Canada's 'housing bubble' deemed close to bursting

[Coldrsx]

Originally Posted by thurmas

This is ridiculous we used to have housing on upper floors and business or light industrial on floors below. Ugh

Right!

Council will be discussing/debating this tomorrow as to providing clearer direction.

[lio45]

Originally Posted by hipster duck

Just doing some back of the envelope math, that would be a monthly payment of almost $6,000 over a 25 year amortization. Even if both people are highly-paid professionals, few households can afford to pay $72k/year just in mortgage payments.

$6,000/month/house only looks high at first sight because we still tend to think about it the "old school" way: we look at the property as something a normal Canadian household should be able to afford.

Consider a 3br house: it can house thirty-three South Asians at ~$300/head/month, so a landlord can easily afford a $6,000/month mortgage and have positive cashflow even if it's far from fully rented. This potential landlord -- for whom it's just numbers -- is the competition that a Canadian household must outbid, if they want that property for their own use (instead of the free market "highest and best use" of thirty-three South Asians packed like sardines).

(In other words, I am with those of you who think we're on track to become closer to Hong Kong.)

[swimmer_spe]

Originally Posted by Coldrsx

As Canmore, Alta., faces housing crisis, debate stirs over employee housing in industrial area

Bow Valley developer says employers have had to make difficult decisions

Jade Markus, Paula Duhatschek · CBC News ·
https://www.cbc.ca/news/canada/calgary/canmore-alberta-housing-crisis-1.6864866

This is what happens when you allow tourism to explode without building housing for the workers.

[swimmer_spe]

Another solution to the big city housing could be the one word we don't speak of in these parts... amalgamation...

Look within the city of Toronto. SFH is not the go to development. Now look to within 100km of Toronto and SFH is the go to development. So,w hat if we took Durham, York, Peel, Halton counties and Hamilton and combined them under one singular municipality structure that dictates things like development of housing and transportation? Maybe that would end the sea of SFH development.

[Wigs]

Originally Posted by whatnext

While it's great that your BF can make 300 sq ft work, we have to ask 'is this the future we want for Canada"? We're slipping back to developing world standards of living.

There's 40,000,000 Canadians. Of those aged 18+, less than 1% would choose to live in 300 sq ft unless that's all they can absolutely afford.

I agree Canada's standard of living is slipping and has been for 15-20 years now.

There's gotta be more housing types and options besides micro apartments between 250-399 sq ft.

[lio45]

Originally Posted by Wigs

There's 40,000,000 Canadians. Of those aged 18+, less than 1% would choose to live in 300 sq ft unless that's all they can afford.

I agree Canada's standard of living is slipping and has been for 15-20 years now.

There's gotta be more housing types and options besides micro apartments between 250-399 sq ft.

300 sq ft to yourself is pretty luxurious by modern post-Justinflation (or "Hong Kongian" if you prefer) standards.

All of 300 sq ft, yours and yours only! Wow!

Other Canadians your age have to share a bathroom and kitchen (and other common living areas) with strangers!

[thebasketballgeek]

Originally Posted by swimmer_spe

Another solution to the big city housing could be the one word we don't speak of in these parts... amalgamation...

Look within the city of Toronto. SFH is not the go to development. Now look to within 100km of Toronto and SFH is the go to development. So,w hat if we took Durham, York, Peel, Halton counties and Hamilton and combined them under one singular municipality structure that dictates things like development of housing and transportation? Maybe that would end the sea of SFH development.

Toronto already amalgamated and it didn’t solve anything.

Winnipeg amalgamated in 1972 and imo it has been to the detriment of the city.

[someone123]

Originally Posted by hipster duck

We're almost at the point now that affluent boomers can't help their children with good jobs buy the homes they want. Like, how many people can dip into their retirement and fork over $1 million cash to their offspring?

This property market is not working well for large and growing portions of the population. For example, I know people around retirement age in their 50's and 60's who have potentially millions to spend on real estate but are struggling to find or build the property they want because there are so few listings and trades are hard to come by. If you're mid-career and own a property the explosion in prices relative to wages has made upgrades much more expensive. These are all "first world problems" but they're examples of groups who on paper gain wealth from the housing market but in practice may have seen their living standards go down.

[Wigs]

If anything amalgamation gave the suburbs too much power over the inner city.
See also: idiot Rob Ford being elected as Mayor of Toronto. And Hamilton councillors fighting over LRT for years, when it could have started construction already

[suburbanite]

Originally Posted by swimmer_spe

Another solution to the big city housing could be the one word we don't speak of in these parts... amalgamation...

Look within the city of Toronto. SFH is not the go to development. Now look to within 100km of Toronto and SFH is the go to development. So,w hat if we took Durham, York, Peel, Halton counties and Hamilton and combined them under one singular municipality structure that dictates things like development of housing and transportation? Maybe that would end the sea of SFH development.

SFH development is not prevalent because there hasn't been greenfield land to develop within the City of Toronto in decades. Adding Durham and all of its agricultural land to the Municipality isn't going to make some new central planning authority in Downtown Toronto think that 15 storey towers in Clarington is somehow optimal development.

