Canada's 'housing bubble' deemed close to bursting

[Drybrain]

Originally Posted by Innsertnamehere

Definitely not back to all time high here. Prices are still down 15-20% from the February 2022 peak.

CREA's benchmark April price for Hamilton (the most recent figure) is down 18 percent from the Feb 2022 peak, but up 8 percent in just four months, from the December 2022 trough. Now sits at $869,000, and $939,000 for a SFH.

As with everywhere, prices went nuts, there was a modest correction, but then prices resumed their upward trajectory in dramatic fashion.

[LightingGuy]

Time will tell if this is a return to high prices or a temporary bear market rally. My money is on the latter. The fundamentals aren't there to support these prices. The only reason prices are going up is due to a lack of inventory. A lot of people refinanced during covid, and they would have to take on much higher mortgage payments to move, which is why they aren't selling. They are also seeing their house go up in value, so they feel rich and don't see a reason to sell.

The longest that this can last is to 2026, which is when people need to refinance at higher rates (assuming rates continue to stay high).

However, a run up in layoffs will force some people to sell early, and depending how bad this recession is, could be what triggers a mass sell-off early.

That said, we also have a federal government who is incredibly focused on preventing this bubble from popping, so we will see what other tricks they have up their sleeves, and if these tricks actually work. If their response is similar to what they did during the pandemic (CERB + deferred payments + 0% interest rates), then I don't see housing crashing.

[swimmer_spe]

Originally Posted by Wigs

Dougie Ford got rid of rent controls for any building first occupied after November 15, 2018

I wonder how much of this mess is due to that.

[Wigs]

Originally Posted by swimmer_spe

I wonder how much of this mess is due to that.

It certainly doesn't help the rental market and renters in Ontario

[chowhou]

Originally Posted by Wigs

It certainly doesn't help the rental market and renters in Ontario

Rent control is a short term relief with long term negative consequences.

Abolishing rent control is a short term harm with long term positive consequences.

Choose what you value.

[LightingGuy]

Originally Posted by chowhou

rent control is a short term relief with long term negative consequences.

Abolishing rent control is a short term harm with long term positive consequences.

Choose what you value.

100%

[1overcosc]

I actually think that some degree of rent control is good, to prevent abusive edge cases, like for example, a landlord who raises rents by 500% overnight to punish a tenant who raised a genuine complaint about the condition of the unit.

I think the best way forward is to keep rent control in place, apply it all units.. but make the annual limits high. Instead of capping rent increases at 2%-3% per year; cap them at, say, 10% per year. That allows a free market for rentals while limiting extortionate scenarios.

[niwell]

To be clear - we don't have rent control, we have rent stabilization. Under true rent control the rent can't increase beyond a certain amount even when tenancy changes.

I think 10% may be too high (especially for larger family apartments) but there is definitely an argument that 3% is too low in the current climate. The system could be changed to allow for slightly higher increases under special circumstances that's more formalized than the current one which is pretty ad hoc. Regardless I firmly believe that tenants who pay their bills shouldn't be arbitrarily kicked out at the whim of their landlord.

[someone123]

There is really just a fundamental mismatch between the kind of housing being offered and the kind tenants need. The landlords have increasingly been medium term investor-buyer condo flippers and the tenants are the larger and larger share of the population who can't afford to buy, which now doesn't just cover students but also middle aged parents with kids and so on.

This is another obvious point but if you mandate low rents or put a lot of restrictions on landlords, people won't want to be landlords anymore. You can choose between market-clearing prices or shortages. The alternative is some kind of subsidy or public housing but we're not doing that at scale in Canada. We have a worst of both worlds setup where we have European-style housing prices and availability without the public housing aspect.

[WarrenC12]

Originally Posted by niwell

To be clear - we don't have rent control, we have rent stabilization. Under true rent control the rent can't increase beyond a certain amount even when tenancy changes.

I think 10% may be too high (especially for larger family apartments) but there is definitely an argument that 3% is too low in the current climate. The system could be changed to allow for slightly higher increases under special circumstances that's more formalized than the current one which is pretty ad hoc. Regardless I firmly believe that tenants who pay their bills shouldn't be arbitrarily kicked out at the whim of their landlord.

BC used to have "CPI + 2%" for years. It was a pretty fair system. Landlords could "catch up" with inflation if they needed to, but renters would be protected from exorbitant increases, and everything would be relative to inflation.

The BC NDP messed with the system. First they said they were going to go with CPI only as the max, then froze it, then set it way below inflation.

