible. But when you rent and sell all units and gross $100 million or more, that 1% profit is not so little. However, I know that is not enough for most developers.

I'm just talking bare minimum to get construction financing.

[swimmer_spe]

Originally Posted by GenWhy?

I'm just talking bare minimum to get construction financing.

The government regulates things like building codes. They could add pricing of units in the mix too.

[GenWhy?]

Originally Posted by swimmer_spe

The government regulates things like building codes. They could add pricing of units in the mix too.

You're entering the "rental apartments won't get built" territory.

[swimmer_spe]

Originally Posted by GenWhy?

You're entering the "rental apartments won't get built" territory.

I know.... and that is the real problem in housing.

[Nite]

The latest Building permits stats for February, released today



https://www150.statcan.gc.ca/n1/pub/71-607-x/71-607-x2021005-eng.htm


https://www150.statcan.gc.ca/n1/daily-quotidien/230404/g-a001-eng.htm

[GenWhy?]

Originally Posted by swimmer_spe

I know.... and that is the real problem in housing.

No I'd argue the real problem is that I can't build adequate housing in the geographical majority of my and adjacent cities. The potential for governments of any kind to mandate rental prices that are so restrictive that I can't build the housing is pretty low on my fear list. It gets voted down continuously here in Vancouver city council.

[LightingGuy]

If you think we have a rental shortage now, just wait until the government tries to bring in price control for rentals. (I wouldn't put this past certain of our politicians)

We saw how well price control worked in the 70s when there was an oil shortage. (Hint: it left significantly more people without gas, and caused longer lines at the pump)
https://www.washingtontimes.com/news/2006/may/15/20060515-122820-6110r/

At least now there is always something available to rent for anyone willing to pay. As soon as price control comes into the mix, demand will absolutely crush supply, and there will effectively be no inventory, leaving significantly more people homeless.

The basic rule is this: You don't fuck with the free market; when you do, the side effects are almost always worse than the problem you were trying to solve in the first place.

[GenWhy?]

Originally Posted by LightingGuy

If you think we have a rental shortage now, just wait until the government tries to bring in price control for rentals. (I wouldn't put this past certain of our politicians)

We saw how well price control worked in the 70s when there was an oil shortage. (Hint: it left significantly more people without gas, and caused longer lines at the pump)
https://www.washingtontimes.com/news/2006/may/15/20060515-122820-6110r/

At least now there is always something available to rent for anyone willing to pay. As soon as price control comes into the mix, demand will absolutely crush supply, and there will effectively be no inventory, leaving significantly more people homeless.

The basic rule is this: You don't fuck with the free market; when you do, the side effects are always worse than the problem you were trying to solve in the first place.

I dunno I feel bad for all those renters in Ontario in buildings 2018 and newer that don't have rent control and are getting pillaged.

While our vacancy rate is still low, we have rental control since I think the mid-90s and have built more rental housing in the last 10 years than we have since the 70s. We can build rental no problem with rent control.

Removal of GST on rental construction, which I think was added in 1991, would go a long way.