[GenWhy?]

Originally Posted by Changing City

Not quite. The public art program is seperate, and only applies to rezonings. It can be included in the project, or a payment towards an art project initiated by the City.

Most new development in the City of Vancouver pay Development Cost Levies (DCLs). A DCL is paid by property developers based on square footage. It partially funds the cost of new or improved parks, childcare facilities, social and non-profit housing and engineering infrastructure, (mostly sewers and bike infrastructure).

In addition, where there's a rezoning (above the base zoning of the area) developers are expected to contribute a Community Amenity Contribution, based on a proportion of the added land value that the rezoning adds. CACs can be used for affordable housing, community centres, libraries, daycares, park improvements, neighbourhood houses, and more. Projects can either be delivered as in-kind facilities, or as payments in lieu. Details here.

Neither source of funding covers the spending on all the replacement and upgraded infrastructure, but they're added to the Capital Program to allow more work to take place - often necessary to allow the projects to go ahead (in the case of sewer upgrades, for example). The trunk sewers and water supply are provided by Metro Vancouver, and they've recently added their own payment on new development across the region, to help pay for those upgrades.

Then add to that a rezoning project is also required on top of the CAC, DCC, and DCL to pay out of pocket for local infrastructure upgrades!

[SignalHillHiker]

Big jump in one house near me.

The orange house with the porthole window was for sale back when I was looking in 2021. At that time, it was listed for just under $130K. The ceilings are too low (normal-sized doors don't even fit - they all had about a foot sawed raw off the bottom back then). So, not for me.

Anyhow, it's attached to the house with the stabbing a week or so ago:



Now it looks like this:











And the asking price is $170K (slightly more than I paid for mine).

The hilarious part is the description:

SWEET DOWNTOWN INVESTMENT OPPORTUNITY! Have you ever wanted to own an Airbnb in the heart of downtown St. John's? Or maybe you are looking for a move-in ready starter home where you need only bring your suitcases! Yes, it's fully furnished! Either way, this super cozy "jellybean row" style 2 storey with it's newer colourful yellow clapboard siding may be just what you're looking for! Operated with great success as an airbnb for the past 2 years, this 2 bedroom, 1 bath charmer is turnkey ready and is located only minutes from The Mary Brown's Centre, George Street, and the many restaurants, shops and night clubs in the vibrant downtown core.

"Successful" might be a bit of a stretch when at least once a year we saw people literally fleeing from it, mentally unprepared for living on a street with 3+ drug dens and lots going on

[swimmer_spe]

Originally Posted by thebasketballgeek

Toronto already amalgamated and it didn’t solve anything.

Winnipeg amalgamated in 1972 and imo it has been to the detriment of the city.

Not sure about Winnipeg, but Toronto did nothing to follow through with the amalgamation for a long time. As much as I hate Ford, by him finally lowering the number of councilors, it has been a small step forward.

Originally Posted by suburbanite

SFH development is not prevalent because there hasn't been greenfield land to develop within the City of Toronto in decades. Adding Durham and all of its agricultural land to the Municipality isn't going to make some new central planning authority in Downtown Toronto think that 15 storey towers in Clarington is somehow optimal development.

Ah, yes a strawman argument. Look st most of the GO stations within the city of Toronto. Now, look at all of the Durham GO stations. One is mainly glorified parking and no real housing nearby, while one has a lot less parking, a lot better intermodal and almost walkable in some parts.

Greenfield and agricultural isn't the largest problem. However, if you took a new development, why not have 15 story towers as part of it?

[suburbanite]

Originally Posted by swimmer_spe

Ah, yes a strawman argument. Look st most of the GO stations within the city of Toronto. Now, look at all of the Durham GO stations. One is mainly glorified parking and no real housing nearby, while one has a lot less parking, a lot better intermodal and almost walkable in some parts.

Greenfield and agricultural isn't the largest problem. However, if you took a new development, why not have 15 story towers as part of it?

I have to stop bothering at this point.

[whatnext]

I don't think anyone posted about these stats that came out last week. I fund it laughable that even before rising interest rates the majority of condo investors was making about $60 a month off their "investment"!

Half of condo investors with mortgages in GTA are not making money: Report
Waning investor demand for condos could put a chill on developments, the report warns
Michelle Zadikian·Senior Reporter
May 29, 2023

Roughly half of new condo investors who have a mortgage in the Greater Toronto Area (GTA) are losing money every month, a new report by CIBC Economics and market research firm Urbanation suggests.

The joint analysis, released on Monday, showed 51 per cent of newly completed condos in GTA were cash-flow negative last year, compared to 44 per cent in 2021 and 40 per cent in 2020.

The changing dynamics are a result of rising interest rates pushing home ownership costs higher, outpacing rent prices. The report says 75 per cent of new condo investors last year in the GTA had a mortgage.

“While the rental market recovered and rents reached new highs in 2022, that growth was more than offset by rising mortgage costs as interest rates soared, resulting in the average investor experiencing negative cash flow,” the report said.