[chowhou]

Originally Posted by niwell

To be clear - we don't have rent control, we have rent stabilization. Under true rent control the rent can't increase beyond a certain amount even when tenancy changes.

Rent stabilization is rent control, it's just not vacancy control. I'm immediately suspicious of the intentions of anyone who tries to argue they're two separate things. It's fine to argue that rent stabilization doesn't have the same issues as vacancy control (and has other issues), but it's disingenuous to say it isn't a price control. To me it feels like you're just trying to avoid all the negative connotations (facts) of rent control by rebranding it.

Originally Posted by WarrenC12

BC used to have "CPI + 2%" for years. It was a pretty fair system. Landlords could "catch up" with inflation if they needed to, but renters would be protected from exorbitant increases, and everything would be relative to inflation.

The BC NDP messed with the system. First they said they were going to go with CPI only as the max, then froze it, then set it way below inflation.

Possibly the worst thing the BC NDP has done in our province. I'm not typically a BCL (BCU) voter, but at some point someone has to step in to fix this mess since the NDP have made it clear they're pro rent control.

[swimmer_spe]

Originally Posted by chowhou

Rent control is a short term relief with long term negative consequences.

Abolishing rent control is a short term harm with long term positive consequences.

Choose what you value.

Can you explain this more?

[Wigs]

Originally Posted by chowhou

Rent control is a short term relief with long term negative consequences.

Abolishing rent control is a short term harm with long term positive consequences.

Choose what you value.

I value the average long-term Ontario renter not being a victim of "Renoviction" by greedy landlords

Everyone needs a place to live but current rental rates in southern Ontario are absolutely horrendous.

[Wigs]

Edmonton is growing by leaps and bounds yet somehow they have affordable housing prices and rentals.

It costs 40% more for a 1 bedroom apartment in St. Catharines-Niagara than Edmonton.

You can still buy a condo in Edmonton for $200k

[chowhou]

Originally Posted by swimmer_spe

Can you explain this more?

Here's a helpful link.

Originally Posted by Wigs

I value the average long-term Ontario renter not being a victim of "Renoviction" by greedy landlords

Everyone needs a place to live but current rental rates in southern Ontario are absolutely horrendous.

That's fine, as long as you've made peace with the fact you're taking from the future to pay the present. I personally want a better future for myself and my descendants.

Originally Posted by Wigs

Edmonton is growing by leaps and bounds yet somehow they have affordable housing prices and rentals.

And yet no rent control.

[niwell]

Virtually every aspect of our modern lives is subject to some form of price control. I'm immediately suspect of anyone who wants to specifically remove it (while letting other things stand) from one of the aspects that's almost universally been deemed a human right. Like with many things related to the housing market, the argument for "return" to free market principles (sic) only works if literally everything is blown up and we start from square one. Pretty much every "study" I've read on this over my career has a pretty clear axe to grind and investors to placate.


Edmonton remains cheap... for now. Meanwhile Calgary's rent is jumping by leaps and bounds. During the last boom I knew more than a few people who were arbitrarily kicked out of their long-term apartments.

[Wigs]

If the average Canadian is doing worse than 20, 30 years ago then the country overall is much worse than when I was a kid.

I want a better future for all Canadians. Right now it looks bleak.

[GenWhy?]

Originally Posted by someone123

This is another obvious point but if you mandate low rents or put a lot of restrictions on landlords, people won't want to be landlords anymore. You can choose between market-clearing prices or shortages. The alternative is some kind of subsidy or public housing but we're not doing that at scale in Canada. We have a worst of both worlds setup where we have European-style housing prices and availability without the public housing aspect.

If "mom-and-pop" landlords no longer want to be in the landlording business that's great. Purpose-built rental construction has been surpassing condos in Vancouver for 3-4 years now, and other Metro cities it is rising rapidly.

I'm waiting for condos owners that rent out to sell and let owners live in them rather than renters.

[casper]

Originally Posted by WarrenC12

BC used to have "CPI + 2%" for years. It was a pretty fair system. Landlords could "catch up" with inflation if they needed to, but renters would be protected from exorbitant increases, and everything would be relative to inflation.

The BC NDP messed with the system. First they said they were going to go with CPI only as the max, then froze it, then set it way below inflation.

I would be supportive of going back to CPI. Especially given minimum wage and most government pensions are also tied to it. That means those in a marginal situation are protected.

But the current frozen increases is not acceptable.

[1overcosc]

Except the cost of providing rental housing increases beyond CPI in most years.

You can't artificially fix the cost of a service to below the cost of providing it and expect there to not be shortages.