“This marks a meaningful shift that may potentially signal that a change in investor behaviour is on the horizon.”

On average, new condo investors were losing $223 per month in 2022, whereas in 2020, new condo investors on average were cash-flow positive to the tune of $63....

https://ca.finance.yahoo.com/news/half-m...a-not-making-money-report-161715067.html

[esquire]

^ That may be true, but I don't think the average condo owner renting out their property was necessarily expecting to clear hundreds or thousands of dollars in profit every month. That's not really the play.

[MonkeyRonin]

Originally Posted by swimmer_spe

The breaking point will be when professionals who can make $100k a year decide to live where it is cheaper. That includes people like health care workers or trades.

People are doing that, and it's in turn driving up costs in those smaller centres. It takes a lot fewer people to saturate the market in a smaller city as they have a lot less excess housing capacity to begin with.

Originally Posted by hipster duck

My cynical prediction is that there will be a bunch of piecemeal little fixes here and there that don't fundamentally 'solve' the problem, but kind of control the fire in sub-optimal and inefficient ways.

I don't think there will be shantytowns, not because I think our government will be able to provide our poorest citizens with adequate housing, but because our governments enforces property rights and can rally the police with such effectiveness that squatters would not be able to organize, set up camp, tap into sources of electricity and drinking water and eventually get city services. The Hong Kong path seems more plausible. I think I remember reading about how tens of thousands of renters in London (UK) live in garages or in illegal secondary suites hastily built at the back of existing properties.

I think you're probably right. The only scenario in which I can see permanent shanty towns forming is if there were just so many people desperate for housing that it became impossible to close the floodgates. Conditions would have to get a lot worse for that to be the case though; and there would probably be bigger problems that would materialize first.

We already have some similar situations to what London has had for years; albeit at a smaller scale, at least for now. I've got a friend of a friend who was renting a literal garden shed (like, without indoor plumbing) in Victoria for somewhere around $800/month!

Originally Posted by whatnext

While it's great that your BF can make 300 sq ft work, we have to ask 'is this the future we want for Canada"? We're slipping back to developing world standards of living.

Many of those tiny units - especially the better-designed ones - are actually in older buildings (and were often built that way rather than converted more recently). Traditionally, these types of units would only rent for a few hundred a month and provide a decent, low-cost alternative to sharing a place. I remember seeing some 100-200 sqft units in Toronto a decade ago that would go for like $400-600/month.

I think it's important that our cities have a diverse range of housing types at varying price points. The problem is when these small units comprise a disproportionately high share of new construction and increasingly come to be accepted as the "new normal".

[swimmer_spe]

Originally Posted by suburbanite

I have to stop bothering at this point.

Hello problem.
Why not be part of the solution?

Originally Posted by MonkeyRonin

People are doing that, and it's in turn driving up costs in those smaller centres. It takes a lot fewer people to saturate the market in a smaller city as they have a lot less excess housing capacity to begin with.

So, you can see how we are actually closer to the breaking point than ever before.

[theman23]

At this pace, we'll likely be back at ATH average prices by the end of the summer:

https://wowa.ca/vancouver-housing-market

[casper]

Originally Posted by whatnext

I don't think anyone posted about these stats that came out last week. I fund it laughable that even before rising interest rates the majority of condo investors was making about $60 a month off their "investment"!

Half of condo investors with mortgages in GTA are not making money: Report
Waning investor demand for condos could put a chill on developments, the report warns
Michelle Zadikian·Senior Reporter
May 29, 2023

Roughly half of new condo investors who have a mortgage in the Greater Toronto Area (GTA) are losing money every month, a new report by CIBC Economics and market research firm Urbanation suggests.

The joint analysis, released on Monday, showed 51 per cent of newly completed condos in GTA were cash-flow negative last year, compared to 44 per cent in 2021 and 40 per cent in 2020.

The changing dynamics are a result of rising interest rates pushing home ownership costs higher, outpacing rent prices. The report says 75 per cent of new condo investors last year in the GTA had a mortgage.

“While the rental market recovered and rents reached new highs in 2022, that growth was more than offset by rising mortgage costs as interest rates soared, resulting in the average investor experiencing negative cash flow,” the report said.

“This marks a meaningful shift that may potentially signal that a change in investor behaviour is on the horizon.”

On average, new condo investors were losing $223 per month in 2022, whereas in 2020, new condo investors on average were cash-flow positive to the tune of $63....

https://ca.finance.yahoo.com/news/half-m...a-not-making-money-report-161715067.html

Here is the link to the actual report from CIBC.

https://cibccm.com/en/insights/articles/in-focus-condo-investment-in-the-gta/

What is interesting about this is the reason for the discrepancy is investors are mostly buying new builds. The CIBC Analyst assumes the inventor is paying a premium for new built condos and then when it comes time to sell they are getting the average for a "used" condo. Looks like the resale value of condos in Toronto has dropped significantly while the cost of a new condo has remained high.

One factor may be new condos are frequently pre-sold. So the transactions recorded this month as an example may be for deals signed two years ago.

I think the press is getting it wrong, but still interesting data.